Archive for the ‘Economy and Business’ Category

It’s not just Wall Street

May 21, 2015

CFerbIKW8AACo-e

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.

(more…)

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.

(more…)

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 read all the arguments on both sides of the question.

I link.  You decide.

(more…)

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.

(more…)

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.

(more…)

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.

‘Fast track’ involves more than just the TPP

April 21, 2015

The significance of “fast track” goes far beyond clearing the way for quick approval of the Trans Pacific Partnership agreement.

There are other TPP-like trade agreements now under negotiation, such as the Transatlantic Trade and Investment Partnership and the Trade In Services Agreement.

The Trade Promotion Authority bill, otherwise known as “fast track,” would govern how such agreements are negotiated and voted on in the future.

In theory this could work well.  Negotiators would pursue objectives set by Congress, the leaders of Congress would be kept informed as negotiations progress and ratification of the agreement would be only a formality.   But there is no mechanism in the current fast track bill by which Congress can call the negotiators to account or demand information.

Fast track assumes good faith on the part of all concerned, and, based on the historic record, including the way the TPP has been negotiated, I think this would be a naive assumption.

LINK

Hatch Bill Would Revive Controversial 2002 Fast Track Mechanism That Faces Broad Congressional, Public Opposition by the staff of Public Citizen’s Global Trade Watch division.

What’s Wrong With Wyden-Hatch-Ryan’s Fast Track Bill – The Specifics by Gaius Publius for Down With Tyranny (via naked capitalism).  [Added 4/22/2015]

At last the TPP comes before Congress

April 17, 2015

Update: The headline should read “At last fast track comes before Congress”.  TPP hasn’t yet come before Congress and it is possible (though unlikely) that it never will.

I’ve been ranting so long about the danger and harm in the proposed Trans Pacific Partnership Agreement that I’m at a loss for something new to say now that it is actually nearly ready to come before Congress for a vote.

The TPP is an agreement among 12 nations, including the USA, Canada, Australia and Japan, which would set limits on financial regulation and food safety standards and make drug patent and copyright laws more restrictive.

hulk-tppIts most controversial provisions is the Investor State Dispute Settlement system, which would allow foreign investors to seek sanctions against governments whose labor, environmental, health and other laws deprived it of its just profits.

Under ISDS, “foreign investors” – mostly transnational corporations – have the ability to bypass U.S. courts and challenge U.S. government action and inaction before international tribunals authorized to order U.S. taxpayer compensation to the firms.

Today Congressional leaders announced support for fast track authority, which means that the House of Representatives would have no more than 60 days to debate the agreement and the Senate 30 additional days, after which they would vote “yes” or “no”.

This does not mean that fast track has been approved.  This would require a vote by the full House and Senate, which is yet to come.

The TPP is a thick and complex document.  Negotiations have been conducted under strict secrecy, and the material will be new to most members of Congress.  What little is publicly known comes from leaked negotiating documents, many of them through WikiLeaks.  (Thank you, Julian Assange).

If TPP is approved through a fast track process, I would bet that dozens of congresspeople a year later will be saying they wouldn’t have voted for it if they had realized all that was in it.

(more…)

Doctors Without Borders on the TPP

April 17, 2015

tpp_infographic2_0

It is not too late to modify these harmful rules.  Negotiations among the United States and 12 other nations have been  are in the process of being completed, and it is now will then be up to the United States Congress to approve the Trans Pacific Partnership Agreement—or not.

The Electronic Frontier Foundation on the TPP

April 17, 2015

tpp_1Well, it’s too late now to try to influence the negotiations.

Senators Orrin Hatch, R-Utah, and Ron Wyden, D-Oregon, the chair and vice-chair of the Senate finance committee, and Rep. Paul Ryan, R-Wisconsin, the chair of the House ways and means committee, agreed to support fast-track approval for the proposed 12-nation Trans Pacific Partnership Agreement.

This would mean that the House would have 60 days to discuss the agreement, and the Senate would have an additional 30 days, before they voted “yes” or “no”, with no possibility of amendment.

The fact that President Obama and powerful Congressional leaders support fast track does not mean that it has been approved.  The procedure requires a vote of the House and Senate, and, since there is strong opposition in both parties, it may well not be approved.

The world invests in China’s new bank

April 16, 2015

aiib-graphic

Fifty-seven governments, including all the major powers except the USA, Canada and Japan, have signed up to participate in China’s new Asian Infrastructure Investment Bank.

The AIIB may or may not be an important force in building infrastructure in Asia.  But the eagerness of the world’s governments to participate shows a willingness to follow the leadership of China even against the advice of the USA.

The red countries on the map are governments that participate in the Asian Development Bank, which is supported by Japan and headquartered in Manila, who also participate in the Asian Infrastructure Investment banks.  The blue countries on the map are other countries who have joined the AIIB.

The yellow countries are Asian Development Bank participants who held back from joining the AIIB.

I know, from reading of history, that China is following a pattern of drawing other countries in to itself rather than engage in overseas conquest.

During the Age of Discovery, for example, Europeans had a trade deficit with China and also India.  All the exploits of Vasco da Gama and Christopher Columbus were intended to find a route by which the European nations could trade directly for the porcelain, silk and spices of Asia rather than through Muslim middlemen.  All the gold and silver that Cortez and Pizarro found in the New World and brought back to Spain eventually went to China and India.

China went into temporary eclipse during the 19th and early 20th century, but the current Chinese government has restored China to its historic position—the nation that the rest of the world comes to, and tries to connect with.

I do not claim to know whether how much Asian infrastructure will in fact be built through the AIIB, nor what the future holds for China.  As stockbrokers say, past performance is no guarantee of future results.  But for now, the Chinese policy of offering things to people is more successful than the U.S. policy of forcing things on people.

LINKS

57 nations approved as founding members of China-led AIIB by Gary Huang for the South China Morning Post.

The infrastructure gap: Development finance helps China win friends and influence American allies by The Economist.

The power of the new Chinese investment bank by Richard Javed Heydarian for Al Jazeera.

 

Why are small farmers more productive?

April 13, 2015

A study by an organization called GRAIN concludes that, although small farmers produce more than half the world’s food, they own only a quarter of the world’s land, and that their share is shrinking.

I think the same principle is at work here, to a lesser extent, as was the case in the USSR and China under Stalin and Mao, when forced collective farming resulted in starvation.

On small farms, owners are the same as managers, and, even if they have hired hands, they are not separate from the workers.  Naturally they will work harder, pay closer attention and exercise more independent judgment than if they were employees of a big corporation or a government.

Why, then, are large farming operations crowding out the small independent farmers?  My guess is that it is because they have economies of scale that lower operating costs per acre, more bargaining power in dealing with lenders, suppliers and food buyers, and, last but far from least, more influence with governments.

LINK

GRAIN – hungry for land: small farmers feed the world with less than a quarter of all farmland.

 

John Michael Greer on the burden of denial

April 9, 2015

Allegedly smart phones don’t do anything to fix the rising spiral of problems besetting industrial civilization, but they make it easier for people to distract themselves from those problems for a little while longer.

John Michael Greer

John Michael Greer

That, I’d like to suggest, is also what’s driving the metastasis of television screens in the places that people used to go to enjoy a meal, a beer, or a cup of coffee and each other’s company.

These days, that latter’s too risky; somebody might mention a friend who lost his job and can’t get another one, a spouse who gets sicker with each overpriced prescription the medical industry pushes on her, a kid who didn’t come back from Afghanistan, or the like, and then it’s right back to the reality that everyone’s trying to avoid.

It’s much easier to sit there in silence staring at little colored pictures on a glass screen, from which all such troubles have been excluded.  [snip]

(more…)


Follow

Get every new post delivered to your Inbox.

Join 689 other followers