Archive for the ‘Economy and Business’ Category

What’s wrong, and what to do about it

December 3, 2014

whatswrongwithuseconomy_a_final1_infographic350w

The AFL-CIO has an excellent series of infographics about what’s wrong with the U.S. economy, which I have put into this post.  For those who have a little time, I link to four articles explaining the infographics.  For those who have more time, I then link to background information on which the articles are based.

My only argument with the AFL-CIO is that they attribute bad economic policies exclusively on Republicans, while ignoring Wall Street Democrats such as Bill and Hillary Clinton, Barack Obama, Joe Biden, Chuck Schumer and Christopher Dodd.

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Corporations that bestride the world

December 2, 2014
Double lick to enlarge.

Double click to enlarge.

Some giant corporations are larger than small countries, but that is not the source of their power.

The source of their power lies in the fact that if a large corporation doesn’t like a government’s policies, it can take its money to a nation more to its liking.

International treaties, as well as organizations such as the World Trade Organization and International Monetary Fund, insist in the right of money to migrate wherever and however its owners wish.

Individual human beings do not enjoy the same right.  Large and sudden shifts of money and population both can be disruptive, but the migration of money is considered a right and the migration of people is considered a problem.

International treaties and agreements such as the World Trade Treaty, North American Free Trade Agreement and the proposed Trans Pacific Partnership Agreement give international corporations a legal status equal to sovereign governments.  If corporate executives think a government’s laws or policies are unjust, they can appeal to a business-friendly tribunal to overturn the law or penalize the government.

The important thing to remember about all this is that none of this is the result of impersonal workings of the laws of economics.

It is the result of decisions made by governments, which could have decided otherwise.

Corporations are created by law.  Any powers they have come from charters by a state or local government which define what the corporate body can and cannot do.

Without legislation allowing such charters, corporations would simply be collections of individuals.  There would be no corporate structure to stand between them and their liability for debts and criminal penalties.

The power of international corporations to shift capital from one country to another exists only because there are laws that allow this to happen.  The power of international corporations to override national sovereignty exists only because nations give up their sovereignty.

It’s possible to imagine a world in which things are different—in which international treaties set standards to require corporations to treat workers decently, sell non-toxic products and refrain from damaging the local environment.

That’s not the world we live in right now.  But it is a world that we the people have the  power to create.

Wall Street is hijacking America’s pension funds

December 2, 2014

Back in 1976 a smart business analyst named Peter Drucker noticed that a steadily increasing amount of stocks in American companies were held by pension funds.

He wrote a book entitled The Unseen Revolution: How Pension Fund Socialism Came to America, which argued that, if things kept going the way they were then, pension funds would own a majority of publicly-traded stocks.

Thus, he argued, the United States was quietly becoming a socialist country, in which workers owned the means of production.

Pension-FundThe flaw in his argument was that, although the pension funds were owned in the name of workers, they did not control the funds, and the funds were not necessarily managed in their interest.

Since 1976, private companies have been dumping defined-benefit plans and switching to plans in which workers take on the burden of saving and the risk of investment.  I left the paid work force in time to get a defined-benefit pension (with no cost-of-living adjustment, however).  If I were young today, I would not be so fortunate.

The exception is government pension plans, but now state and local governments, through a combination of corruption and ignorance, are allowing Wall Street speculators to put employees’ pension money into the kind high-risk speculative investments that caused the latest stock market crash.

My e-mail pen pal Bill Harvey sent me a link to a good article about this, which is copied below.

When the next crash comes, the employees will be out of luck and the fund managers will walk away after pocketing high fees.

This reflects two great weaknesses in American society.

One is a moral weakness, that financiers regard it as ethical to profit at the expense of those who trust them.

The other is an economic weakness, that financial manipulation is more profitable than creating value in the real economy.

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Wall Street Is Taking Over America’s Pension Funds by Murtaza Hussain for The Intercept. (via Bill Harvey)

‘Assembled in the USA,’ but made in China

November 26, 2014

mftg&walmart-v4-1024x839

Walmart is selling TV sets with the label, “Assembled in the USA,” but the Association for American Manufacturing has complained to the Federal Trade Commission that the TV sets are actually made in China.

FTC rules say that a product can’t be labeled as assembled in the USA unless the principal assembly takes part in the USA, and the assembly work is substantial.  Walmart’s supplier, Element Electronics, doesn’t do enough assembly to qualify, the complaint says.

One reason American manufacturers have shifted production overseas is to meet Walmart’s demand for low prices.  Walmart is the USA’s largest importer.  That’s something for American Christman shoppers to think about.

∞∞∞

How Walmart Destroyed U.S. Manufacturing by Molly McGrath and Brad Markell for the Walmart 1 Percent.

Walmart Workers Ramp Up Protests for Black Friday by Diane Krauthamer for Labor Notes.

The passing scene: Links & comments 11/22/14

November 22, 2014

Whatever Happened to Overtime Pay? by Nick Hanauer for Politico.

Nick Hanauer, the wealthy entrepreneur who wrote “The Pitchforks Are Coming … for Us Plutocrats,” wrote a new article about how the erosion of overtime pay is a reason so many middle-class people are poorer than their parents.

In 1975, the Department of Labor’s definition of eligibility for overtime pay—time-and-a-half for overtime— applied to 65 percent of the American work force.  Now it only covers 11 percent.

President Obama could fix it with a stroke of the pen, Hanauer wrote.  Either millions of workers would get more pay raise through overtime.  Or millions of jobs would be created as employers sought to avoid paying overtime.  But Hanauer said his inside information is that this isn’t going to happen.

Bank of North Dakota Outperforms Wall Street by Ellen Brown for Counterpunch.

The Bank of North Dakota, which is the only U.S. bank owned by a state government, outperforms the big Wall Street banks while promoting the state’s economic development and financing public works.  Ellen Brown said the reason for the bank’s success is that it doesn’t gamble with speculative investments and it plows its profits bank into the state rather than into big bonuses and executive salaries.

How the Government Steals from Citizens by A. Barton Hinckle for Reason magazine.

D.C. police plan for future seizures years in advance in city budget documents by Robert O’Harrow Jr. and Steven Rich for the Washington Post.

 A reminder: The Fifth Amendment to the Constitution states that “no person … shall be deprived of life, liberty or property without due process of law, nor shall private property be taken for public use without just compensation.”  This is a principle of justice.  It should not be regarded as an obstacle to get around.

How the rich are getting richer

November 17, 2014

US-BLS-Income-Expenditures-by-income-groupChart from Wolf Street.

This chart gives an indication as to why the U.S. economy is dragging and why income is flowing upward.

Over the eight years ending in 2012, Americans with incomes of $150,000 a year and up spent, as a group, roughly the same amount of money that Americans with incomes of less than $30,000 a year spent, as a group.

But the spending of the $150,000-plus group was well under their total income, so they were able to save and add to their total wealth.  The spending of the $30,000-minus group was above their income, and had to be supporting by borrowing.  That’s why the upper brackets generally get richer, and the lower brackets seldom do.

Our elected vs our unelected governments

November 6, 2014

The most important political question in the United States is whether our elected government can and will assert its authority over our unelected governments..

The elected government consists of the President, Congress, state governors and legislators and all other parts of government controlled by persons chosen by voters in contested elections.

revolving-doorThe unelected governments are (1) the secret “national security” espionage, covert action, surveillance and police agencies and (2) the Wall Street banks and financiers.  The reasons I call them governments are:

  • Their policies affect the direction of the USA as much as the policies of the elected governments do.
  • They are independent of the authority of the elected government and violate laws with impunity.
  • They exercise more influence and control over the elected government than the elected government does over them.

Wall Street exercises power over economic policy.  It has political power based on campaign contributions to the Democratic and Republican parties and on the revolving door between banks and top government positions.

Our political campaign system makes it virtually impossible to run for national office, or for statewide office in large states, without millions of dollars in campaign contributions.  Unless you are rich yourself, you need money from rich individuals or large corporations.  While big contributors differ among themselves in important ways, they all oppose anything that would diminish their wealth and power.

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The passing scene: November 6, 2014

November 6, 2014

New Shipping Canal in Nicaragua Faces Questions and Opposition by Jens Gluesing for Der Spiegel.

Click to enlarge.

Click to enlarge.

Nicaragua is proceeding with plans for a new canal connecting the Atlantic and Pacific Oceans, which will be bigger than the Panama Canal.

The Nicaraguan Canal will be paid for and built by China, which will get a 50-year concession to operate the canal and an option for an additional 50 years.  It would give China a great foothold for expanding its economic influence in the Western Hemisphere.

The canal is scheduled for completion in just five years, although construction hasn’t started as yet.  Unlike the Panama Canal, it will be big enough to handle container ships.

Some Nicaraguans are opposed, because of the impact on Lake Nicaragua, source of most of the country’s drinking water, and because 30,000 Nicaraguans will be displaced from their homes to make way for the canal.  Others question whether the canal will be financially viable, since the Panama Canal is being expanded and other central American countries are building “dry canals”—railroads to transfer cargoes from one ocean to the other.

The New Loan Sharks by Susanne Soederberg for Jacobin magazine.

desperationnationStagnation of American wages and economic uncertainty have made payday loans a big business, because so many Americans are barely getting by and have no savings cushion for unexpected emergencies.

Payday loans are not a marginal part of the U.S. economy.  They are a big business financed by economic giants such as Wells Fargo, JP Morgan Chase and Bank of America, and by Advance America, which is owned by Mexican billionaire Ricardo Salinas Pilego.

The Red Cross’ Secret Disaster by Justin Elliott and Jesse Eisinger of ProPublica and Laura Sullivan of NPR.

The Red Cross is another charitable organization which has succumbed to the corporate model, which puts fund-raising and public relations ahead of doing its job.

Housing, financialization and the crash

October 27, 2014

Via Corrente

This video by Richard D. Wolff is a clear and accurate account of the financial crash and the current struggles of American working people.  It dates from 2011, but it is still relevant.  I recommend fast-forwarding through the first three and a half minutes minutes, which are about economic classes, and getting to the meat of the video, which is about the foreclosure and credit crisis.

I can remember when most goods and services were paid for through cash and check, without having to go through credit card companies, other lends and insurance companies.  I don’t deny the benefit of credit or of insurance, or advocate going without either, but it is striking how much we Americans are at the mercy of lenders and insurers.

Bad Paper: The world of the debt collector

October 20, 2014

Jake Halpern wrote a New Yorker article, and then a book, Bad Paper (which I haven’t read), about the debt collection industry.  He was interviewed by Bloomberg’s Megan McArdle.

My mom was getting hounded by a debt collector for a bill that she did not owe.  She eventually paid it just to get him to stop harassing her.

bad.paperI started investigating and found out that much debt-collection activities were in my hometown of Buffalo, New York.  I ended up writing a profile on a Buffalo-based debt collector who bought and sold and collected on debt for pennies on the dollar; that story ran in the New Yorker.

That New Yorker story got optioned by Brad Pitt’s production company.  So I went back to Buffalo with the screenwriter.

No one wanted to talk to a journalist back when I was doing the New Yorker piece, but now that I was with Brad Pitt, everyone talked.  One night, the screenwriter and I go out to dinner with a banker and a former armed robber who had gone into business with one another.

They tell me an incredible tale.  They purchased $1.5 billion worth of bad debt for pennies on the dollar. Their aim was to make a fortune.   All goes well on this unlikely venture until some of the debt is stolen and the former armed robber must delve into an underworld where debt is bought and sold on street corners.  This quest ends in a showdown with guns in the inner city of Buffalo, New York.

The world Halpern describes is lower on the economic food chain than the one described by Matt Taibbi in The Divide, but the process is basically the same.  A lender decides it is not worth the effort to collect on certain bad debts, and sells the debt to a collection agency for pennies on the dollar.

The problem is the lack of reliable information as to what is owed and for what.  Sometimes the collectors don’t know how much is principal and how much is accrued interest.  Sometimes unscrupulous lenders will sell the same debt to several collection agencies.

Halpern said he wound up having more sympathy with debt collectors than he expected.  It is one of the few occupations open to convicted felons.  The central figure in his New Yorker article was a former cocaine dealer trying to go straight.

What does he think needs to be changed about debt collection?

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