Archive for the ‘Economy and Business’ Category

There are more TPPs in the pipeline

July 1, 2015

The Trans-Pacific Partnership is just the beginning.

POLITICO reported that four more trade agreements are now being negotiated.

Following Congress’ hard-fought approval of “fast-track” trade authority last week, U.S. Trade Representative Michael Froman vowed not only to complete the 12-nation Trans-Pacific Partnership but an even bigger pact with the European Union and three other major trade deals — all in the 18 months remaining in President Barack Obama’s term.

It could add up to the biggest trade blitz in history, transforming the rules under which the world does business.

sw0625cd_590_356“We’ve got a lot of pots on the stove,” Froman told POLITICO while watching senators cast their final votes to send the legislation to the president. We want to get TPP done and through Congress. We want to get TTIP negotiated. We’re going to finish ITA. I’m hoping to finish EGA and TISA.”

Those would be, in order: the Transatlantic Trade and Investment Partnership agreement with the European Union, an even bigger pact than the TPP in terms of economic size; the World Trade Organization’s Information Technology Agreement, which covers about 97 percent of world IT trade; the Environmental Goods Agreement, accounting for 86 percent international commerce in green goods; and the 24-party Trade in International Services Agreement, which involves three-quarters of the United States’ gross domestic product and two-thirds of the world’s services, such as banking and communications.

via POLITICO.

I’d heard of the Transatlantic Trade and Investment Partnership (TTIP) and the Trade in Services Agreement (TISA), but not the Information Technology Agreement or the Environmental Goods Agreement until now.

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Technology primarily benefits those who own it

June 29, 2015

jobs.5x650I can remember 50 and 60 years ago when people worried about what Americans would do with all the affluence and leisure time that would result from automation.   Today that seems like a cruel joke.

Technology primarily benefits those who own it.  Applied science primarily benefits those who fund it, or at least reflects what the funders are interested in.  There can be spillover effects that benefit everyone, but these don’t necessarily happen of their own accord.

I came across a good article on this topic in Technology Review.  The lesson I draw from it is (1) technology is not a substitute for social and economic reform and (2) there is a need for scientific and technological research outside the domains of for-profit corporations and the military.

LINK

Who Will Own the Robots? in Technology Review.  (Hat tip to naked capitalism}

Wall Street as the co-government of the U.S.

June 23, 2015

I’ve written many posts about the revolving door between Wall Street and Washington, and how the U.S. government puts the interests of the financial oligarchy above the interests of the American public.

I’ve just finished reading a book that shows how far back in American history this goes.

 ALL THE PRESIDENT’S BANKERS: The Hidden Alliances That Drive American Power by Nomi Prins (2014) is a narrative history showing the interdependence of the Presidents and the Wall Street banking and financial community from the early 20th century to the present day.

Nomi Prins showed how American Presidents from 1910 to 1970 had to take the interests of Wall Street banks into account in implementing their policies, and then how, from 1980 on, the banks freed themselves from governmental restrictions to engage in ever-bigger speculations, from which they had to be bailed out.

Her story begins with the Panic of 1907 with President Theodore Roosevelt standing by helplessly while J. Pierpont Morgan summons bankers to his mansion and arranges a bailout to prevent financial collapse.

The Federal Reserve System was created in 1913 in order to prevent such a situation from recurring.

This was a major turning point in American history.  It gave the United States a financial stability and financial resources without which it could not have been a world power.  It made possible U.S. participation in the world wars, the projection of American global power and the great expansion of federal government activity—none of which could have been paid for on a pay-as-you-go basis or with foreign loans.

At the same time, it formalized the position of the great American banks as a kind of fourth branch of government.

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The real U.S. strategic rivalry with China

June 18, 2015

Don’t look back. Something might be gaining on you.
==Sachel Paige

   The big issue that we Americans have with China is not who controls the Spratley Islands in the South China Sea.

It is the shifting of U.S. manufacturing jobs to China and the U.S. trade deficit with China.

The United States probably does have legitimate economic grievances against China.  Some American economists, for example, think the Chinese government keeps the exchange rate for its currency artificially low in order to make its exports cheaper in world markets.

But the main problems we Americans have with China are due to things we have done to ourselves.

The Chinese never forced U.S.-based companies to give up domestic manufacturing capability. It never forced us Americans to neglect our physical infrastructure—our Internet service, our roads and bridges, our dams and levees. It never forced us to neglect our human resources—our higher education, our industrial research. It never forced our financial elite to invest in debt rather than invest in production.

Trying to substitute a military rivalry for an economic rivalry may or may not hurt China. It will not do us Americans any benefit because our problems do not originate in China.  They originate at home.

China has its own problems—labor unrest, ethnic conflict, corruption, air pollution, suppression of dissent.  Whether any of these problems are potentially fatal, I do not know.   What I do know is that it would be foolish for us Americans to count on China self-destructing.

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The stupidity theory of organizations

June 13, 2015

This was originally posted on April 30, 2013.

dilbert1

Stupidity in big organizations is not a bug. It’s a feature. So say two scholars, Mats Alvesson of Lund University in Sweden and Andre Spicer of City University in England, in their recent paper, The Stupidity Factor in Organizations.

They say organizations need “functional stupidity,” which is a willful lack of recognition of the incompleteness of knowledge and a willful refusal to question the organization’s goals and policies. This builds confidence and loyalty which helps the organization to function smoothly.

Alvesson and Spicer discuss how managers use vision statements, motivational meetings and corporate culture as “stupidity management” to develop loyalty and suppress critical thinking. They discuss how employees use “stupidity self-management” to suppress doubt and get with the program.

In Herman Wouk’s novel, The Caine Mutiny, a recruit decides that the U.S. Navy is an organization designed by geniuses to be operated by idiots. When in doubt, he asks himself, “What would I do if I were a idiot?” That is a gross exaggeration, but an exaggeration of truth.

Managers want employees who are intelligent enough to carry out orders competently, but not so intelligent that they question the orders. Critical thinking creates friction that prevents the organization from running smoothly. Over time the organization’s tendency is eliminate that friction, and become more disconnected from reality.

You can see this in how Washington officials and journalists understand. They treat the processes of government, such as the 60-vote rule in the Senate or the revolving door between corporate and government employment, as if they were objective and unchangeable facts, like the laws of thermodynamics. They treat actual problems, such as unemployment or global climate change, as if they were matters of personal preference.

The trouble with ignoring reality is that sooner or later it catches up with you. Then crisis generates what Alvesson and Spicer call the “How could I have been so stupid?” syndrome.

Click on A Stupidity Based Theory of Organizations for a PDF of Alvesson’s and Spicer’s paper. If you read it with close attention, I think you will see the dry humor beneath their social science jargon.

Click on Understanding Organizational Stupidity for Dmitry Orlov’s summary of their paper and his comments.

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Economists, free trade and the TPP

June 12, 2015

Free-Trade-pg1-copyA writer named Michael Goodwin and an illustrator named Dan E. Burr have come up with a clear and complete explanation of the problems with free trade in general and the Trans Pacific Partnership in particular.  Click on Economix Comix to read it.

More toxic trade agreements are in the pipeline

June 11, 2015
Negotiators of Trans-Pacific Partnership Agreement

Scope of the proposed Trans-Pacific Partnership Agreement

Negotiators of Trade in Services Agreement

Scope of the proposed Transatlantic Trade and Investment Partnership

Negotiators of Trade in Services Agreement

Scope of the proposed Trade in Services Agreement

If Congress approves the Trade Promotion Authority, aka Fast Track, it will grease the way not only for the Trans-Pacific Partnership, but for two other toxic trade agreements now in the pipeline—the Transatlantic Trade and Investment Partnership and the Trade in Services Agreement.

The Transatlantic Trade and Investment Partnership is basically the same as the Trans-Pacific Partnership, except that it covers a different set of countries.

The Trade in Services Agreement is mainly about deregulation of financial services, but it also has a section on “movement of natural persons.”  In other words, TISA would cover immigrationtemporary visas for specialized workers, according to a draft released by Wikileaks.

Notice which countries are not in any of the three proposed agreements.  The BRICS countries—Brazil, Russia, India, China and South Africa—would retain sovereignty over their economies after United States, the European Union and their satellites give them up.

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It’s not just Wall Street

May 21, 2015

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It’s not just the USA that allows bankers and financiers to break the law and get away with it.   Or regards the largest financial institutions as “too big to fail”.

This goes back to Prime Minister Tony Blair, who thought he could make London the world’s financial hub by freeing banks from all regulation.

As in the USA, the government’s priority is to protect the financial institutions rather than to protect the public.

Banking regulation is even weaker in Europe than in the United States, and one of the goals of the proposed Transatlantic Trade and Investment Partnership, the next international agreement in the pipeline after the Trans Pacific Partnership, is to set limits on financial regulation.

That would make banking and finance un-reformable, either in the USA, the UK or other TTIP signatories.

Update 5/22/2015.  The five banks that pleaded guilty to rigging interest rates and the exchange rate for foreign currencies are Britain’s Barclays and the Royal Bank of Scotland, the USA’s Citicorp and JP Morgan Chase and Switzerland’s UBS.

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The claim that off-shoring lowers costs

May 20, 2015

Yves Smith wrote on her naked capitalism blog:

… … The claim that outsourcing and off-shoring lower costs is greatly exaggerated.

Off-shoring and outsourcing … … do lower direct factor and lower-level worker costs.

But they do so at the increase of greater coordination costs of much more highly-paid managers.  And they also increase shipping and financing costs, and downside risk.

Having people work at a distance, whether managerially or by virtue of being in an outside organization where the relationship is governed by contract, increases rigidity (harder to respond to changes in market demand) and the odds of screw-ups due to communication lapses.

And outsourcing also reduces an organization’s skills.  Those lower-level people have a lot of product know-how that you lose when you transfer activities to an outside operation.

It’s nice to think that you can hollow out your organization and just do all the sexy design and marketing stuff and dump the grunt work on other players.  But over time you are breeding future competitors.

Thus off-shoring is best understood as a device for transferring income from the rank and file to middle level and senior executives.

via naked capitalism.

In short, off-shoring lowers the wages of production workers, and raises the salaries and importance of managers.   And who makes the decision about off-shoring?  The managers!

This reminds me of America by Design and Forces of Production, books I read by an economic historian named David Noble.   He wrote that there was no evidence of an overall economic benefit in replacing skilled workers with automatic machinery.  The benefit was in increasing the power of managers and industrial engineers, and decreasing the power of workers.

There’s something called public choice theory, which is about how public officials, when making decisions, consider their own good as well as the public good.  I’d say this theory applies just as much to decisions within corporations or any other organization.

What it means is that when corporate officials say “the market” determines this or that, we the people are entitled to ask—the market for what and for whom?

How Apple undermined the US economy

May 8, 2015

I’ve always bought Ford and General Motors cars, partly because I wanted to support jobs for my fellow Americans.

As Abraham Lincoln reportedly put it, “When I buy a shirt from England, I get a shirt and England gets a dollar.  But when I buy a shirt from America, I get a shirt and America gets a dollar.”

At the same time, I’ve always bought Apple computer products, and, in so doing, I may have done more to undermine the U.S. economy than I did when I bought a Ford Escort or a GM Saturn.

9554-1329-applecash-140611-lI read an article yesterday on a blog called Moneyball Economics about how Apple offshored the American smartphone industry to South Korea, Taiwan and mainland China.

This is a big thing.  The writer, Andrew Zatlin, pointed out that the United States imported nearly $100 billion worth of smartphones each year, half of them Apple iPphones.  Smartphones are the third largest U.S. import, behind oil and automobiles.

He said it is like a Marshall Plan for these three countries.  The iPhone industry creates a million jobs in eastern Asia and provides valuable technological knowledge that makes those countries more competitive in the world.   They aren’t all Apple smartphones, but Apple has half the market and sets the pace.

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Another stock market bubble ready to pop?

May 7, 2015

wall_street_stock_market_bubble

Why are stock prices rising while the real economy is doing so badly?

Answer: Stock buybacks.

Mike Whitney, writing for Counterpunch, explains how corporate CEOs keep their stock prices high even when their sales and profits are lagging by borrowing money and buying back stock.

CEO salaries and bonuses are typically tied to stock prices, so CEOs are rewarded for increasing their corporate debt rather than figuring out how to improve efficiency and make better products.  Whitney quoted Wall Street analysts as saying stock buybacks account for more than half the post-recession rise in the stock market.

Janet Yellen and Ben Bernanke at the Federal Reserve Board made this possible by holding down interest rates, an action that punishes risk-averse small savers who’d prefer to keep their money in insured bank accounts and pushes them into the financial markets.

That’s why the financial markets are doing so well and working Americans are doing so badly.  But this cannot go on forever, and I think the next crash will be worse than the previous one, just as the current recovery is worse than the previous one.

LINKS

The Rich Get Richer: Titanic Stock Bubble Fueled by Buyback Blitz by Mike Whitney for Counterpunch.

The Whisper of the Shutoff Valve by John Michael Greer on The Archdruid Report.

Debating the TPP: links to the pros and cons

May 2, 2015

I’m strongly against the proposed Trans Pacific Partnership agreement and the fast track proposal for approving it, based on what I know of both.

I write this even though I admit I don’t know what will be in the TPP when it is finally submitted to Congress.  I could be wrong in everything I say.   I don’t think I will be, in fact I’m pretty sure I won’t be, but in this post, I link to arguments in favor as well as those opposed so you can judge both sides of the question.

I link.  You decide.

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A graph showing what went wrong with the U.S.

April 30, 2015
imrs

Double click to enlarge.

This chart shows the average annual income, year by year, of the bottom 90 percent of income earners (top to bottom scale) and upper 1 percent of income earners (left to right scale).

Unless you have a good reason for believing that American working people became less productive after 1973 or so, and the economic elite suddenly became more valuable, there is something very wrong with the U.S. economy.

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Poor nations and the new world order

April 28, 2015

One of the things I’ve come to realize in recent years is that institutions exist that constitute a kind of world government.

I always thought that for a world government to exist, it would have to have its own army.  But the International Monetary Fund, the World Bank and the investor-state dispute settlement judges in international trade agreements don’t need armies to enforce their—unless you consider the U.S. Central Intelligence Agency to be their army.

PrashadPoorerNations97818I just finished reading  THE POORER NATIONS: A Possible History of the Global South (2012) by Vijay Prashad, which is about how international institutions came into being to fight nationalistic governments in Africa, Asia and Latin America—the Third World.

These international institutions are greatly from the world government envisioned by the idealists who created the United Nations.

I’m worried about how the Trans Pacific Partnership agreement and other proposed trade agreements would create rules to protect international corporations and investors against national laws to protect labor, public health and the environment.  But for Third World nations, as Prashad showed, this is nothing new.

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A note on the TPP and fast track

April 23, 2015

I’ve been writing about the proposed Trans Pacific Partnership agreement as if it were a done deal, and the only significance of the Trade Promotion Authority bill, aka “fast track,” in regard to the TPP is to push it through with a minimum of debate.  This is not so.

I do in fact think that is the significance of “fast track,” but I should emphasize that the TPP is not a done deal.  The Japanese government is balking at some of the proposals and, without Japan, the TPP would be meaningless.

So a “fast track” plan that allowed Congress to give meaningful input into the negotiations would be important.  Whether or not the Wyden-Hatch-Ryan bill does this is an important question.


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