Sunday, September 23, 2018

Week-end Wrap - September 22, 2018

Week-end Wrap - September 22, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

The Spider’s Web: Britain’s Second Empire
[Naked Capitalism 9-22-18]
Until I saw this new film on Saturday, I had the following story -- on how the effects of climate change is now causing an increase in global hungry -- as the lead. But I long ago concluded that it is the financial and economic pressure imposed on companies and countries by predatory financiers -- including but not limited to budget austerity -- that is the fundamental obstacle to solving climate change, and most other problems. Thus, the number one task must be confronting the banksters and financial powers that be. The USA was originally founded in opposition to the economics of the British empire, but American School economics has been almost entirely repressed and replaced by its British free trade nemesis. This also corroborates the lead of the Sept 9. wrap, How the City of London created Eurobonds, destroyed the Bretton Woods world financial system and saved crooks, criminals, and dictators from the rule of law.

The theme of the fight between the British and American schools of political economy is whether a national economy should be controlled by the richest economic elites to suit whatever ends they select, or by the people, to promote the General Welfare. You will see echoes of this theme in most of the stories below.

See also Mainstream Economics Has Become a Celebration of the Wealthy Rentier Class, by Michael Hudson.

Global hunger is no longer decreasing, and is now increasing, because of the effects of climate change
By Charles Benavidez, September 19, 2018 [, via Naked Capitalism 9-20-18]

Tim Geithner, Ben Bernanke and Hank Paulson dealt a catastrophic blow to public faith in American institutions.
By Zach Carter, September 15, 2018 [Huffington Post, via Naked Capitalism 9-17-18]
...throughout the mess, the Federal Reserve and the U.S. Treasury had been permitting the largest banks in the country to funnel as much cash as they wanted to their shareholders ― even as it became clear those same banks could not pay their debts. Lehman itself had increased its dividend and announced a $100 million stock buyback at the beginning of 2008. Insurance giant AIG paid a dividend of $4.40 per share, the highest in company history, on Sept. 19, 2008 ― three days after the Federal Reserve handed the insurance giant $85 billion in emergency funds. According to Stanford University Business School Professor Anat Admati, the 19 biggest American banks passed out $80 billion in dividends between the summer of 2007 and the close of 2008. They drew $160 billion in bailout funds from the U.S. Treasury, and untold billions from the Fed’s $7.7 trillion in emergency lending.... 
[Ben Bernanke, Hank Paulson and Timothy Geithner] didn’t really rescue the banking system. They transformed it into an unaccountable criminal syndicate. In the years since the crash, the biggest Wall Street banks have been caught laundering drug money, violating U.S. sanctions against Iran and Cuba, bribing foreign government officials, making illegal campaign contributions to a state regulator and manipulating the market for U.S. government debt. Citibank, JPMorgan, Royal Bank of Scotland, Barclays and UBS even pleaded guilty to felonies for manipulating currency markets.

Not a single human being has served a day in jail for any of it.

The financial crisis that reached its climax on that Monday morning 10 years ago was not fundamentally a problem of capital, liquidity or regulation. It was a crisis of democracy that taught middle-class families a grim lesson about who really mattered in American society ― and who didn’t count.

For most of American history, financial policy was a central political battleground. There was the feud between Thomas Jefferson and Alexander Hamilton over Revolutionary War debt; the Whiskey Rebellion; Andrew Jackson’s assault on the Second Bank of The United States; the greenbacks Abraham Lincoln issued to help finance the Civil War; William Jennings Bryan and the cross of gold; the creation of the Federal Reserve; FDR’s New Deal. These were among the most heated political issues of their day. And they were all understood to be questions of power and democratic accountability, not merely matters of growth or efficiency.... 
Here’s what happened to everyone who didn’t work for a bank: As a percentage of each family’s overall wealth, the poorer you were, the more you lost in the crash. The top 1 percent of U.S. households ultimately captured more than half of the economic gains over the course of the Obama years, while the bottom 99 percent never recovered their losses from the crash
....Geithner hadn’t set the dials wrong. He had made a choice about who deserved the government’s full attention and how aid would be distributed. And he had done it without any meaningful input from Congress, or even a public debate. 
“It led to a breakdown and a lack of trust in institutions,” says Admati. “What we witnessed here … is kind of ominous. It raised a lot of questions about who controls society ― corporations or the elected government.” 
Financial crises foment authoritarianism. In 2015, a trio of German economists studied financial panics in 20 advanced economies dating back to 1870, and concluded that they almost always result in major gains for “far right” political parties after a lag of a few years. The most pressing question for policymakers facing a banking meltdown is not, “How do we restore our banks to profitability?” but, “How can we prevent social collapse?” 
And on this front, the technocrats at the top of American government failed every bit as thoroughly as their counterparts in Europe. By crafting bailout-and-austerity packages that protected German and French banks while imposing direct hardship on everyone else, the International Monetary Fund, the European Central Bank and German Chancellor Angela Merkel sent a very clear message about whom the European Union really represents.

The result has been a predictable and terrifying resurgence of authoritarian politics unseen since the Second World War. In Greece, it takes the form of the neo-Nazi Golden Dawn. In Italy, it has taken power as the Five Star Movement. In Austria, it is the Freedom Party; in Hungary, the government of Viktor Orban. And in the United States, it has manifested in the presidency of Donald Trump.

The Threat to Democracy Isn’t Coming From Its People
By Jamelle Bouie, September 14, 2018 [Slate, via Naked Capitalism 9-16-18]
Has American democracy been hijacked by the passions of its people, now a dangerous and untamable majority undermining the republic? 
In a new issue of the Atlantic, Jeffrey Rosen, head of the National Constitution Center, says yes. “[James] Madison’s worst fears of mob rule have been realized—and the cooling mechanisms he designed to slow down the formation of impetuous majorities have broken.” 
....But this story of popular excess—to be tamed by enlightened elites—doesn’t stand to scrutiny. Our current president wasn’t elected by a majority of the people, the public’s preferences across a range of issues haven’t been translated to public policy, and ideological polarization—whatever its disadvantages—isn’t responsible for the decline of congressional deliberation. Far from an excess of majority rule, American democracy has seen the rise of minority rule, with efforts to entrench it in the states. If there’s a malign actor in this drama, it’s not “the people,” it’s many of the elites currently in power.... 
An honest examination of democratic decline would look at the ways in which our counter-majoritarian institutions are thwarting the public will—as expressed through its elected representatives—and how that can create support for truly destabilizing forces. It would account for how the Republican Party itself has made Madisonian institutions unworkable by abandoning the commitment to compromise and fair play that makes them work. The transformation of the GOP into a parliamentary-style party primarily responsive to donors, right-wing activists, and conservative media is arguably the central problem for American governance.

Real News Network, posted to Naked Capitalism front page by Yves Smith 9-18-18
...on September 7, an international tribunal found that Ecuador violated a treaty with the United States by allowing its court system to issue a nine point five-billion-dollar judgment against Chevron in this case. 
Chevron devastated an entire region with pollution, and the national government affected responded by fining Chevron less than what BP has so far paid for its fouling of the Gulf of Mexico. Now an international "court" established according to the plan of international free traders has declared that Ecuador is not allowed to do that. I'll repeat here: The Threat to Democracy Isn’t Coming From Its People.

by Michael Hudson, September 18, 2018 [Naked Capitalism]
Today’s financial malaise for pension funds, state and local budgets and underemployment is largely a result of the 2008 bailout, not the crash. What was saved was not only the banks – or more to the point, as Sheila Bair pointed out, their bondholders – but the financial overhead that continues to burden today’s economy. 
Also saved was the idea that the economy needs to keep the financial sector solvent by an exponential growth of new debt – and, when that does not suffice, by government purchase of stocks and bonds to support the balance sheets of the wealthiest layer of society. The internal contradiction in this policy is that debt deflation has become so overbearing and dysfunctional that it prevents the economy from growing and carrying its debt burden.

A new authoritarian axis demands an international progressive front
by Bernie Sanders, Guardian, via Naked Capitalism 9-16-18]

Here’s Why Setting a Maximum Wage for CEOs Would be Good for Everyone
By Mark R Reiff, September 20, 2018. Originally published at Aeon, via Naked Capitalism 9-20-18]

Further evidence that the tax cuts have not led to widespread bonuses, wage or compensation growth
[Economic Policy Institute, via Naked Capitalism 9-21-18]

Yes, Government Creates Wealth
By Mariana Mazzucato [Democracy, via Naked Capitalism 9-17-18]
Excerpted from The Value of Everything: Making and Taking in the Global Economy by Mariana Mazzucato (2018, PublicAffairs)
The narrative that government is inefficient and its optimum role should be “limited” to avoid disrupting the market has proven extremely powerful. But this prevailing view of government is wrong; it is more the product of ideological bias than anything else. The stories told about government have undermined its confidence, limited the part it can play in shaping the economy, undervalued its contribution to national output, wrongly led to excessive privatization and outsourcing, ignored the case for the taxpayer sharing in the rewards of a collective—public—process of value creation, and enabled more value extraction....

Government already has developed the key infrastructure and technology upon which twentieth-century capitalism was built, even though it has received inadequate recognition for things like the microchip and global positioning technology.

One big problem with how Jeff Bezos spends his fortune on charity
by Ted Lechterman, September 22, 2018 [Salon]
...the suspicion that philanthropy distracts the public from questionable conduct or economic injustice is a familiar worry. Since the days of robber barons like Andrew Carnegie and John D. Rockefeller, social critics have charged that philanthropy is a wolf in sheep’s clothing.... 
Dramatic acts of charity by the ultra-wealthy may reduce pressure on governments to tackle poverty and inequality comprehensively. Depending on private benefactors for access to basic necessities can reinforce social hierarchies. And when the elite spend their own money on essential public services like housing the homeless and education for low-income children, it lets the rich mold social policy to their own preferences or even whims.... 
Observers, including MarketWatch reporter Kari Paul and Guardian columnist Marina Hyde, have noted that if people like Bezos and the businesses they lead were to stop fighting for low tax rates, democratically elected officials would have more money to spend tackling big problems like homelessness and other urgent priorities.... 
My research indicates that using tax deductions to supply essential public services, such as education and housing assistance, may be a misuse of this privilege because it has the potential to undermine democratic control
Members of the public have a vital interest in being able to oversee the provision of goods and services that support their most basic needs. This kind of accountability is possible only when these needs are served by democratic governments, not rich benefactors operating in their place.

If Jeff Bezos wants to help low-income people why not just pay them better?
[Guardian, via Naked Capitalism 9-16-18]

Australian Central Banker: Loanable Funds Theory Is False
by Stephanie Kelton [via Naked Capitalism 9-21-18]
Kelton tweeted: "An indictment of textbook (deposit multiplier) money & banking. Assistant Governor of the Royal Bank of Australia (RBA) had to give a "landmark speech" to "clear up confusion" about how banking works."

For a fuller discussion of the theories of money creation -- and which is correct -- see Jon Larson's Creating money out of thin air, and my Creating Money Out of Thin Air and Trained Incapacity, both on Real Economics in January 2015. 

John Hancock will include fitness tracking in all life insurance policies 
[VentureBeat, via Naked Capitalism 9-20-18]
Predicted by Matt Stoller here [Naked Capitalism] in 2012. I hope this business suffers a speedy and costly death.
[Law and Political Economy, via Naked Capitalism 9-21-18]]. 
“Presently, both antitrust law and our dominant frame for economic policy more generally tend to favor top-down, hierarchical forms of coordination rounded in ownership rights, while viewing more democratic, horizontal forms of coordination with skepticism. This deep-seated preference, which itself precedes the contemporary concern with promoting competition, can be traced in part to antitrust’s (and the law’s) original preference for protecting property rights over workers’ freedom of association and contract – even as the pre-New Deal courts invoked the freedom of contract in other areas of economic and labor policy.”
[Governing, via Naked Capitalism 9-21-18] 
As in Freguson, and law enforcement for profit generally. From the article: “these revenue boosters carry economic costs that far outweigh the short-term revenue gains. Because the burden of these penalties falls disproportionately on people who can’t afford to pay, jurisdictions collect far less than expected and waste resources chasing down payments that won’t materialize…. States can further see net losses if driver’s licenses are suspended or residents are incarcerated for nonpayment…. “People can’t drive and go to work, which means they can’t pay the fines and fees or support their families,” says Joanna Weiss, co-director of the Fines and Fees Justice Center.”
[Jacobin, via Naked Capitalism 9-21-18]
“Tuesday’s one-day strike was workers’ way of ratcheting up the pressure on McDonald’s to finally take action — not only in its corporate-owned restaurants but also in its franchises….. McDonald’s women’s committees are regularly meeting in the ten cities where the strike took place, and more are being organized in other parts of the country… #MeToo didn’t start in Hollywood. Women leaders in the Fight for 15 have been talking about sexual harassment since the movement began. Women farm workers in the Coalition of Immokalee Workers, hotel workers in UNITE HERE, and garment workers in the International Trade Union Federation have all been organizing around sexual violence and harassment in the workplace for years. They spoke out long before #MeToo became front page news and they are continuing to. What may make this time different is the moment we are in.”

Did Trump just kill the US auto industry?
By David Goldman, September 22, 2018 [Asia Times, via Naked Capitalism 9-22-18]
The future of the auto industry lies in electric vehicles, for which China will be the world’s largest market by far. China also has the world’s most advanced battery technology as well as the most robust supply chain for battery production. 
China’s response to American tariffs has been to offer German and Japanese industrial companies a privileged position in joint ventures with Chinese manufacturers. China also is reportedly planning to reduce import tariffs for America’s competitors. Toyota and Honda also announced plans to expand Chinese production in July.... 
China has prepared a supply chain for electric vehicles in depth, and it is extremely difficult for automakers who are not entrenched in the Chinese market to compete.
China also holds the keys to the future of self-driving cars. Rather than attempt to design autonomous vehicles to negotiate the poor infrastructure of American cities, China is designing cities around the concept of autonomous vehicles, with roads fenced off from pedestrians and 5th-generation mobile broadband. 
China is not only the largest auto market in the world, and likely to grow as a percentage of the world auto market, but it is the center of auto industry innovation.

Manufacturing: “In a World of Robots, Carmakers Are Hiring More Humans"
[Industry Week, via Naked Capitalism 9-21-18]. 
“Of the 13 publicly traded automakers with at least 100,000 workers at the end of their most-recent fiscal year, 11 had more staff compared with year-end 2013, according to data compiled by Bloomberg. Combined, they had 3.1 million employees, or 11% more than four years earlier, the data show…. In developed markets, tasks that can be handled by robots have already been automated years ago and automakers are now boosting hiring in research and development as the industry evolves. Auto companies are hiring more for software positions than hardware roles to prepare for a future in which more vehicles are communicating with each other and their surroundings….”

China’s Trade-War Tack Is Steeped in History
[Bloomberg, via Naked Capitalism 9-19-18]
Finally, someone gives an overview of the painful history of China's "trade" with the West, such as the Opium Wars.

NY Governor: “Cuomo’s Win: It’s All About the Money”
by Matt Taibbi, Rolling Stone, via Naked Capitalism 9-19-18]. “
The issue that’s dividing Democrats is not marijuana legalization, or a $15 minimum wage, or body cameras for cops, or any of a dozen other things. The issue is money. The “real” candidate is inevitably the one that lets donations from Wall Street and the pharmaceutical industry and big tech and military contractors come pouring in. That candidate will always, 100 percent of the time, end up voting against an obvious reformor worsening an existing law.”

Shield of the Republic: A New Democratic Foreign Policy
By Peter Beinart, September 16, 2018 [Atlantic, via Naked Capitalism 9-19-18]
Amid all the talk about the democratic party’s move to the left, a contrary phenomenon has gone comparatively unnoticed: On foreign policy, Washington Democrats keep attacking Donald Trump from the right. They’re not criticizing him merely for his lackluster response to Russia’s interference in the 2016 elections. They’re criticizing him for seeking a rapprochement with key American adversaries and for potentially reducing America’s military footprint overseas.

Brett Kavanaugh’s Role in Schemes to Politicize the Judiciary Should Disqualify Him
The Trump nominee is trying to bury his connection with one of Karl Rove’s ugliest gambits.
By John Nichols, September 14, 2018 [The Nation, via Naked Capitalism 9-17-18]

In 2001 and 2003, two Republican staffers on the Senate Judiciary Committee hacked and stole 4,670 files from the computers of six Democratic senators. The theft was discovered only when in late 2003 The Wall Street Journal printed excerpts from some of the stolen files. According to the Senator Patrick Leahy, "The ringleader behind this massive theft was a Republican Senate staffer named Manny Miranda. The scandal amounted to a digital Watergate—a theft not unlike Russia’s hacking of the DNC." The stolen files were used to help win confirmation for President Bush’s most controversial judicial nominees, most notably Priscilla Owen, who was described at the time as a "special project" by Karl Rove to fill the federal courts with conservative ideological extremists. 
Judge Kavanaugh was asked extensively about his knowledge of the theft during both his 2004 and 2006 hearings. And I mean extensively: 111 questions from six senators, both Republicans and Democrats. He testified under oath—and he testified repeatedly—that he never received any stolen materials, and that he knew nothing about it until it was public. He testified that if he had suspected anything “untoward” he would have reported it. At the time, we left it there. We didn’t have evidence to suggest otherwise. 
Today, with the limited amount of Judge Kavanaugh’s White House record that has been provided to the Judiciary Committee, for the first time we have been able to learn some information about his knowledge of this theft.
With Supreme Court Decision on Dark Money “We’re About to Know a Lot More About Who Is Funding Our Elections
[Common Dreams, via Naked Capitalism 9-20-18]

The Racism v. Economics Debate Again
[Current Affairs, via Naked Capitalism 9-20-18]
Political scientist Tom Ferguson is well along on a granular analysis of voters who flipped from Obama in 2012 to Trump. The data overwhelmingly show it was economic issues that led to the change.

Vote No Sentiment Escalating at UPS
[Labor Notes, via Naked Capitalism 9-19-18]
“Delivery drivers’ top complaint is that the deal would allow UPS to create a second tier of ‘hybrid drivers’ who could deliver packages at a much lower wage. That’s the deal-breaker for 20-year driver Eugene Braswell. As far as he’s concerned, it’s unfair to have workers ‘doing the exact same thing that I’m doing, for less money.’ And in the long run, he believes selling out future hires will tear the union apart. Someday he’ll be a retiree, he said, and disgruntled hybrid drivers could be the ones deciding whether or not to safeguard his pension. He’s been comparing notes with his friend Vinnie, a shop steward at the post office, about how the letter carriers union has suffered since an arbitrator imposed a second tier in 2013. ‘They have the casuals working for less money, and they’ve got no unity at all,” Braswell said. “We’ve got to fight that tooth and nail.'”

This Labor Day, A Clean Slate for Reform
[Law and Political Economy, via Naked Capitalism 9-20-18]
Lots of suggestions. One such: “The number of significant strikes in the U.S. has fallen to almost none. That’s because the law puts up so many hurdles and obstacles – it severely limits where, when, and how workers can act together. Instead of maximizing power, the law diminishes it. We need to rewrite the law to allow workers to analyze power relationships and exercise collective power strategically. For example, when companies fissure their functions into separate firms connected by subcontracts, we could allow workers to treat those connected firms as one for the purpose of strikes, pickets and boycotts.”

By Emily Sinovic, September 11, 2018 [KCTV, via Naked Capitalism 9-17-18]

Supercritical CO2: The Path to Less-Expensive, “Greener” Energy
by Stephen Mraz, September 10, 2018 [Machine Design]

"Generating electricity from heat could become more efficient, more compact, and less costly" using Brayton cycle turbines.
"This graphic shows how much smaller a cSCO2 turbine is than a steam turbine with the same output. The sCO2 turbine is being designed and built by Echogen."

Book review of Joshua B. Freeman's Behemoth: A History of the Factory and the Making of the Modern World
by Deborah Cohen, September 27, 2018 issue [New York Review of Books]
With nostalgia for manufacturing jobs now thoroughly weaponized in American politics, Joshua Freeman’s Behemoth: A History of the Factory and the Making of the Modern World is timely. Freeman, a historian of American labor and the author of American Empire, the Penguin history of the post–World War II United States, takes as his subject huge factories, the behemoths of his title: River Rouge; the Soviet steel complex Magnitogorsk, east of the Urals; and China’s Foxconn City, with its hundreds of thousands of workers, arguably the largest factory ever in operation. Focusing on these giants, Freeman suggests, reveals what happens when concentrated production and economies of scale are taken to the showiest extreme. It also helps to explain the hold that factories have had on the imagination over the past 250 years: the promise (largely delivered on) that industrialization would lift billions out of poverty, competing with the fears (also realized) that it would wreck the environment and sharpen social conflicts.

Robotics Dominate at 2018 International Manufacturing Technology Show
by Carlos Gonzalez, September 11, 2018 [Machine Design] (slide show)

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