Week-end Wrap - July 28, 2018

Week-end Wrap - July 28, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

"...we had come to the stage where for our people what was needed was a real democracy; and of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy." - Theodore Roosevelt,  An Autobiography, 1913

[Posted by someone on Facebook]

The Missing Profits of Nations
Posted on July 23, 2018 by Thomas Tørsløv, PhD student, University of Copenhagen and Ministry of Taxation, Denmark, Ludvig Wier, PhD candidate, University of Copenhagen, and Gabriel Zucman, Gabriel Zucman.
[Originally published at VoxEU, via Naked Capitalism]

Between 1985 and 2018, the global average statutory corporate tax rate fell by more than half. This column uses new macroeconomic data to argue that profit shifting is a key driver of this decline. Close to 40% of multinational profits were artificially shifted to tax havens in 2015, and this massive tax avoidance – and the failure to curb it – are in effect leading more and more countries to give up on taxing multinational companies. 

Perhaps the most striking development in tax policy throughout the world over the last few decades has been the decline in corporate income tax rates. Between 1985 and 2018, the global average statutory corporate tax rate fell by more than half, from 49% to 24%.
Why are corporate tax rates falling? The standard explanation is that globalisation makes countries compete harder for productive capital.... 

But is it well founded empirically? Today’s largest multinational companies don’t seem to move much tangible capital to low-tax places – they don’t even have much tangible capital to start with. Instead, they avoid taxes by shifting accounting profits. In 2016 for instance, Google Alphabet made $19.2 billion in revenue in Bermuda, a small island in the Atlantic where it barely employs any worker nor owns any tangible assets, and where the corporate tax rate is zero percent. 

....Overall, we find that close to 40% of multinational profits – defined as profits made by multinational companies outside of the country where their parent is located – are shifted to tax havens in 2015. Our work provides transparent, easy-to-compute metrics for policymakers to track how much profits tax havens attract, how much they gain in tax revenue, and how much other countries lose.... Our findings have implications for economic statistics. They show that headline economic indicators – including GDP, corporate profits, trade balances, and corporate labour and capital shares – are significantly distorted.

Monetary Theory and the Left

Tony (probably correctly) believes that I should write more about monetary theory.

Good point. Without monetary reform, there is simply no way the the world can pay the huge bills that will be incurred running an effective program to combat climate change. So in no particular order, here are my excuses for not writing about the subject every damn day—like it probably deserves.

1) I have written extensively on money and the economics of development. I still consider the chapter on Money to be the most well-thought-out chapter in Elegant Technology. But over the years, I have sort of run out of things to say.

2) The "left" is notoriously uninterested in monetary debates—lord knows I have tried. I have heard money debated in barber shops, gas stations, feed mills, church basements—sometimes (rarely) even in political forums. I grew up in the corn belt. My grandfather was an active member of the Farmer-Labor Party. But I haven't heard anyone from the "left" discuss the money subject since I started at U Minn in 1967. And the few people I have tried to engage either get lost in the math or the fact that fractional banking is not as established / legitimate as the big myths of banking and finance. The fact that the evidence is beyond rational debate does not sway minds—especially those who believe that "the personal is the political" and so shun the notion that something as impersonal as money may be the most important political subject of them all.

3) That leaves the "right." There are people like Ron Paul who are very good critics of the Federal Reserve. But his "solution" is the Gold Standard. Now the Fed has fallen into the hands of some serious fools, but on their very worst days, they are still a superior alternative to the Gold Standard.

4) Ellen Brown. Enter her name in the search box of this blog and you will find dozens of posts related to some well-written argument she is making. She loves the Bank of North Dakota—easily the best idea Progressives ever had. Strange how no one has duplicated that institution in other states, but she has done a nice job of lighting the fire that may lead to a California version.

5) There are a lot of crackpots out there. Because the nature of money is a subject that is virtually absent in the mainstream financial press, most people who develop any theories at all are usually self-taught. Now because there are a wealth of good books written about money and folks like Franklin, Edison, and Ford took an active interest in the subject, it IS possible to get your arms around this sprawling subject by reading alone, but it is difficult. It's the folks who aren't willing to do the necessary homework that end up as cranks.

Anyway, I promise to try to address legitimate monetary questions directed my way.

HAWB 1954-1976: The three major developments in aerodynamics

How America Was Built
HAWB 1954-1976: NACA, NASA, Richard Whitcomb, the Area Rule, Supercritical Wings, and Winglets

Do you like to look at aircraft? Have you ever wondered about the forward, second-deck hump of the Boeing 747? What about winglets, those vertical tips at the end of wings?

These are all the result of the U.S. government's active intervention into the economy. When Republicans, conservatives, and libertarians insist that nothing good comes from government, remember winglets and the 747's hump and realize that they are either lying shamelessly, or are embarrassingly ignorant, about the role of government.

By the end of the Second World War in mid-1945, aircraft design was on the verge of breaking the sound barrier. But aerodynamicists and aeronautical engineers were finding that achieving Mach speeds was much more difficult than anticipated. What we now know is that as an aircraft approaches Mach One in velocity, the aircraft's body generates shock waves in the air, which causes a huge spike in aerodynamic drag. The then accepted equations mathematically describing the aerodynamic behavior of aircraft just did not account for shockwaves formed at the speed of sound.

In 1943, the National Advisory Committee for Aeronautics (NACA, the forerunner of NASA) Langley Research Center in Hampton, Virginia hired a young aerodynamicist  who had just graduated from the Worcester Polytechnic Institute in Massachusetts. His name was Richard T. Whitcomb, and he was originally assigned to the Flight Instrument Division. This was not an area that held any interest for Whitcomb. He wanted to work in aerodynamics, and made himself enough of a nuisance that he was soon assigned to Langley's Eight-Foot High-Speed Tunnel, under the supervision of John Stack. 

How are you going to pay for it? Why Understanding Monetary Theory and Policy Is Critical For the Left

We now have the technology in hand to solve all our problems. The only real obstacle moving forward is the thinking of all those people who ask: How are you going to pay for it? 

Fortunately, Jon and I are not alone in trying to answer that question. Even more fortunately, there are many people who have much more patience than Jon and I in trying to explain our answer repeatedly. Or, perhaps, more accurately, we have the technology in hand to record and replay at our convenience people doing a splendid job answering that question, How are you going to pay for it? Early in June 2018, it was at a symposium held by the Next System Project, an initiative of The Democracy Collaborative. The panel was moderated by Gar Alperovitz and included Stephanie Kelton, the key economist on Bernie Sanders’ presidential campaign, now professor of public policy and economics at Stony Brook University; Michael Hudson, professor of economics at University of Missouri, Kansas City; Pavlina Tcherneva, an associate professor and chair of the department of economics at Bard College and a research associate at the Levy Economics Institute; and Raúl Carrillo, staff attorney at the New Economy Project and a director of the Modern Money Network.

There is a YouTube video plus a full transcript at the NSP's website at Money Matters! Why Monetary Theory and Policy Is a Critical Terrain For the Left. The video is also on Michael Hudson's website.

Below the embedded YouTube are extended excerpts from the transcript.

Week-end Wrap - July 21, 2018

Week-end Wrap - July 21, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

When a U.S. citizen heard he was on his own country’s drone target list, he wasn’t sure he believed it. After five near-misses, he does – and is suing the United States to contest his own execution 

by Matt Taibbi [Rolling Stone, via Naked Capitalism 7-20-18]
Not economics, but I'm having a really hard time not listening to the echoes of very old voices in my head: "Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety." And Taibbi has the next one in our wrap.

Taibbi: No, the Mythical ‘Center’ Isn’t Sexy
by Matt Taibbi [Rolling Stone, via Naked Capitalism 7-17-18]
Taibbi provides an unrestrained response to New York Times columnist Frank Bruni's reaction to the surprise primary win of young Bronx Democrat Alexandria Ocasio-Cortez. Bruni channeled TPTB's dismay and alarm that Democratic Socialists have begun to score electoral victories at the Congressional level. A historical note: after the Non-Partisan League won an almost complete sweep of November 1916 elections in North Dakota and began to enact its program, including state-owned grain elevators, and a state bank, the New York Times fulminated about "bolshevism on the prairie."

Synthetic Photosynthesis

When I first started writing about climate change and the environment back in the 1980s, the atmospheric CO2 levels stood at approximately 340 parts per million. We are now firmly past 400. We are so far into uncharted territory, that all predictions are at best, educated guesses. However, very few of these guesses are encouraging. Anyway, I like this fictional account below.

Because it points out an obvious fact. Not only are we going to have to spend big bucks replacing the fire-based infrastructure, we must do something to return the CO2 levels to let's say, 310, or even 275. What we need is a synthetic version of photosynthesis. And we need it immediately because say we did invent a process that could capture atmospheric CO2 and turn it into O2 plus a very pure carbon, we are going have to put up probably 250,000 installations to start moving the needle down. Even Elon Musk wouldn't promise this in five years. We are talking a Manhattan Project-size effort x 50.



Compared to the effort to make inexpensive solar cells, the synthetic photosynthesis business is still pretty primitive. But at least there are folks who are producing hardware who also have a good idea how important this is.

Lots of folks dare call it treason

Trump really laid a turd in the punch bowl when he announced to the world that he trusted the word of Vladimir Putin over his own "intelligence" experts on Russiagate. The defenders of the conventional wisdom will be shaking with rage over that one for a long time—with "Progressives" leading the charge. Robert LaFollette (one of the founders of the Progressive movement) had his political career destroyed because he voted in the Senate against the USA entry into WW I. Pretty sure he would not have approved of the current war-mongering lynch mob.

For a guy with a reputation for lying, this was as close to the unvarnished truth as we have heard from a USA president since at least Carter. The Empire runs on lies—can't let any honesty creep into the conversation. And I am not sure what came over Trump but I'll chalk it up to Finland—the Nordics are notoriously honest and uncorrupt so maybe the air helped.

Because there is absolutely no hard evidence to back up the Russiagate claims, I always assumed that the backers of the narrative would eventually see the light and sheepishly re-enter a world where evidence still means something. But it hasn't happened yet and the unfounded accusations have been going on for almost two years.

On Class and Climate Change

In 1899, Thorstein Veblen would publish perhaps the most interesting, and misunderstood, book ever. It was called The Theory of the Leisure Class. Many, perhaps most, of the readers of this scintillating tome consider it a wonderful work of satire that highlights the foibles of the idle rich, and those who would emulate their lifestyles. And while I would agree that many parts of Veblen’s analysis are screamingly funny, we miss the point if we assume that Veblen was merely trying to entertain. Because beneath the chuckles, there is a deadly serious class analysis that goes a very long way towards explaining why a problem like climate change doesn’t get treated as seriously as it should be.

In Veblen’s world, there are two basic classes. The Industrial Class organizes the community’s necessary work. The Leisure Classes fasten themselves on the backs of the industrial classes “through force and fraud” in the often successful attempt at getting something for nothing. The Marxists then ask, “Aren’t your industrial classes merely another name for the proletariat?” This is important—the answer is NO.

Back in the day when Marxists preached that they were the friends, advocates, and only true representatives of the Proletariat, there was always something demeaning in their analysis. When someone picks strawberries all day in the hot sun, the Marxist description of the Proletariat and their troubles is still surprisingly accurate. But what do you call an farmer with 2500 acres under cultivation, or an engineer, or a big building contractor, or any number of important and often high paying occupations? They are obviously Industrial Class jobs but they all come with very different problems than face someone doing stoop labor. Obviously, there is an incredible amount of stratification within the occupations that can be found under the heading of “organizing and performing the community’s necessary tasks.”

Just as the Industrial Classes are stratified, so are the Leisure Classes. There is a large gap in income and status between a pickpocket and a hedge fund manager. But while there are hundreds of differences between the two major classes, many quite profound, the most telling is that when the Leisure Classes engage in conspicuous consumption and waste, their highest calling is uselessness. On the other hand, the goal of the Industrial Class is to be useful.

This class analysis is almost universally despised by the academic idea police. The right wing hates it because so many of their elites are little more than well-dressed thieves. The “left” (especially the Marxist varieties) hates it because it opens the possibility that there are enlightened, imaginative, and quite necessary “capitalists.” But it continues to be relevant because it describes the existing social order so much better than probably all the competing class descriptions combined.

Week-end Wrap - July 14, 2018

Week-end Wrap - July 14, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus


Bill Mitchell — Elements in a strategy for the Left

[via Mike Norman Economics 7-10-18]

In my recent book (with Thomas Fazi) – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – a central organising concept is that a progressive future is only possible if progressive citizens do two things: 

1. Learn how the monetary system operates and understand the capacity of the currency issuer and the opportunities and constraints that the government has. In other words, educate ourselves so that we have the capacity to refute the neoliberal lies that sustains the current system that has seen progressive outcomes diminish markedly. 

2. Take control of the political process and expunge neoliberal factions from progressive political parties (like the Blairites in the British Labour Party, almost all the Australian Labor Party, the Wall-Street embedded elites in the US Democrats, much of the traditional machinery of the European Socialist parties etc).Reclaiming the state is about reclaiming the legislative and regulative capacity of the nation state so that it is directed at advancing well being for the many rather than the few, to steal Jeremy Corbyn’s so excellent catch-cry....

Mitchell is a proponent of Modern Monetary Theory, which argues that money can be created out of nothing, by either a bank, the banking system, or by government, and that since governments can create money just as well as banks, there is no need to worry about budget deficits, so long as the money created is used for productive purposes.  MMT explained, Sept. 8, 2015, and Wray on MMT, January 13, 2015

When North Dakota Farmers Blew Up Partisan Politics: the Nonpartisan League: By Focusing on Economic Cooperation, Early 20th-Century Small Landowners Pushed Back Against Crony Capitalism, by Michael J. Lansing, May 18, 2018 [Zocalo]
Jon Larson writes: "Last Thanksgiving, Tony produced a short post on the Nonpartisan League. Think of this as an update. I happen to think the history of the NPL is important because it shows how effective a movement can be if they have a workable agenda. Instead of running against parties and personalities, an agenda-driven party wins because they are FOR something. Even better, an agenda usually outlives even the best supporters. And the State Bank of North Dakota is arguably the best political idea Progressives ever had—the signal accomplishment that lives on to this day."

NPL in North Dakota (cont.)

Last Thanksgiving, Tony produced a short post on the Nonpartisan League. Think of this as an update. I happen to think the history of the NPL is important because it shows how effective a movement can be if they have a workable agenda. Instead of running against parties and personalities, an agenda-driven party wins because they are FOR something. Even better, an agenda usually outlives even the best supporters. And the State Bank of North Dakota is arguably the best political idea Progressives ever had—the signal accomplishment that lives on to this day.

Week-end Wrap - July 7, 2018

Week-end Wrap - July 7, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus
 
Mexico Votes Overwhelmingly for “Change” by Electing López Obrador President
by CEPR, July 2, 2018 [The Real News Network]

“This is a triumph against a great deal of fear-mongering and ‘fake news’ that attempted to link López Obrador [AMLO] to Russia and that warned that his policies would bring economic disaster to Mexico,” CEPR Co-Director Mark Weisbrot said today. “But people in Mexico appear to be fed up with an economy that’s failed them for 40 years now. Poverty is worse than a quarter century ago, real wages are lower than in 1980, inequality is worsening....

Sounds just like USA. And what policy do USA and Mexico have in common? NAFTA. A race to the bottom.

Greg Palast - How the "Bernie of Mexico" Won the Presidency

[Democracy Now!, via Mike Norman Economics]

This is actually AMLO’s [López Obrador] re-election: He first won the presidency in 2006. But back then the thieving, scheming, blood-stained criminal gang that rules Mexico (and I’m being polite), declared AMLO’s dissolute opponent the winner. In 2006, rather than concede to vote thievery, lick his wounds and toddle off on a book tour, AMLO took his supporters into the streets, raised hell, blocked the capital’s central square for months, held a People’s Inaugural, and vowed to never, ever concede. 

And tonight, twelve years later, AMLO has won a crushing, too-big-to-steal victory in Mexico’s presidential election. 

And while the Good and Great told him he’d be finished if he kept protesting the stolen election, he made counting every vote the very first of his five-point campaign platform. He understands that even those with empty stomachs also hunger for democracy. And there’s a lesson here. Are you listening, Al Gore? Mr. Kerry and Mrs. Clinton? 

....So, far, 132 officials and candidates have been murdered in this election cycle. I spoke with voting rights activist (and movie star) Yareli Arizmendi in Mexico City, who told me that the old guard politicians were tied up with the Zetas and other drug gangs. In all fairness, I should note that many victims were not just AMLO allies but also PRI, Green Party and independents who challenged the control of their cities and states by narco-traficantes. 

Indeed, AMLO’s campaign gained fuel when, in 2014, the public learned of the disappearance of 43 students (and 3 investigating journalists). Evidence now indicates they were hacked to pieces and dissolved in acid by the Guerreros Unidos gang – on orders from a politician connected to the ruling party.

Week-end Wrap - June 30, 2018

Week-end Wrap - June 30, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Democratic Elite Scrambles to Respond to Ocasio-Cortez 

by Norman Solomon, June 29, 2018 [ConsortiumNews , via Naked Capitalism]

But on Wednesday afternoon, the party committee approved a proposal to prevent superdelegates from voting on the presidential nominee during the first ballot at the 2020 Democratic National Convention. (The last time the party’s convention went to a second ballot was 1952.)

From Naked Capitalism, by Lambert Strether, Water Cooler, June 29, 2018:

Pavlina R Tcherneva@ptcherneva

"pie in the sky" is code for:
1) you're a threat: your proposals make economic, political, moral sense to too many people
2) I want the status quo even if it's reactionary or economically irrational
3) I will always fund 2) but cast 1) as out of reachhttps://twitter.com/StephanieKelton/status/1011969893099503616?s=19 …

Stephanie Kelton

✔@StephanieKelton

The weapon of choice against @Ocasio2018's progressive agenda will be crying poor and complaining about debt and deficits. They'll claim it's all pie-in-the-sky because Pete Peterson. They're wrong. http://www.latimes.com/opinion/op-ed/la-oe-kelton-pony-for-all-20170929-story.html …

How Long Can The Federal Reserve Stave Off the Inevitable?, by Paul Craig Roberts, June 26, 2018 [Institute for Political Economy via Mike Norman Economics]

When are America’s global corporations and Wall Street going to sit down with President Trump and explain to him that his trade war is not with China but with them? The biggest chunk of America’s trade deficit with China is the offshored production of America’s global corporations. When the corporations bring the products that they produce in China to the US consumer market, the products are classified as imports from China. 

Six years ago when I was writing The Failure of Laissez Faire Capitalism, I concluded on the evidence that half of US imports from China consist of the offshored production of US corporations. Offshoring is a substantial benefit to US corporations because of much lower labor and compliance costs. Profits, executive bonuses, and shareholders’ capital gains receive a large boost from offshoring. The costs of these benefits for a few fall on the many—the former American employees who formerly had a middle class income and expectations for their children. 

In my book, I cited evidence that during the first decade of the 21st century “the US lost 54,621 factories, and manufacturing employment fell by 5 million employees. Over the decade, the number of larger factories (those employing 1,000 or more employees) declined by 40 percent. US factories employing 500-1,000 workers declined by 44 percent; those employing between 250-500 workers declined by 37 percent, and those employing between 100-250 workers shrunk by 30 percent."