Asymmetries in Fiscal Policy

Perry Gogas 15xx (2)

Dr. Periklis Gogas is a frequent contributor to The Business Thinker magazine. He is an Assistant Professor of Economic Analysis and international Economics, Department of International Economics and Development, Democritus University of Thrace, Greece


Ioannis PragidisDr. Ioannis Pragidis is a co-author for the Business Thinker magazine. He is a Lecturer of Economic Analysis at the  Department of Business Administration, Democritus University of Thrace, Greec

 

 

Introduction

Fiscal and monetary policies are the cornerstone of policy-making.  However, until 2000 the main bulk of empirical research was dedicated solely to the effects of monetary policy to real economic activity. In the aftermath of the global financial crisis of 2008 there is a renewed interest and a growing debate of whether governments should run fiscal stimulus packages (based on Keynesian macroeconomic theory) in order to restore previous growth rates or run an austerity program to reduce deficits and in the long-run the debt-to-GDP ratio. Recently for example, highly indebted Eurozone countries (Greece, Ireland, Portugal and Spain) are required to implement strict fiscal austerity measures in order to balance their balance sheets. In this context it is interesting to see whether and how Keynesian principles may apply.

According to economic theory, the impact of an expansionary fiscal policy on GDP can range between negative and positive values and be large or small depending on the broader macroeconomic setting. Thus, we can identify five potential sources of nonlinearities/asymmetries from the implementation of fiscal policy:

a) the phase of the business cycle: whether the economy is expanding or contracting,

b) the GDP to debt ratio: the effect of fiscal policy may differ when this ratio is small or large

c) the sign of the fiscal policy shock: positive versus negative shocks of the same instrument). For example an equal in absolute magnitude expansionary versus a contractionary tax policy.

d) the nature of the fiscal policy shock: whether an expansionary or contractionary fiscal policy is implemented through spending or revenues (taxes).

e) the magnitude of the shock: “small” and “marge” fiscal policy shocks may have asymmetric effects with respect to real GDP.

Despite the many possible sources of non-linearities and divergence of economists’ opinions, the empirical research is still too narrow and only recently has started to take into consideration the possible asymmetries reported above. Trying to reconcile economic theory with the empirical results many practitioners analyse the effects of fiscal policy on economic activity over the business cycle -case a) above- for many countries. Most of these studies report a spending multiplier around unity in boom times and 0.36 in recessions. However, the rest of the possible non-linearities have not be tested adequately yet. In order to fill this gap in empirical macroeconomics we employ several econometric methodologies in order to test for the existence of asymmetries that may be associated with the conduct of fiscal policy.  In doing so, we try to detect two types of fiscal policy asymmetries. First, whether equal in magnitude contractionary or expansionary fiscal shocks –case c) above- have the same multiplier impact on real output and second whether theoretically equal –in terms of their impact on the government budget- fiscal policy tools, such as a tax cut or an increase in government spending – case d) above-  have the same impact on output. Using quarterly data that span the period 1967Q1 to 2011Q4 for the U.S we uncover some very interesting results.

Empirical Methodology

We reveal that an increase in government spending is by far more effective in stimulating the real economy than a decrease in government revenue, i.e. a tax cut. Moreover, an interesting result is that we uncover an asymmetry in the size of the government revenue shocks. It appears that a large increase in government revenue (increase in taxes) during periods of increasing government expenditures may have a positive and lasting effect on the growth rate of real output. This may be the case since such a shock may be perceived as a strong signal of the government’s commitment to fiscal consolidation. This improves the credibility of the implemented policy and alters the public’s expectations on future economic conditions. On the other hand, during periods of decreasing government spending the decrease of taxes cannot boost the economy into a growth path. Finally, we find evidence on asymmetries in terms of the persistence of fiscal policy shocks. Increments in spending and revenue shocks, i.e. increased government spending or an increase in taxes, are more persistent as they take seven to eight quarters to fade, whereas their negative counterparts, a decrease in government spending and a tax cut, take only three to four quarters.

Empirical Results

We reveal that an increase in government spending is by far more effective in stimulating the real economy than a decrease in government revenue, i.e. a tax cut. Moreover, an interesting result is that we uncover an asymmetry in the size of the government revenue shocks. It appears that a large increase in government revenue (increase in taxes) during periods of increasing government expenditures may have a positive and lasting effect on the growth rate of real output. This may be the case since such a shock may be perceived as a strong signal of the government’s commitment to fiscal consolidation. This improves the credibility of the implemented policy and alters the public’s expectations on future economic conditions. On the other hand, during periods of decreasing government spending the decrease of taxes cannot boost the economy into a growth path. Finally, we find evidence on asymmetries in terms of the persistence of fiscal policy shocks. Increments in spending and revenue shocks, i.e. increased government spending or an increase in taxes, are more persistent as they take seven to eight quarters to fade, whereas their negative counterparts, a decrease in government spending and a tax cut, take only three to four quarters.

Policy Implications

The policy implications of the empirical evidence we found with the two alternative empirical methodologies are very important. To summarize them here:

a)  It appears that the most effective fiscal policy instrument in terms of its impact on real private GNP is government spending. The empirical evidence provided in our analysis shows that government spending has the sign and impact predicted by standard Keynesian macroeconomics.

b) On the other hand, government revenue shocks, i.e. through taxation, are found to have a much smaller (approximately four times) multiplier than equal in size spending shocks.

c) Finally, our results highlight the importance of the credibility of the fiscal policy. It appears that an increase in government revenue sends a strong signal to the public that the government is committed to fiscal consolidation and is moving towards prudency. This alters the public’s expectations about future economic activity increasing confidence that may a positive impact on real private GNP.

According to these results a policy maker would be far more successful in implementing fiscal policy through government spending than revenue. Moreover, to stimulate the economy, an expansionary fiscal policy through an increase in government spending appears that it would be the most efficient instrument of choice for the policy maker. An equal in size stimulus package through lower taxes would be marginally successful as the corresponding multipliers reveal.

References

  • James P. Cover, (1992). Asymmetric Effects of Positive and Negative Money Supply Shocks.  Quarterly Journal of Economics, 107(4), 1261- 1282.
  • Robert Lucas, (1972). “Expectations and the Neutrality of Money”. Journal of Economic Theory 4 (2): 103–124. doi:10.1016/0022-0531(72)90142-1.
  • John F. Muth. (1961). “Rational Expectations and the Theory of Price Movements”, Econometrica 29, pp. 315–335.

 

LOCKHEED C130 HERCULES: VERSATILITY + STRONG CASH FLOW = COMPETITIVE ADVANTAGE

C130 pic
GEORGE_SPARTAN0001.

George A. Haloulakos, CFA DBA Spartan Research and Consulting, Core Adjunct Finance Faculty – National University and Instructor-Finance, University of California at San Diego (UCSD) Extention

ABSRACT

Lockheed’s leadership in military aircraft for more than 50 years has been anchored and aided financially by the steady, stable presence of its multi-purpose C130 Hercules program.  From a finance perspective, the C130 can be viewed as a cash cow.  Companies with a “cash-cow” (i.e., a self-financing product group or division that is a market share leader in its respective business and generates surplus cash) in its product portfolio are well positioned to earn above-average financial returns by funding new product development and expanding their overall sales.  In the aviation field, where new aircraft programs require enormous sums of capital and very long lead times for development, this can be especially advantageous.  Lockheed’s iconic C130 Hercules built for the US Air Force and US Navy, is arguably the most versatile tactical transport aircraft ever built. Its uses appear almost limitless: airlift and airdrop, electronic surveillance, search and rescue, space-capsule recovery, helicopter refueling, landing (with skis) on snow and ice, and aerial attack. It has even landed and taken off from a carrier deck without benefit of arresting gear or catapults.  This program has been in operation since the mid-1950s and its multi-service / multi-faceted functional role has kept the Marietta Georgia plant in production and modification/upgrade mode of the C130 to the present day!  The purpose of this paper is to discuss the added-value arising from a cash-cow business model using the C130 as a case study.

FINANCIAL STRATEGY & THE GROWTH SHARE MATRIX

The Growth Share Matrix, developed by Bruce Henderson for the Boston Consulting Group in 1970, is an analytical model used to evaluate product lines or business groups within a corporate framework and make capital investment decisions based on the relationship of market share, growth and expected financial outcomes.  The matrix classifies product or business groups into four quadrants based on their respective growth rates and relative market shares.

Cash Change

 The four quadrants are popularly known as:

“Stars” – High growth / High share [upper left quadrant]

“Cash Cows” – Low growth / High share [lower left]

“Question Marks or Wild Cats” – High growth / Low share [upper right]

“Pets or Dogs” – Low growth / Low share [lower right]

 

Typically, a balanced portfolio is comprised of a mix of cash cows, stars and question marks, while pets (or dogs) are either divested or avoided because of being viewed as potential cash-traps or financial sink-holes.  In a balanced portfolio, the idea is for: “Cash cows” to generate funds to support future growth by financing the “stars” whose high growth and high share assure that future growth AND to convert or develop the “question marks” into “stars.”  From a flow of funds perspective, cash flows from the lower left quadrant into both the upper left AND upper right quadrants.

High relative pic

Essentially, the firm is managed as an investment portfolio with the product or business groups treated as individual investments.  Each group is evaluated on how its expected financial performance (arising from its growth/share features) will add to the total corporate business portfolio with least risk.  The goal is to avoid total dependence on any single group, lower volatility of return on invested capital (ROIC) as measured by standard deviation (sigma) and maximize total risk-adjusted ROIC for the entire firm.

The Significance of Market Share

Higher relative market share implies higher cash generation.  As a firm increases its physical output, the higher capacity utilization rate lowers unit costs due to higher absorption rate of fixed overhead.  Lower unit costs that arise from economies of scale (i.e., a “learning curve” effect in which accumulated experience translates into increased efficiency) enables earnings to grow faster the higher the share.  Market share of a firm’s brand is measured in relation to its largest competitor.  Therefore if a brand has a 25% share and its largest competitor has the same, the inferred ratio is 1:1.  However, if the largest competitor had a 75% share, the ratio would be 1:3 and this implies a relatively weak position.  If the largest competitor had a 5% share, the ratio is 5:1 and this implies the firm’s brand is in a relatively strong position that may be reflected in earnings and cash flow.  When used in practice, this scale is logarithmic.

 The Significance of Growth

The Growth Share Matrix assumes that a higher growth rate indicates correspondingly high demands on investment.  The cut-off point between high and low growth is usually 10% per annum.  High growth is associated with either neutral or modestly negative cash flow, as high investment is required to maintain competitive position.  Low growth is associated with positive or surplus cash generation because a mature business theoretically has lower investment requirements to maintain its competitive position.

Putting Them Together: ROIC, Market Share and Growth

Return on Invested Capital (ROIC) measures how efficiently a firm converts invested capital (debt + equity) into profit.  A subset of ROIC is Return on Equity (ROE), which measures a firm’s net income in relation to its shareholder equity.  A company with strong or vibrant earnings growth and a high ROE is usually a market share leader in its industry or sector.  Strong earnings growth with a low ROE indicates a firm may be absorbing capital in order to maintain profit growth.  This high level of investment is often associated with business models that have a high level of fixed costs, and are usually manufacturing firms.

According to Investor’s Business Daily [8/12/2010, page B1], “top quality stocks, when they begin their winning runs, generally carry an ROE ratio of 17% or higher.”  With publicly traded companies, the ROE is metric more closely tracked because of its association with shareholder equity, but is also viewed as the driver for ROIC, a metric often used in conjunction with ROE when managing a firm’s business model as a product portfolio, with market share and growth as the key variables for making investment decisions.

LOCKHEED’S AIRCRAFT PRODUCT PORTFOLIO

For explanatory purposes of this paper, I have classified Lockheed’s aircraft product portfolio into three categories: High-Tech Military Aircraft, Military Transport & Multi-Purpose Aircraft and Commercial Aircraft.  To the best of my knowledge, there are no public corporate documents that conceptualize the aircraft product portfolio in this exact manner, but in my research and teaching roles, it serves as a helpful way to understand Lockheed and its business history.  In the interest of clarity and concision, please note that the list of aircraft in each of the aforementioned categories is not all inclusive, but rather highlights the key aircraft programs that are representative of Lockheed’s overall competitive position.   For the same reason, mapping of these groups is general rather than specific.

Military trans

Chart4

THE BENEFITS OF HAVING A CASH COW IN THE PRODUCT PORTFOLIO

The primary benefits of the cash cow model in the context of aviation are financial independence/flexibility, manufacturing synergy and brand equity.  These benefits provide the foundation in which an aircraft manufacturer is able to launch new products that help accelerate overall corporate growth and cash flow, that in turn, strengthens the overall corporate business model.  Positive cash flow from a given product group implies that its reinvestment requirements have been met thereby leaving surplus cash to be redeployed elsewhere in the business portfolio for new product development, share buyback or paying down debt.  Manufacturing synergy occurs as long-term projects can often generate collateral benefits such as technology transfer (i.e., production methods that can be applied across different programs) and serving as a process driver to lower unit costs as well as promote innovation.  Brand equity – the value of having a well-known name based on superior performance and quality – puts a firm in a much stronger position to generate more money from its product and service offerings.  In this paper we will document how Lockheed’s C130 Hercules program has, and continues to provide the benefits of financial independence/flexibility, manufacturing synergy and brand equity – the benefits or attributes of a cash cow model.

WHAT MAKES THE C130 HERCULES AN EXEMPLARY CASH COW MODEL

The attributes that have enabled the C130 Hercules to be a cash cow model for more than 50 years are versatility, reliability and superior performance.  The C130 has been in continuous production longer than any other military aircraft with a “workhorse” reputation that it is ready for any mission, anywhere, anytime.  In Lockheed’s public documents, the following summary is offered:

“The C-130J Super Hercules offers superior performance and new capabilities, with the range and flexibility for every theater of operations and evolving requirements. This rugged aircraft is regularly sent on missions in the harshest environments, and is often seen as the first aircraft “in,” touching down on austere landing strips before any other transport to provide humanitarian relief after natural disasters.

With more than 1 million hours of flying combat, humanitarian, special operations, aerial refueling, firefighting, and search and rescue missions around the world, the C-130J stands ready for its next mission and for whatever the future holds.

C-130J Super Hercules by the Numbers:
— 1 million+ flight hours logged
— Operated by 15 countries
— 16+ different missions operating worldwide
— Used to set 54 world records
— 300+ C-130Js delivered or on order
— Can operate out of 2,000 foot-long dirt strips in high mountain ranges
— Ability to transport more than 40,000 pounds of cargo and supplies

C-130 Hercules Family by the Numbers:
— Operated by 70 countries
— 2,400+ C-130 aircraft delivered”

Source: Lockheed-Martin Public Documents, 2013.

 FINANCIAL & STRATEGIC IMPACT OF C130 HERCULES AIRCRAFT

The benefits of cash flow generation and manufacturing synergy had noticeable impact on the company from almost the beginning.  The success of the C130 (first launched in 1954) with the US Air Force and US Navy enabled Lockheed to introduce the first propeller turbojet commercial aircraft in 1961 [Electra – a favorite with PSA, American and Western].  From this Lockheed evolved the Electra to the long-range submarine chaser, the P3 Orion.  The Electra and reciprocal engine aircraft had limited commercial success as the Boeing 707 surpassed them all following its commercial launch in 1958.  [For a detailed report on the Boeing 707, see “The Boeing 707: A Case Study on Betting It All” by George A. Haloulakos and Farhang Mossavar-Rahmani.]  However, the collateral benefits of the C130 as a cash cow would continue in the ensuing decades.  Throughout the Cold War as Lockheed developed exotic high-tech military aircraft with reconnaissance and strike capabilities for the US Air Force and the Central Intelligence Agency, the C130 continued to be a steady, stable cash flow generator providing financial support for these projects.  Yet at the same time, the C130 was rapidly developing into a most versatile, reliable multi-purpose aircraft.  The stable, strong presence of the C130 upgraded Lockheed’s brand image as a superior, all-purpose, military aircraft manufacturer.  This type of reputation coupled with positive financial results has enabled the C130 to support Lockheed as a positive contributor through the long up-and-down cycles that characterize the industry.

Given the highly classified nature of Lockheed’s military aircraft business, and numerous corporate reorganizations over the years, it is difficult to precisely estimate the detailed financial mix of the different aircraft programs.  However, it is a matter of public record that the company’s notable commercial aircraft programs had limited success (Electra Prop Turbojet), did not fully materialize (Super Sonic Transport [SST]) or posted very marginal financial results (L1011 Tri-Star).  While the C5 military transport program experienced financial pressure due to start-up costs and related difficulties, ultimately it became a solid contributor.  However, the C5’s start-up problems concurrent with the L1011 Tri-Star’s cost overruns and delayed launch (due to problems with jet engine supplier Rolls Royce) raised serious concern about Lockheed’s financial viability.  [For a detailed report on the Lockheed L1011 Tri-Star, see “Lockheed Tri-Star Redux: A Play to Win Strategy” by George A. Haloulakos.]

All the while as Lockheed experienced the good, the bad and ugly in terms of overall corporate financial results, the C130 Hercules remained as solid and strong as the mythological hero for which it was named.  In sum, performance, versatility and reliability has enabled the C130 to remain perennially relevant since the 1950s.  While not a “star” in the context of the Growth Share Matrix or a glamour vehicle like the company’s renowned high-tech military aircraft, the C130 is a stalwart “cash cow” and a model of versatility.  For these reasons, the C130 may be the “most valuable aircraft program” in Lockheed’s product portfolio.

In reviewing the stock price history of Lockheed (now Lockheed-Martin) from the mid-1950s to date, the one constant in the corporate business portfolio has been the C130 Hercules.  This is not to imply that the C130 Hercules has carried the entire company on its shoulders, but its significant presence and ongoing financial contribution is indisputable.  As a “cash cow” the stable, steady financial performance of the C130 program has enabled the company to not only help fund the growth of its “star” high-tech military aircraft, but also provide a safety net during cyclical declines.

Despite a close call in the early-to-mid 1970s, Lockheed ultimately triumphed over financial adversity, and having the C130 in its arsenal was a key element in remaining a relevant and key player in the aviation industry.  As a result Lockheed shares have been a big long-term winner for the buy-and-hold investor.  The following matrix affirms this conclusion.

Chart5

Another way to appreciate the financial and operational staying power of the C130 is to examine the US military transport aircraft introduced during the 1950-1959 period by make and model, and compare the status of each aircraft in terms of service and/or production.  The following matrix documents that only the C130 is still in active service and in production.  All other military transport aircraft from that era have ceased production long ago, and only two other aircraft models remain in active service.

Chart6

THE MISSION OF THE C130 HERCULES

Lockheed’s C130 Hercules was originally designed as an assault transport but was adapted for a variety of missions, including: special operations (low-level and attack), close air support and air interdiction, mid-air space capsule recovery, search and rescue (SAR), aerial refueling of helicopters, weather mapping and reconnaissance, electronic surveillance, fire fighting, aerial spraying, Arctic/Antarctic ice resupply and natural disaster relief missions.

At present, the C130 primarily performs the intra-theater portion of the tactical airlift mission. This medium-range aircraft is capable of operating from rough, dirt strips and is the prime transport for paratroop and equipment drops into hostile areas.  Detailed information is located in the APPENDIX.

THE MISSION CONTINUES TO BE ACCOMPLISHED

This is self-evident when reading the body of main text for this paper as well as the Appendix.  What is equally impressive is how accomplishing this mission has translated into a significant financial payoff that continues to the present day.  The C130 Hercules as a “cash cow” has not only provided a financial anchor for Lockheed’s aviation business portfolio, but has also helped fund the firm’s high-tech military aircraft programs, that, in turn, has produced significant cash dividends that accompanies the historic capital gains of its stock price noted earlier in this paper.

The financial payback in the form of cash dividends has been particularly evident into the 21st century.  In late September 2013, Lockheed increased its quarterly dividend by 16% to $1.33 per share from $1.15.  This was the firm’s 11th consecutive double-digit increase and its quarterly dividend has more than doubled from 2010-2013!  Lockheed strives to return at least 50% of free cash flow to shareholders through dividends and share buybacks while maintaining leadership in its “star” product group, high-tech military aircraft.  This cash return to Lockheed shareholders while maintaining leadership in a high-growth/high-share business is made possible by the steady, stable presence of having a “cash cow” – in this case, the C130 Hercules – in its corporate business portfolio.

CLOSING THOUGHTS

Lockheed’s overall successful long-term record as a publicly traded company is a variation or by-product of a time-honored investment formula associated with Andrew Mellon (1855-1937) former US Treasury Secretary and financier.  Investor’s Business Daily (12/10/2013, page A3) observed that Mellon’s record of earning major returns resulted from dividing his investment funds in “new industries and those that are solid, but out of favor.”  In other words, Mellon invested in businesses that offered stable, steady returns while simultaneously identifying new opportunities promising high-growth and high market share.  Similarly, the reader may infer that Lockheed did the same by investing in the C130 Hercules so that this aircraft remained relevant and versatile over the ensuing decades while using surplus cash from that program to fund faster growing, higher margin aviation programs, namely its high-tech military aircraft that remains the firm’s signature accomplishment for more than 50 years.

APPENDIX

BACKGROUND INFORMATION ON THE C130 HERCULES

The following sub-sections that comprise Background Information are from the Aviationzone.com web site.  While I have paraphrased and significantly rewritten this content (including clarification or spelling out of aviation terminology and other related data), in the interest of proper attribution and disclosure, I have italicized these sub-sections (i.e., treating this as a direct quotation) to accord credit to Aviationzone.com – a most invaluable reference source.

On August 23, 1954, the first of two YC130 prototype test aircraft made its maiden flight from Burbank, California to Edwards Air Force Base.  These two C130 prototypes were built at Lockheed’s “Skunk Works” operation in Burbank; but since then, more than 2,000 C130s have been built in Marietta, Georgia.

 The C-130A was the initial production model, with four three-bladed Allison T56-A-9 turboprops.   A total of 219 were ordered.  The first of the production models flew on April 7, 1955 with unit deliveries starting in December 1956.  Versatility of this aircraft was evident from the beginning: two DC-130As (originally GC-130As) were built as drone launchers/directors, carrying up to four drones on under-wing pylons.   All special equipment was removable, permitting the aircraft to be used as freighters (accommodating five standard freight pallets), assault transports, or ambulances.  [Note that the deployment of drones, while popularly associated with the “war on terror” is an asset with origins dating back more than 50 years.]

 US Air Force (USAF)

The C130B entered services in June, 1959, with a total of 134 delivered to the USAF. The B-model introduced the four-bladed Allison T56-A-7 turboprops, carried additional fuel in the wings plus upgraded (strengthened) landing gear.   Several C130Bs, used for aerial fire-fighting missions, are still in service with Air National Guard units.  Six C130Bs were modified in 1961 for mid-air snatch recovery of classified Air Force satellites.  During the 1960s, the C130 was used in combat, reconnaissance and other such missions where its multi-purpose capabilities enabled it to serve in Southeast Asia (“Vietnam Conflict”) and various global theaters during the Cold War.

 For the “Vietnam Conflict” several Air Force C-130As were converted into gunships.   In addition to their side-firing 20mm Vulcan cannons and 7.62mm Mini-guns, these converted C130As also possessed sensors, a target acquisition system, and a forward looking infra-red (FLIR) and low-light television system.  As the Cold War remained intense throughout the 1960s, a number of A-models, re-designated C130D, were fitted with wheel/ski landing gear for service in the Arctic and for resupply missions to units along the Distant Early Warning (DEW) line. Here are some noteworthy features: (a) two main skis – each 20 feet (6m) long, 6 feet (1.8m) wide, and weigh about 2,000 pounds (907kg) each; (b) nose ski is 10 feet (3m) long and 6 feet (1.8m) wide; (c) increased fuel capacity and provision for jet-assisted takeoff (JATO). These D versions were flown by the Air National Guard and have been replaced by the LC130H variant.

The C130E is an extended-range development of the C130B. A total of 369 were ordered and deliveries began in April 1962.   For the E model, the maximum ramp weight increased to 155,000 pounds (70,307kg) or 20,000 pounds (9,072kg) more than the B model.  Fuel capacity was increased by over 17,000 pounds (7,711kg).   In addition, more powerful Allison T-56-A-7A engines were used along with a pair of external fuel tanks (with a capacity of 1,360 gallons) that were slung beneath the wings, between the engines.  The recent wing modification to correct fatigue and corrosion on the USAF’s fleet of E models has extended the life of the aircraft well into the 21st century.

Similar to the E model, the C130H has updated T56-A-T5 turboprops, a redesigned outer wing, updated avionics, plus other minor improvements.  There is a divergence regarding when delivery actually began.   Delivery may have started as early as July 1974 [other sources state April 1975].   More than 350 C130Hs and derivatives were ordered for active and reserve units of the U.S. services.  The H model has become the most produced of all C130 models, with orders for 565 as of the end of 1979.

 US Navy (USN and Marines (USMC)

The C130 Hercules first entered naval service in 1960.  Four ski-equipped LC130F’s were obtained for Antarctic support missions and were soon followed by 46 KC130F models procured by the Marine Corps in 1962 for the dual role of assault transport and aerial tanker for fighter and attack aircraft.   During the same year the Navy obtained seven C130F’s without in-flight refueling equipment to serve its transport requirements. The KC-30F made its first test flight in January 1960 as the GV1 under the old Navy designation system.  The tanker version is able to refuel two aircraft simultaneously from the 3,600 gallons in its cargo compartment. The fuel is routed via two detachable pylon pods located below the outer wing, containing refueling gear.

 The Navy procured a number of C130Gs in 1965 to provide support to Polaris submarines and the exchange of their crews.   While essentially the same as the F model, these particular aircraft had increased structural strength, allowing higher gross weight operation.   All models feature crew and cargo compartment pressurization along with single-point refueling and a Doppler navigation system. Four of these aircraft were later modified as “Take Charge and Move Out” (TACAMO) communications relay aircraft and were re-designated EC130G. After replacement by the E6A, three aircraft were returned to transport configuration (albeit with no cargo ramp) as TC130Gs, one now serving as the Blue Angels support aircraft, with the name “Fat Albert” and regularly featured at air shows in this support role.

 One other model, the EC130Q, served in two Fleet Air Reconnaissance (VQ) squadrons.  This version featured a permanently installed “Very Low Frequency” (VLF) radio transmitter system used to supplement shore-based communications facilities and served as a strategic communications aircraft with ballistic-missile submarines.  During its third flight, this aircraft lost its left wing due to a fire.  However it was repaired and eventually transformed or converted into an AC130A gunship that was later retired in 1995.

Distinguished Service Record in Desert Shield and Desert Storm

Over 145 Hercules aircraft were deployed in support of Operations Desert Shield and Desert Storm. These aircraft moved units to forward bases once they arrived in the theatre.  From August 10, 1990 to the cease-fire, Air Force C130s flew 46,500 sorties and moved more than 209,000 people and 300,000 tons of supplies within the Area of Responsibility (AOR). They provided logistical support, aero-medical evacuation of the wounded, and battlefield mobility once the fighting started. During the “100-hour” ground campaign, C130s flew over 500 sorties a day!

 Question: What Makes the C130 Special?  Answer: Its Many Features!

From the Aviation.com web site, the C130’s features are enumerated below, and provide a self-evident basis on why this aircraft remains a relevant, significant contributor.

C130 design employs a cargo floor at truck-bed height above the ground, an integral “roll on/roll off” rear loading ramp, and an unobstructed, fully-pressurized cargo hold which can rapidly be reconfigured for the carriage of troops, stretchers or passengers. The C130 Hercules can also be committed for airdrops of troops or equipment and for Low Altitude Parachute Extraction System (LAPES) delivery of heavy cargoes.

  • Cargo Compartment – The C130 can carry more than 42,000 pounds (19,051kg) of cargo. Rollers in the floor of the cargo compartment enable quick and easy handling of cargo pallets and can be removed to leave a flat surface, if needed. Five 463L pallets (plus a ramp pallet for baggage) may be loaded onto the aircraft through the hydraulically-operated main loading ramp/door assembly located in the rear of the aircraft. The ramp can also be lowered to the ground for loading and unloading of wheeled vehicles. Tie-down fittings for securing cargo are located throughout the compartment.

In its personnel carrier role, the C130 can accommodate 92 combat troops or 64 fully-equipped paratroopers on side-facing, webbed seats. For aero-medical evacuations, it can carry 74 litter patients and two medical attendants.

  • Aerial Delivery of Cargo – Three primary methods of aerial delivery are used for equipment or supplies. In the first, parachutes pull the load, weighing up to 42,000 pounds (19,051kg), from the aircraft. When the load is clear of the plane, cargo parachutes deploy and lower the load to the ground.

The second method, called the Container Delivery System (CDS), uses the force of gravity to pull from one to 16 bundles of supplies from the aircraft. When the bundles, weighing up to 2,200 pounds (998kg) each, are out of the aircraft, parachutes deploy and lower them to the ground.

LAPES is the third aerial delivery method. With LAPES, up to 38,000 pounds (17,237kg) of cargo is pulled from the aircraft by large cargo parachutes while the aircraft is five to 10 feet (3m) above the ground. The load then slides to a stop within a very short distance.

  • Wings and Fuel Tanks – The full cantilever wing contains four integral main fuel tanks and two bladder-type auxiliary tanks. Two external tanks are mounted under the wings. This gives the C130 a total usable fuel capacity of approximately 9,530 gallons.
  • Landing Gear – The modified tricycle-type landing gear consists of dual nose gear wheels and tandem mains and permits aircraft operation from rough, unimproved runways. Main gear retraction is vertically, into fuselage blister fairings, and the nose gear folds forward into the fuselage. Power steering is incorporated into the nose gear.
  • Electrical Systems – AC electrical power for the C130H model is provided by five 40 KVA generators, four driven by the engines and one driven by the Auxiliary Power Unit (APU). On the E model, the power is supplied by four 40 KVA engine-driven generators, and a 20 KVA generator driven by the Air Turbine Motor (ATM). DC power is provided from AC sources through four 200 ampere transformer rectifiers and one 24 volt, 36 ampere-hour battery.

Hydraulic Systems – Four engine-driven pumps supply 3,000 psi (pounds per square inch) pressure to the utility and booster systems. An electric AC motor-driven pump supplies pressure to the auxiliary system and is backed up by a hand pump. The hydraulic system maintains constant pressure during zero or negative “g” maneuvers.

 Stretched Versions

Several military operators use the civilian version of the Hercules, which bears the Lockheed designation L-100. Certificated in February 1965, the basic L-100 was broadly equivalent to the C130E, without pylon tanks or military equipment. The L-100-20 was given plugs fore (5 feet/1.5m) and aft (3.3 feet/1m) of the wing. The L-100-30 has a full 15-foot (4.6m) fuselage stretch.

 Roles and Variants

The following matrix enumerates the roles and variants for the C130 that has enabled the Hercules to be a “cash cow” for Lockheed since the late 1950s.

Chart7

 Other Special Projects or Interesting Events

Landing on a US Aircraft Carrier — One of the most astounding took place in October of 1963 when the U.S. Navy successfully landed a Marine Corps KC-130 on the deck of the USS Forrestal aircraft carrier.

Adding VSTOL (Vertical Short Take Off and Landing) Capabilities — In the aftermath of the 1980 failure of Desert One (aka Operation “Eagle Claw”) the U.S. military made radical modifications to a C-130H Hercules so it could take off and land almost like a helicopter. The aircraft was equipped with lift rockets slanting downward, slowdown rockets facing forward, missile motors facing backward, and still more rockets to stabilize the plane as it touched down. The mission — land in a Tehran soccer stadium, rescue 53 American hostages held captive in Iran, and then make a quick getaway!  Two aircraft received these special modifications and were re-designated YMC-130H. The first modified plane (#74-1683))created in just a couple of months, crashed on the runway during a training exercise after a rocket discharged prematurely and ripped off the aircraft’s right wing. The second modified plane (#74-1686) was never used and is now on display at Robins US Air Force Base in Georgia.

 

REFERENCE SOURCES

Air Force Historical Research Agency, United States Air Force, Maxwell Air Force Base, Alabama.

Aviationzone.com

Boston Consulting Group.  Product and service brochures. 1981.

Edleson, Michael E. “Investment Analysis and Lockheed Tri-Star.” Harvard Business School: HBS Case No. 9-291-031, Rev. November 17, 1993.  Pp. 1-6.

Evergreen Aviation Museum (The Captain Michael King Smith Educational Institute).  McMinnville, Oregon, USA.

Findlay, M.C. and Williams, E.E. Toward A Neo-Institutionalist Theory of Finance. August, 1981.

Flying Leatherneck Historical Foundation & Aviation Museum.  Marine Corps Air Station (MCAS) Miramar.  San Diego, California, USA.

Green, William (compiler) and Punnett, Dennis (silhouette artist). The Observer’s Book of Aircraft.  Frederick Warne & Co. (London and New York). 1965.

Haloulakos, G.A. CFA Charterholder. (BS, MBA. Marshall School of Business, University of Southern California).  “Lockheed Tri-Star Redux: A Play to Win Strategy.”  2013.  BusinessThinker.org

Haloulakos, G.A. CFA Charterholder. (BS, MBA. Marshall School of Business, University of Southern California) and Mossavar-Rahmani, Farhang.  Finance Chair – National University.  (DBA.  United States International University).  “The Boeing Company: A Case Study on Betting it All.”  2013.  Airliners.net and BusinessThinker.org

Haloulakos, George A., (DBA Spartan Research and Consulting), Case Study Files and Field Notes on Corporate Strategy, Military/Aerospace Industry, High-Tech and Commercial Jet Aircraft – Spartan Research, 1980 – 2013.

Haloulakos, George A. (CFA Charterholder).  Dollar$ and Sense: A Workbook on the ABCs of Investments.  Page 11.  Spartan Research and Consulting, Inc. (Bellevue, WA).  2002.  ISBN: 9780-1007-2482-2.  UCSD Bookstore.

Haloulakos, George A. (Graduate Assistant – Marshall School of Business, University of Southern California). “Reformulating Corporate Financial Theory for the 21st Century.”  Research support for M.C. Findlay, III (Finance Chair – Marshall School of Business, University of Southern California).  August, 1981.

Haloulakos, V.E.  Aerospace Engineer, Scientist and Professor.  (BSME, MSAE and ENGR.D.  Viterbi School of Engineering, University of Southern California).

Investor’s Business Daily. “Healthy ROE: A Key Trait of Leadership.”  Page B1. August 12, 2010.

Investor’s Business Daily. “Lockheed Offers Higher Dividends.”  Page B11. December 4, 2013.

Investor’s Business Daily.  “Banker Andrew Mellon Put The Roar In The 20s.”  Page A3.  December 10, 2013.

Lockheed-Martin Company.  Various public company documents.  1954 – 2013.

Mitchell, Gordon.  “Hitched to the Tri-Star – Disaster at Lockheed Would Cut a Wide Swathe.” Barron’s (March 15, 1971).  Pp. 5-14.

New York Times Historical Archives.  1954 – 2013.

Scott, Kelly.  CISA (Certified Information Systems Auditor), EA (Enrolled Agent), instrument rated private pilot, aviation enthusiast. (BS, MBA.  Haas School of Business, University of California at Berkeley).

Time.  (August 21, 1972).  Page 62.

RESEARCH SUPPORT

Scott, Kelly.  Industry/Historic/Technical Research.  CISA (Certified Information Systems Auditor), EA (Enrolled Agent), instrument rated private pilot, aviation enthusiast. (BS, MBA.  Haas School of Business, University of California at Berkeley).   Mr. Scott worked for NASA Human Factors Laboratory at NASA Ames Research Center testing pilot heads up displays (HUD) simulation of ground taxi in poor visibility.  Subsequently in later years, using C130’s, the Army Air National Guard Rescue Group at Moffett Field would approach and land with all lights off occasionally using HUD devices.  He was proud to be a part of the simulation testing and its connection with the C130 Hercules!

 

 

 

 

The Integrata Foundation: An Approach between Liberation and Alienation through Information Technology

Heilmann Dr. Wolfgang Heilmann is a German economist and honorary professor at the Karlsruhe Institute of Technology . He studied economics and philosophy in Frankfurt and Tubingen, where he graduated with a degree in economics. Later on he received his doctorate with a thesis on “social utopias of the modern era” at Hans Peter .

For more details go to the end of article.   The concept of the Integrata Foundation for the Humane Use of Information Technology is expressed by its name. The humane use of information technology would pursue a course of action between the societal decoupling (liberation) and alienation caused by information technology, a tool that, in particular, should be used to attain additional benefits for society, i.e. more quality of life for every individual person and mankind as such. The objective of the Integrata Foundation is to contribute to this epochal social process of restoration for the benefit of mankind within the meaning of democratic humanism.

Foreword

This paper focuses on the humane use of information technology. The Integrata Foundation believes this technology, which is gaining a foothold in more and more areas of life, should be a tool for improving living conditions and proposes that this attribute be adopted in the decisions taken by the responsible persons in government, business and society. Humanization should take priority over rationalization and functionalization. What do we precisely mean by humane use of information technology? Naturally it concerns man; however, not so much as an individual as a citizen in today’s society. The state in its function as a democratically legitimized body binds the individual to society and provides the necessary infrastructure; accordingly it also plays an important part regarding the use of information technology. Consequently, we are addressing first and foremost responsible citizens in a democratic society as well as all persons who want to shape their lives and future in an information society. Bearing this in mind, we are concentrating on information technology. It played a decicsive part in developing the concept of our foundation and also encompasses communication technology which, in our understanding, comprises the methods and processes used for transmitting and exchanging information; and we attribute particular importance to this aspect. Nonetheless, a significant point is that we do not want to primarily concentrate on the engineering, the machines and devices, nor on the networks and services provided by telecommunication, but above all on the methods and processes used to apply them, i.e. the technology, which includes the engineering and organization, and all types of application systems and programs. This includes both the programs that are being used in millions of computers and in billions of test points and, hence, exert an influence on us as well as the myriad pro? grams broadcast by television and other media. In this connection, the question as to what use these programs have keeps coming up. As citizens we demand that this technology provide additional benefits to society. We are well aware of the additional economic benefits gained throughout 200 years of technical development: the enormous reduction in working hours and simultaneous increase in buying power made possible by the use of technology. In future, too, technology will have to ensure such development so as to secure an adequate standard of living for all people, or to create this for about two billion people. This is undoubtedly the most important task facing the world. Yet “man shall not live on bread alone”, as the prophets state in the Bible. We realize that not only material need has to be healed but ever more agonizing spiritual shallowness needs to be overcome. This is where information technology can serve its greatest purpose – the second most important task in our world so to say. It is here that we expect additional social benefits! What has information technology brought us in this respect up to now?

1. Decoupling through information technology Information and communication technology is an encompassing innovation bearing extensive consequences for individuals, business and society. We can say with certainty that industrial society was transformed into an information society within the span of several decades. This is particularly true for the wealthy western countries and so?called threshold countries. The developing countries will follow. This innovation process will transform them, too, sooner or later. Poor countries will turn into blooming areas of a humane world community, the people there will no longer suffer need and hardship, and they will mature into self?confident individuals. In the course of theoretical observation this development could be viewed as liberation from many of the evils in today’s world. Reality, however, presents a very different picture. When information technologies are set in the fore of consideration, it would be better to use the sociological term of decoupling. This refers to a process, in which the bonds between a system and its inner and outer surroundings are loosened, thereby increasing its scope of independence and autonomy. One needs to distinguish between different forms of decoupling (see also W. Heilmann: Telemedien und Soziale Prozesse, Thesen zur Informations-gesellschaft, inaugural lecture on 7 December 1999, University of Karlsruhe). 1.1 Through spatial decoupling, made possible in many jobs by information technology, tele-work, for example, has become standard in the meantime. Although it originally referred to a modern form of “work at home”, practically any type of office work now is a teleprocess between people and machines.

Through myriad combinations and types of functions of machines and processes, people working in neighboring offices mainly communicate by means of information technology and people located far away from one another work together as though they were in the same office. Distance no longer is an organizational obstacle: technology has become ubiquitary.

1.2 The ensuing independence of a certain place is augmented by the chronological decoupling made possible by teleprocesses, i.e. periods of time and points of time have gained greater independence. Studies have shown that people can divide their time more freely between work and leisure time. Moreover, the asynchronous functioning of many services and devices allow worldwide communication to be relatively independent of the time zones in which offices working together are located. In other words, one can affirm that information technology has helped modern man gain a certain sovereignty of place and time. In this respect, we have become more free.

1.3 A third dimension of decentralization, which bears considerably more liberation, is attained by the disciplinary decoupling that is connected to tele?processes. Although an employee who works at his computer at home or while traveling most likely is not doing this without some type of monitoring, he is relatively independent of his boss. Thus, the high degree of self?determination which people have achieved in their free time is transferred to working and business life. This disciplinary decoupling is supported by a series of significant developments on the labor market: part?time work and sabbaticals lessen the need for being present and new contractual relationships, such as free?lance work, are transforming the old employment contracts into agreements between two legally equal parties.

1.4 This statement does not say much about the economic or social status of the contracting partners; however, from a sociological point of view this is a considerably more far?reaching process of decoupling. Social decoupling, which we understand to refer to a loosening of the social ties between people and their social environment, goes far beyond anything that was possible in former times. Together with the spatial, chronological and disciplinary dimensions of decentralization mentioned above, man is gaining a previously unknown degree of independence and freedom through social decoupling. Does this mean that information technology brings liberation after all? Reality is nowhere close to that. Hence, Frank Schirrmacher, on the cover of his book “Payback”, actually poses the question: “Why are we forced to do what we don’t want to do in the age of information?”

2. Alienation through information technology As a matter of fact, the independence and freedom of the individual is not only guaran? teed but also threatened by information technology: • We are flooded with information. • We suffer cell phone terror. • We are bombarded by emails. • We are the victims of large?scale government surveillance. • We are being robbed and cheated through computer crime. • There is a need for education despite unprecedented educational opportunities. • Advertising lies and dulls the minds of consumers… If one takes these headlines seriously, one could gain the impression that man is in the process of sacrificing the ideal of a humane society to a powerful technology.

Who is to blame for this plight? The technology as such is neutral and can be put to good or bad use! Business practices should be scrutinized because they are mandated by people who should know better. And what about the government? The government is suffering shock from terrorism. Here, too, people carry responsibility. So, again it is ourselves we have to look to! But we – people as such – refuse to take any blame or, even worse, do not even notice any of this: even though it is we who write the programs that torture and manipulate us. “The most scary thing of all is man,” says the film expert Marcus Stiegler about the new fascination with horror in movies, comics and computer games. Do we still have sufficient control over our everyday lives? Or are we too dependent on the media, whose products blow us around like strong winds? In other words, information technology does not have only positive effects on our society, but also very alarming ones as well. As is true of any tool, computers, the internet and the media also have repercussions on the users; and, moreover, the more intensive the influence becomes, the more stronger the repercussion. From a certain point on, the mastery of man is reversed into servitude; a continuously accelerating process of alienation starts to take over. “Alienation” – as defined in German Wikipedia dated 13 December 2009 ? “is the socially advanced, irreversible process of the appropriation of nature as well as its material and spiritual transformation to culture, including the institutions, which seem heteronomous as soon as they dominate man and oppose man’s individual and collective wish? es.”

2.1 Examples from everyday life Some examples of information technology in everyday life will be given to substantiate and exemplify that alienation begins at the workplace, where we are told by a workflow or project management system what needs to be done. Many prefer this to being ordered around by a human boss. The consequences of this kind of organizational structure will soon become evident, i.e. because of the daily repetition we will have to repeatedly capture and process monitoring and control signals from more and more systems. Such impulses shape us the same way as the TV shows we watch every evening. Hence, Mathias Eckold, in the AULA show broadcast by WDR2 on 14 September 2008, which had the title “You will become what you watch…”, concludes: “We feel the power of the media even if we consider the ‘entertainment shows too stupid’, the ‘sports cover? age too extensive’, the ‘news too hungry for scandals’, and the ‘crime films too blood? thirsty’ … we are strongly influenced by them.” The power of the media will also be felt if one avoids TV and surfs in the Internet instead to gain information or education. The powerful search machines offer almost anything that man desires – also a remarkable and high?quality selection of education, art and science. Not everyone immediately finds what he is looking for or needs, but the systems are becoming better and more influential. Nonetheless, an increasingly critical awareness is growing in the general public. Hence the computer pioneer and professor of computer science, Dr. Maurer, criticizes Google “because it is expanding its opinion? forming power and gaining a monopoly by means of acquisitions”. It is offering information that more and more people are accepting uncritically, believing it to be true.

The ranking of the contributions is particularly problematic, especially when it is influenced by certain methods. The collection and evaluation of personal data is utterly unacceptable. The possibilities of misuse are obvious. In many other instances the general public is not yet aware of what has actually happened as a result of electronic media. This is so because the concrete manifestations of information and communication technology, which the citizens of our western, democratic world encounter every day, are changing our reality and, hence, also our view of reality. The reality experienced by our fathers was different from the “medial reality” known to our children. We are moving further and further away from the old world and are increasingly moving into the sphere of influence of all kinds of programs. Computers or information and communication technology affect our behavior, thinking and feeling so strongly that we find it hard to remain aware of our humanness, much less develop it further. We simply do not have time for this, and in the process, we are losing our sense of what is appropriate for us as humans and citizens. Through external control, commercial manipulation and exposure to a constant stream of media programs, we are becoming a program?controlled society in which individuals are more or less controlled by programs. And many are actually starting to think and act digitally. That’s the problem!

2.2 What the future holds in store “No, that’s not true!” many of us will say. “We are still the ones making the decisions and the computer is a stupid mathematical slave.” Norbert Hering, who spoke “about the limits of understanding between the brain and processor” at MEDICA MEDIA a couple of years ago (2002), affirms that the principle “Man in control” is still true. We would like to add: And that is how it should be! Only if this is true can we speak about humane use of information technology. Nevertheless – and we need to raise this question – aren’t there situations in which man would benefit significantly if the computer made decisions on the spot and without further inquiry, for example whenever security is concerned or utmost precision and very fast reactions are called for or in medicine? These kinds of situations will occur, but also some which would serve us less. “Cyber warfare”, the dilemma of modern warfare, probably is the worst thing that comes to mind in this respect. In this scenario not only a computer but a whole arsenal of digital tools and devices as well as complex information and communication networks would act for us. What worries us most of all, however, is the unbelievably fast interlinking of digital in? formation systems in the Internet. At first it was only an attempt at improving the ex? change of knowledge between scientists. This experiment was more successful than anticipated. Now the Internet consists of thousands of networks with millions of hubs (computers) that administer billions of websites. And this convolute is growing incessantly. It is preparing to gather the entire knowledge gained by mankind and to make it available for further use. Will we need to confront a giant brain similar to that de? scribed by Heinrich Hauser in his science?fiction novel more than 50 years ago? At any rate, it is doubtful whether it could be destroyed with the help of such simple creatures as ravenous ants.

Right now the system is still going through children’s diseases: one has to search for a while to find the information that generates knowledge (in man). Nonetheless, this – as such not intelligent – meta?brain is acquiring a body, which will be veritably omnipresent in a not so distant future. By this we mean the innumerable embedded systems that will soon be component parts of the objects we use in our daily lives, leading a more or less inconspicuous and informal life there. In connection with semantic systems, they will meter and report states, they will identify and communicate with us, and they will denounce us – not only to other people, but above all to machines and within the system network. Evidently a new species is developing, a species that at best may be indifferent towards life, but definitely not friendly: the digital species. Do we still have a chance of maintaining control of a centrally controlled computer network that computes, tests, makes decisions, reproduces itself and learns at the speed of light? Or will the digital principle triumph over the analog principle of life in the end? In other words, our considerations are not limited to the computer per se, but concern the age?old philosophical question as to man, his being and position in the world. In our times man’s position as creation’s crowning glory is being relativized. Man, the analog being, is facing the tool created by him; a tool that embodies possibilities far exceeding those of a “sorcerer’s apprentice”.

The digital omnipresence and productivity of this tool are becoming a global challenge. Will mankind be overcome by a malignant disease or simply be swept aside without protest? Will people remain masters of their life or will they be degraded to servants of digital control and surveillance systems, will they be? come strangers who do not see and much less understand, or want to understand, the whole? In this unavoidable dispute between man and computer, the Integrata Foundation takes the side of man. We do not want the hard?won freedom gained from natural and government forces in the course of many centuries to be lost to a tool. We want to live in a self?determined humane world in future.

2.3 Possible courses of action Yet who should, who can counter?act this development with even a bare chance of success? The ethical?moral standards are so high that no government institution can meet them. This can be expected even less from a commercial system; and religious institutions are out of the question for all the people who do not believe in God. Nonetheless, we would like to refer to the Global Ethic Declaration, initiated by the German theologian Hans Küng in 1993. According to German Wikipedia (18 September 2008), 6,500 persons from 125 regions and religious traditions participated. They agreed on four guiding principles, calling for a culture of non?violence, solidarity, tolerance and equal rights. Whereas one cannot but agree with these principles, they are far too elementary for the problems arising from information technology. Other people and associations, also such without any religious affiliation, are asking whether what is happening to us isn’t outside our power and decide – on the basis of fundamental considerations – to let it happen. After all, they assert, the use of modern technology, particularly in the field of information and communication, brings undisputable benefits not only to the commercial sector and government but also to every individual and all humankind. This opinion mainly is held by computer scientists and programmers, who deal with the instruments of information technology all the time. Internet professionals firmly believe that they have control over the medium, or they are so fascinated by it that they do not consider their dependence a problem but merely a bad habit. You can’t expect to be helped if you don’t see the problem. In contrast, the critical statement made recently by Frank Schirrmacher is very helpful. On the cover of his book, he points out that “a way out of the calculability of life and the threatening end of free will cannot be traced back to a refusal of technology but rather to a new way of thinking that reawakens man’s awareness of his strengths: creativity, tolerance and the ability to master unpredictable occurrences.” Nonetheless, it is doubtful whether the solution of our epochal socio-technical problem can be solved through an individual new way of thinking alone. The ideas and philosophy of the Transhumanists, by contrast, are too different from all that has been said. “Transhumanism” (Latin “trans” = beyond; Latin “humanus” = human) is a philosophical school of thought and active movement that advocates changing the human species through the use of technological methods. Its goal is to generally expand the limits of human possibility and, thus, improve the human condition in many different respects.

“Relevant technologies in this connection are, amongst others: nano-technology, genetic and bio-technology, bio?gerontology, cryonic and other bio?stasis technologies, cognitive sciences, information technology, artificial intelligence and up? loading consciousness into digital memories (German Wikipedia dated 17 December 2009). Even though Transhumanism pursues a similar goal as the Integrata Foundation, namely improving the human condition, and information technology definitely is one of the technologies with whose help this goal is pursued, we would like to point out that our focus is fundamentally different: the Transhumanists want to directly change man as a living being and, thus, improve his conditions of life. We, however, want to use technology to change the conditions of life and, thus, improve the life of man. We hope that this will also make people better. Obviously, the cultural and civilizational circumstances and values created by human activities are landmarks of an upwards development. Even the most dreadful destruction caused by wars and epidemics could not reverse this process – if one chooses a sufficiently long period of observation. Despite inconceivable human catastrophes and continuing significant differences between different regions of the world, we can assert that world culture today is better in terms of humaneness than any previous cultures known to us. However, civilization and culture did not develop linearly, there were bounds and surges.

The more significant the innovation was (hand?axe, plow, machine, computer), the greater the alienation from former conditions and the greater also the impulse for the spirit of mankind to create a new culture. Thus, alienation also can be a step towards more instead of less humaneness, and it is in this sense that we expect the alienation caused by information technology to lead to an epochal step forward for all world cultures. In the current phase of development we are still in the midst of generating IT innovations. But obvious faulty functions and defects of the system, which lead to disappointment, frustration and rejection among users are manifesting themselves. Thus, from the aspect of social politics, it is important that more and more critical voices pointing out the critical developments speak up. Yet, we must not only criticize technology, even if this already would be a form of social criticism. We must go beyond that stage and develop solutions to guide the developments in the correct and desired direction. This calls for tremendous efforts. Cultures that simply accepted results of alienation declined, were assimilated or simply perished. Since Arnold Toynbee’s “Challenge and Response”, we know that only those societies that face challenges and find solutions will give birth to a new civilization, a new culture.

The search for valid rules for dealing with alienation caused by information technology is primarily the responsibility of scientists, sociologists, psychologists, computer scientists and all those who in one way or another are professional users of information technology. Yet, what is being discussed in this paper is not only a concern of researchers. Since we are all more or less intensive users of information technology, this concerns all of us and we should all make a contribution. Followers won’t help us on, we need social politicians who will devise solutions now. The forces in society have to decide and act now. And we need practical examples for this as well as scientifically founded, pragmatic knowledge, we need the courage to make judgements and – as demanded by Popper – the courage to stand up for them. Bearing this in mind, our demand for a humane use of information technology is a call to everyone to participate in social synthesis. Efforts limited to individuals or small, widely dispersed groups are doomed to fail because of the comprehensive character of the threat of alienation. If we want the process of humanization to continue, we have to work together and act for the benefit of a democratic humanism.

3. Humane use of information technology The Integrata Foundation, in the spirit of such democratic humanism, campaigns for using information technology not only for rationalizing and functionalizing processes of life and work, but also for improving the quality of life of as many people as possible in all regions of the world. In this sense, it is first and foremost “socially” oriented, and technically oriented to a lesser extent. The necessary social synthesis means that we must act. We should all act like Jiu?Jitsu fighters, who absorb the strength of their opponent, bind it with their own strength and then force the opponent to his knees. Information technology must be willfully used as a tool, with which the world can be made more humane, both on a large and small scale. Our concrete goal can be summarized as follows:

3.1 More quality of life through information technology! The call for more quality of life forms the core of the foundation’s purpose. It is to be achieved by systematically using the possibilities offered by information technology. This task is primarily the responsibility of professionals working in the many fields of application as well as computer scientists and programmers, in other words anyone who organizes the use of information technology. Basically, they derive their specific tasks from their professions, which may be in businesses, scientific institutions or social organizations. Thus, we have a diverse and colorful setting, in which the pursuit of more quality of life isn’t coming into its own. Consequently, this situation is to be shifted towards a more humane form of information technology. For this reason it is necessary to highlight the fields of application which characterize the conditions of life in our society and, accordingly, to determine where it would be best to initiate improvements. The question as to a definition of humane is not posed in an absolute but only in a relative sense, as an alternative. This pragmatic way of proceeding is very old, perhaps as old as mankind itself. We looked for alternatives for our time and, using the highly complex term of “quality of life” as a framework, drew up the following list of ten issues, which we believe could and need to be improved at the present time. Thus, the ten is? sues devolve into ten criteria of quality of life: 1. Conserving and restoring physical and spiritual health.

2. Preserving inner and outer security, while protecting the freedom and dignity of man.

3. Creating and safeguarding freedom of movement and humane traffic conditions to ensure personal encounters.

4. Rebuilding the trust between communication partners by appropriate information and free communication.

5. Opening up the access to education and job training based on an individual’s abilities and, at the same time, also ensuring the ideological neutrality of educational institutions and entertainment.

6. Creating employment opportunities and possibilities to earn a living which are tailored to people and available in sufficient number and quality so as to promote common welfare and prosperity for everyone.

7. Developing information technology further so that it can be used as a helpful leadership by people of people in business and society.

8. Promoting the participation of citizens in public opinion?making and forming the community in such a way that freedom, order and justice are equally balanced.

9. Protecting nature and the environment against overexploitation and destruction, and promoting natural processes for the benefit of future generations. 10. Overcoming the lack of meaning and time of modern man and finding a dignified form of life with leisure for culture and religion.

3.2 The HumaniThesia portal

The HumaniThesia portal, which is still under construction, will be dedicated to research and presentation of the whole scope of topics related to the humane use of information technology. It will be open to users without any charge as soon as an internal pilot project has been completed. The central focus of the portal will be the ten criteria of quality of life. A forum will be set up for each cluster of topics, where the respective criterion can be discussed. The discussions will be open to all participants, amongst these also the Integrata Foundation. Depending on the intensity and productiveness of the discussions, interim results will be formulated and stored as such in the “Arguments” block of the portal by an editor (see Figure below)

 

Schematic HumanIThesia2

 

In addition, the “Arguments” block will provide relevant articles, contributions, manuscripts of lectures and other publications or links to such sources of information, and it will be built up like a reference work. It will also contain ethical?moral assessments, maxims, manifests and – vice-versa – critical contributions about the humane use of in? formation technology. We ascribe special importance to the “Examples” block, which will include practical proposals for improving the conditions of life with information technology as well as visions and concepts, projects, application examples and other relevant works, such as screenplays and TV spots that look into the subject critically. The “Teaching Texts and Compendia” make up a third block of information that will be made available to the public. These are teaching materials and web?based training modules on the core questions regarding the humane use of information technology. A glossary explaining the terms used in the portal, in particular the technical terms used by the Integrata Foundation, and a list of relevant literature will round off the portal. (Please see also: W. Heilmann. “HumaniThesia. Konzept eines Internet-Portals zur humanen Nutzung der Informationstechnologie.” www.humanithesia.org.) It is hoped that the HumaniThesia portal will become a center for discussing and implementing trend-setting examples of the humane use of information technology in the near future. The best proposals will be awarded the Wolfgang Heilmann Prize, which already has been granted ten times.

3.3 The Wolfgang Heilmann Prize Every year the Integrata Foundation awards the Wolfgang Heilmann Prize, named for the founder, to outstanding work that describes how modern control technology can be implemented to generate humane forms of work and employment, that significantly contributes to improving the conditions of life and promises to lead to a better quality of life. Pragmatic factors are at the foreground of the foundation’s considerations, i.e. it honors works that put forth conceptual proposals over and beyond the progress of knowledge. Such works can take the form of scientific contributions, project descriptions and other texts as well as screenplays. However, grand schemes are given lower ratings than concrete projects or best?practice presentations, because the latter are more likely to change our world, even if only in small details. It goes without saying that far reaching and concrete concepts are particularly prize?worthy. Since the establishment of the Integrata Foundation in 1999, the following topics have been announced and honored with prizes. For more detailed information about the prize?winners and their work, please go to www.integrata-stiftung.de/Preis. 1999: Tele-Services: Tele?cooperation, electronic commerce 2000: Tele-Learning: Job training and further training in a networked world 2001: Knowledge management as a contribution to the humane use of information technology 2002: Tele-Medicine: The humane use of information technology in medicine 2003: Tele-Management: Management in virtual organizations 2004/5: De-congestion of traffic through telematics and tele-cooperation 2005/6: More humane use of communication technology 2006/7: Security, information and media competence 2007/8: Citizen?centered applications of information and communication technologies 2009/10: More quality of life through information technology The prize is endowed with Euro 10,000.00 and can be divided among up to three prize? winners. A jury made up of experts from science, business and society chooses the winner. Decisions taken by the jury are final and cannot be contested. The members of the jury sit on the panel voluntarily. Up until now, the prize?worthy works were found after publication of a corresponding announcement. After the HumaniThesia portal is launched, the proposals submitted there will be included in the selection process. This means that every outstanding proposal published in the portal during a year has a chance of receiving the prize. In this way, we hope to offer an incentive to people, above all young people, and to win them over for the ideas promulgated by the foundation. The conflict between man and computer as well as the spiritual struggle for a more humane world must be borne by all social forces together. This will only prove successful in the long run if every new generation puts forth its ideas. It remains to be hoped that very many people from all areas of life, young and old, will take part in the HumaniThesia portal and help guide the development of information technology in the right direction – for the well?being of every individual person and mankind as a species.

The goal of the foundation is not to conserve the ash but to pass on the fire of humanity.

Bibliography Heilmann, Wolfgang. “Telemedien und soziale Prozesse, Thesen zur Informationsgesell? schaft.” Inaugural lecture, University of Karlsruhe, 7 December 1999. Hering, Norbert. “Über die Grenzen des Verstehens zwischen Gehirn und Prozessor.” Lecture, MEDICA MEDIA, Düsseldorf, 20 November 2002. Schirrmacher, Frank. Payback, 1st edition,

About the Author Dr. Wolfgang Heilmann is a German economist and honorary professor at the Karlsruhe Institute of Technology . He studied economics and philosophy in Frankfurt and Tubingen, where he graduated with a degree in economics. Later on he received his doctorate with a thesis on “social utopias of the modern era” at Hans Peter . After working for IBM and in the engineering industry Heilmann founded the initially constructed as a “joint venture for integrated data processing” Integrata who converted in 1989 into a corporation. For the following ten years Dr. Heilmann served as corporation’s chief executive officer. In recognition of his business and social merits Heilmann 1995, the Federal Cross of Merit on Ribbon awarded. Dr. Heilmann is the founder of  Integrata Foundation for Humane Use of Information Technology, which has set itself the goal of improving the quality of life of all people through the use of information technology. The Foundation awards the Wolfgang Heilmann Prize for outstanding proposals for improving the use of computers in society.