Archive for the ‘Economy and Business’ Category

Cannabis is the world’s most profitable crop

March 28, 2015
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Source: Information Is Beautiful

The passing scene: March 20, 2015

March 20, 2015

When a Summer Job Could Pay the Tuition by Timothy Taylor as the Conversible Economist.

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When I attended college in the 1950s, any young American could earn enough working at a full-time summer job, and a part-time job during the school year, to pay tuition at a state university.  The USA is generating just as much wealth per person as it was then, so there is no inherent reason why that shouldn’t still be possible.

Wrong-Way Obama? by William Greider for The Nation (via Truthout)

The world economic situation is very much like it was on the eve of the Great Depression of the 1930s.  World leaders need to work together to create jobs, and to write down debt that is a burden on economic growth and never going to be paid anyway.  The Transpacific Partnership Agreement is the exact opposite of the kind of international agreement that is needed.

Who Owns the Post Office? by Mark Jamison for Save the Post Office (via Angry Bear).

The Founders of the United States didn’t think of the Postal Service as a business.  They thought of it as a means of binding the nation together.   Benjamin Franklin, once a postmaster, would have been shocked by closing of post offices in small towns because they didn’t generate enough traffic.

How Parents in One Low-Income Town Are Raising Hell to Save Their Schools by Alan Richard on Alternet.

School teachers will tell you that the key to better schools is parents getting involved.   Parents in a small town in Mississippi have figured out how to make that work.

Peasant Sovereignty? by Evanggelos Valliantos for Independent Science News.

A recent study of nine European countries is the latest study to confirm that peasants and small farmers are more productive than large mechanized farms based on industrial agriculture.  If decision-makers are concerned about feeding the world, they should be thinking about how to get land in the hands of hard-working peasants who have little.

Turning Japanese: coping with stagnation by Roland Kelts for The Long+Short.

Japan is considered a failure by some because its economy isn’t growing.  But the Japanese economy and culture work well for the Japanese.  We Americans could learn something from them.

Corporations as privately-owned governments

March 18, 2015

A large corporation is not like a person.  It is like a government, a privately-owned government.   We Americans make a big mistake when we fail to realize this.

Our American tradition tells us to be suspicious of the power of governments.  We try to limit the government power by means of a written Constitution, and separation of governmental powers among three branches of government and between Washington and the states.   We tend to value individual rights more highly than the common good.

Corporations-v.-PeopleWe don’t  have a good way of fitting corporations into this way of thinking.

A public, limited liability corporation is an institution with special privileges and powers established by law, in order to allow people to combine their wealth to accomplish a common purpose.

The power of the corporation comes from the principle of limited liability.  Investors in a company are not responsible for the obligations of the company beyond the amount of money they have put in.   That gives corporate owners a huge advantage they would not have enjoyed as individuals.

This is a good thing when the purpose aligns with the public good, as sometimes happens but not always.   Big American corporations historically have been strong engines of economic growth.   They’ve also been dangerous concentrations of monopoly power and sources of political corruption.

American leaders in the era of Theodore Roosevelt and Woodrow Wilson understood this well.  They enacted anti-trust laws so that corporations were subject to the discipline of competition.  They set up systems of regulation to prevent executives from advancing corporate interests at the expense of the public.

Starting in the late 1970s and early 1980s, American leaders forgot this.  They thought that anti-trust laws and government regulation held corporations back [1] and experimented with giving corporations free rein.

Many adopted the philosophy of Milton Friedman, which was that since the working of the free market produced the optimum result, there was no need to consider anything else.

We’re now living in the results of that experiment.

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Corporate power and impunity

March 18, 2015

architecture-of-impunitySource: Transnational Institute

Stockholders gain at the expense of the rest of us

March 13, 2015
wagesinfographic1200px

Unemployment is now officially below 6%, but the point is still valid.

Large businesses such as General Motors earmark less money for workers’ pay and for investment, research and technology compared to earlier eras.

They do this in order to be able to hand over more money to stockholders in the form of dividends and stock buybacks.

The reason is that stockholders have leverage and workers don’t, and stockholders no longer take the long view. In 1960, the average stockholder owned a stock for eight years, Harold Meyerson reported in the Washington Post.  Now they sell their stocks after four months, and, when high-frequency trading is factored in, it’s 22 seconds.[1]

Passive, short-term stockholders, unlike the original investors, contribute little or nothing to the value of a company.  Why should their interests be paramount?

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Why doesn’t technology make us all better off?

March 11, 2015

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We Americans long enjoyed the world’s highest material standard of living, and we were told that was because of the superior productivity of American industry.  That sounds like common sense.  If you want more, you need to produce more.  Obviously.

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But about 30 or so years ago, this changed.  Our productivity continued to increase, but our wages and salaries didn’t increase along with it.

Why?

Some say that the problem is technology.   Automation means that fewer wage-earners are needed, and our work had less value.   So naturally there are fewer jobs, and employers generally don’t have to pay as much to find people to take these jobs.

Fewer wage earners are needed.  Needed by whom?  Our work has less value.  Value to whom?

They are less needed, and of less value, to the corporate boards and wealthy stockholders who own the technology.  Or, to put it another way:  Capitalists, not workers, own the means of production.

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It’s true that the average factory worker or retail clerk did not personally create the technological innovations that made it possible for them to do more with the same amount of work.  But neither did the average corporate executive or corporate stockholder.

If technology is owned and controlled by a small financial elite, then the applications of technology will be such to benefit that elite.

It is possible that, in acting in their own interest, the elite will do things that are good for society as a whole.  It also is possible that they will do things that are bad for society as a whole.

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When that happens, we the people need to understand that their power and ownership is not based on divine right or impersonal economic laws.   It is the result of corporate structures and legal rights established by law, and laws can be changed.

Some radical thinkers, such as Stanley Aronowitz, David Graeber, Richard D. Wolff and Gar Alperovitz, are reviving the idea of worker ownership and public ownership of the means of production, which is not the same thing as government ownership.

More moderate reformers think it is just necessary to change the balance of power within society.

The important thing, as I see it, is to stop letting priorities be determined by the “job creators,” the ones who own the machinery, the research laboratories and the so-called intellectual property.   The question is not whether they need us.  The question is whether we need them.

LINKS

Of Flying Cars and the Declining Rate of Profit by David Graeber for The Baffler.

Why Wages Won’t Rise by Robert Reich.

The Great Decoupling of the U.S. Economy by Andrew McAfee on his blog.

Global lessons on inclusive growth by Jason Furman for Policy Network.

The Most Important Economic Chart by Atif Mian and Amir Sufi for House of Debt.

The wedges between productivity and median compensation growth by Lawrence Mishel for the Economic Policy Institute.

 

 

Cigarette smoking is down, but not out

March 10, 2015

us-smoking-chartSource: kottke.org.

One of the big changes that has taken place during my lifetime is the decline of cigarette smoking.

When I was a boy, starting to smoke cigarettes was like learning to drive a car—a normal part of growing up.  Boys and young men such as myself who didn’t smoke were regarded as eccentric.

Now cigarette smokers are like a persecuted minority.   The campaign against smoking, and the harassment of smokers (without ever making tobacco illegal), has changed behavior.  This is not something that I would have expected 50 years ago.

While the tobacco industry is down, it is not out.   Americans still smoke more than 1,000 cigarettes a year per person, which seems to me like a large number.

More importantly, there are big markets overseas for tobacco products.  The tobacco industry is trying to use international trade treaties to prevent foreign countries from accomplishing what the United States did

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The limits of an economy based on debt

March 9, 2015

credit-compensation3-15aSource: Charles Hugh Smith.

Since the 1970s, wages have failed to keep pace with productivity, and Americans have maintained their material standard of living by borrowing.   While this enabled Americans to buy good and services and keep the U.S. economy going, the ability to borrow has reached its limit.

This means a more frugal standard of living and slower economic growth.  And, as I see it, there is no much anybody can do about it.

The chart shows the ratio of the total amount of American debt—individual, business and government—and total wages and salaries of workers employed by private industry.  In 1960, total debt was a little over three times total wages and salaries; now debt is a little over nine times total wages and salaries.

What I think the chart shows is:

  • Healthy growth in wages and salaries in the 1960s, keeping pace with debt.
  • Stagnation in wages and salaries in the 1970s, without much growth in debt.
  • A bubble in the 1980s, with the economy fueled by increased borrowing.
  • Healthy growth in wages and salaries in the 1990s, keeping pace with debt.
  • Another bubble in the 2000s.
  • Maxxing out on debt in the 2010s.  Those who can try to pay down their debts; those who can’t go bankrupt.

The fact that Americans are paying down their debts and trying to save is a good thing, not a bad thing.  But it means that the federal government will be less able than in the past to stimulate the economy by stimulating spending and borrowing.

I think it would be a big mistake to try to start another debt bubble.  Instead we Americans need to think about building up the real economy, and putting people to work doing the many things that need to be done.

LINK

The One Chart You Need to Predict the Future by Charles Hugh Smith.

The U.S. jobless rate is falling [Update: Maybe]

March 7, 2015

MW-DH110_jobs_r_20150306091454_ZHVia MarketWatch.

It’s interesting that the report of gains in jobs and a drop in unemployment was followed by a drop in stock prices.

Conceivably this could be been due to the improvement being less than expected, but analysts quoted in my morning newspaper said investors fear that the apparent recovery will cause the Federal Reserve Board to stop holding down interest rates in order to stimulate the economy.

A certain number of people can be expected take their money out of the stock market and put it in savings accounts in banks, or in bonds, because they would getting actual interest income again.

In other words, stock prices reflect an unsustainable government policy, and not the real health of the economy.

alternativenationalemploymentratesVia TownHall.com.

Still, it’s good news that the unemployment rate is falling, and is falling by every measure.

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Mark Blyth on ending the creditor’s paradise

March 5, 2015

An American economist, Mark Blyth, author of Austerity: the History of a Dangerous Idea, gave a talk to members of the German Social Democratic Party on why so-called austerity is a bad idea.

I write “so-called” because the dictionary meaning of austerity is doing without things you don’t really need.  Food rationing in the UK and USA during World War Two is an example of austerity.  It doesn’t mean prioritizing the requirements of holders of financial assets over the needs of everybody else.

Here’s why Blyth had to say.

Back in the 1970s, a period that now seems quite benign, corporate profits were very low, labor’s share of income was very high, and inflation was rising.  We were told that this was unsustainable, and new institutions and policies were constructed to make sure that this particular mix of outcomes would never happen again.

austerity-depressionIn this regard we were singularly successful.  Today, corporate profits have never been higher, labor’s share of national income has almost never been lower, and inflation has given way to deflation.  So are we happier for this change?

What we have done over the past thirty years is to build a creditor’s paradise of positive real interest rates, low inflation, open markets, beaten-down unions, and a retreating state — all policed by unelected economic officials in central banks and other unelected institutions that have only one target: to keep such a creditor’s paradise going.

In such a world, why would you, the average worker, ever get a pay rise?

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Scott Walker’s Southern economic strategy

February 25, 2015

right-to-work-2Gov. Scott Walker of Wisconsin is pushing through a right-to-work law, which gives workers protected by union contracts the right not to pay union dues.

It is part of an economic strategy copied from Southern states such as Alabama—to attract branch plants of industries headquartered elsewhere by means of low taxes, low wages and no labor unions.

The price of the strategy is low educational levels, low public services and deteriorating infrastructure—all the things that make a state attractive to entrepreneurial, high-tech and high-wage enteprise.

I think the Walker strategy is a bad one because Wisconsin can’t out-impoverish states like Mississippi, and the USA as a whole can’t out-impoverish nations like Bangladesh.  Even if we could, would we want to?

What we Americans as a nation need to think about is how to add value, and how to distribute the benefits among the working people who create value.

Scott Walker has been a highly successful politician, and looks to be a strong presidential candidate, by distracting attention away from these questions.   Instead he encourages people who are floundering economically to focus their resentment on their neighbors who still have union jobs and good wages, and away from the tiny economic elite who benefit from the low wage, high unemployment economy.

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The changing U.S. economy in four maps

February 22, 2015

The most common job in each state in 1978.

16389997587_0e9959bd23_zThe most common job in each state in 1988.

16574791922_bd081f6292_zThe most common job in each state in 2000.

16574792062_6c7be6e8d6_zThe most common job in each state in 2014

mostcommonjobSource: National Public Radio via Mike the Mad Biologist.

Long story short:  The most common jobs remaining are the ones that haven’t been automated and aren’t being done cheaper overseas.

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Squeezing Greece won’t help German people

February 14, 2015

The Greek debt crisis is not a conflict between Germany and Greece.   It is the European Union acting as a debt collection agency for central bankers.

German working people get no benefit from the demand that the government of Greece impoverish the people of Greece so as to pay interest to the European Central Bank and the International Monetary Fund.

Cartoon by David Simonds. Angela Merkel's hard line on debt threatens the euro project.They in fact will suffer in the long run, because the more wages and living conditions are driven down in other countries, the harder it will be to maintain them in Germany.

Some five years ago, I wrote a post about how Germany was a good role model for the USA, because its leaders were committed to industrial productivity and a high-wage economy.   Unfortunately, the German leaders instead have taken the USA as a role model, and followed our downward path of financialization.

I believe that people who borrow money have a moral obligation to pay it back—if they can.  I believe that there are other moral obligations that take precedence, such as the welfare of those who depend on you.  That’s why the United States and other nations substituted bankruptcy laws for debtors’ prisons.

The Greek debt problem would have solved itself if Greece had its own currency instead of the Euro.  As Greece’s balance of trade worsened, its currency would be devalued and its products and services (including the tourist industry) would become cheaper in terms of dollars and euros.

The great fear of the “troika”–the ECB, IMP and the leaders of the European Union–is that Greece will stop using the euro, and that some of the other 17 countries that use the euro will follow suit.  That might be a problem for bond-holders.  I don’t see it as a problem for ordinary people in Germany, the USA or any other country.

LINKS 

It’s the class conflict, stupid! by David Ruccio on occasional links and commentary.

Europe: Shaking the Temple by Conn Hallinan for Dispatches from the Edge.  (Hat tip to Bill Harvey)

From Minsk to Brussels, it’s all about Germany by Pepe Escobar for RT Op-Edge.

 

Dow Jones firms’ profit is $48,887 per employee

January 31, 2015
Profit-per-employee

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The 30 companies that make up the Dow Jones Industrial Averages took in an average profit of $48,887 per employee last year.  It would be interesting to know what those employees’ average incomes were.

LINKS

Five years into recovery, Dow companies squeeze workers as investors thrive by Michael Santoli for Yahoo Finance.

Another image of labor’s broken back: $48,887 in profit per employee! by Daniel Becker for Angry Bear.  (Hat tip to naked capitalism)

What happened to American business start-ups?

January 28, 2015

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We Americans pride ourselves on our entrepreneurial spirit, but the number of new business start-ups is going steadily down.

The U.S. business death rate exceeds the business birth rate.  According to Gallup, the United States ranks 12th in the rate of new business start-ups, behind such nations as Denmark, Finland, Hungary, Israel, Italy, New Zealand and Sweden.

Why?  I can think of several possible reasons.

  • Businesses are often started by employees of large corporations who see a market niche that their employers are unwilling to try to fill.  The increase in non-compete agreements makes it increasingly harder for employees to do this.
  • The stagnation of the U.S. economy is self-perpetuating.  Nobody will start a business unless they think people will buy its products or services.  The lack of good jobs at good wages means there is less of a demand for new products.
  • Because of the uncertain economy, individuals are less willing to risk their savings by investing in startups.
  • The lack of a good social safety net makes entrepreneurialism more risky.  In Sweden, even if your business failed, you still would not have to worry about lack of medical care or your family going hungry.

This is important.  New and small businesses are local.  They employ Americans.  They don’t usually have the option to outsource to India or China.

Big businesses are not immortal.  In the ecology of business, the dying giants are replaced, if they are replaced, by growing small businesses.   Without a stream of new businesses, the economy becomes dependent on old and declining businesses, such as General Motors and Chrysler, while have to be bailed out and propped up.

I don’t think small-business subsidies and set-asides are the key to having start-ups.  The best things for business startups are a high-wage, full-employment economy, an end to abusive non-compete agreements and a breakup of big-business monopolies.

LINKS

How Wall Street Killed Entrepreneurs by Yves Smith for naked capitalism.

American Entrepreneurship: Dead or Alive? by Jim Clifton, chairman and CEO of the Gallup.

Has American Business Lost Its Mojo? by Thomas B. Edsall for the New York Times.  [Added 4/7/20154]

Slow Business Start-ups and the Job Recovery by Liz Laderman and Sylvain Leduc for the Federal Reserve Bank of San Francisco. [Added 4/7/2015]

How Special Interests Undermine Innovation by James Bessen for Foreign Affairs.  [Added 4/7/2015]


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