Sunday, April 28, 2019

Week-end Wrap - Political Economy - April 27, 2019

Week-end Wrap - Political Economy - April 27, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Share of wealth held by the bottom 90% by country
[Real World Economics Review Blog, via Mike Norman Economics 4-24-19]

The Great Deformation: Why Income Inequality Has Become Intractable
Yves Smith, April 23, 2019 [Naked Capitalism]
Taylor’s talk last week focused on the drivers of the rise in inequality, which came about via a rise in profit share of GDP, something we first noted in 2005 in a Conference Board Review article. That has enabled the top 1% to pull away from everyone else. Investment as a proportion of GDP has also dropped while consumption has increased. The paper has more detail, but Taylor estimates it would take 40 years to reduce inequality to 1980 levels. He also warns that wealth concentration could increase from 40% held by the top 1% to 60%....
...advocates of workers have failed to take up the task of determining what a reasonable level of profit is. We’ve mentioned before that in the early 2000s, Warren Buffett deemed a profit share of 6% to be unsustainably high. Yet for the past three years, the profit share has been nearly twice this high. 
Oddly, the left and labor supporters have not engaged with the question of what a fair profit might be. Modern cultures have deeply internalized the idea that the result of market forces is somehow virtuous, when markets sit both in a legal system and in a set of societal norms that play a large role in what supply and demand looks like.

[Below via, via Naked Capitalism 4-23-19]
I'm reading 's new book, "People, Power, & Profits". Really appreciate this point about globalisation & wages:

“Pete Buttigieg Trivializes the Impact of Trade on US Job Losses”
[Dean Baker, Truthout, via Naked Capitalism 4-23-19]
“In his campaign for the Democratic presidential nomination, Pete Buttigieg has been telling audiences that the U.S. lost six times as many jobs due to automation than trade from 2000 to 2010, according to The Washington Post. This is literally true, but for all practical purposes it is a very big lie….Tthe loss of millions of manufacturing jobs to imports was an explicit political choice, because our leaders decided it was more important to promote investment opportunities in China for Goldman Sachs and to increase protection for Pfizer’s drug patents…. [A]t the very least, we should be able to talk honestly about what happened and why. Instead, Buttigieg seems intent on going the route of denial.”
The meme that it's automation and not trade that destroyed millions of USA jobs is a first-line defense of the corporatist oligarchy's policies of holding down the working and middle classes. It is contradicted by the plain evidence of neglect, disrepair, and despair that should be evident to anyone willing to look at any small and medium sized town that has been deindustrializied -- especially South Bend, Indiana, which was the home of the largest producer of industrial production precision lathes in the world, South Bend Lathe:
In the wave of acquisitions in the 1960s, South Bend Lathe was converted from a family-owned business to a division of Amsted Industries, a large conglomerate. In the 1970s, faced by imports from lower-wage economies, profits at South Bend Lathe dropped along with the decline of the American machine tool industry. In December 1974, soon after the United Steelworkers won what they thought was a lucrative labor contract, Amsted Industries decided to liquidate the company. This decision threatened the jobs of 500 people.
Any Democrat parroting this meme of blaming automation, not trade, is basically unfit for office, and certainly should not be allowed near the Oval Office. They have obviously swallowed the kool-aid served up by the mainstream economics profession -- a profession which failed to foretell the results of trade "liberalization, the results of deindustrialization, and the results of financialization, including the World Financial Crisis of 2007-2008. We need political leaders who understand that the mainstream economics profession is a failed institution, and are seeking alternatives to economic neoliberalism. This statement by Buttigieg proves he is not such a leader. 

Why the mainstream economics profession gets it entirely wrong on the issue of trade versus automation: 

The epic mistake about manufacturing that’s cost Americans millions of jobs
By Gwynn Guilford, May 3, 2018 [Quartz]
An economist at the Upjohn Institute, an independent organization that researches employment, Houseman specializes in measuring globalization. She had been working with a team of Federal Reserve economists with access to more granular data than was publicly available, which allowed them to strip away the computers industry output from the rest of the data. That revealed just how the rest of manufacturing was doing—and it was much worse than what Houseman and her colleagues expected.

“It was staggering—it was actually staggering—how much that was contributing to growth in real [meaning, inflation-adjusted] manufacturing productivity and output,” says Houseman.... This erroneous notion, based solely on a statistical anomaly, long ago crystallized into deeply misleading consensus that high-tech advances in America’s manufacturing sector give it a comfortable competitive edge. And that’s not at all the case. 
One way of gauging how the sector has been doing is to compare how much real output in manufacturing has grown, both with and without computers, compared to the private sector as a whole—which encompasses everything from finance and agriculture to retail and manufacturing.... Between 2000 and 2016, the average growth in the sector’s real output was only about 63% of that of the private sector. But when you take out computers out of both data series, the trend is far more striking: Since 2000, manufacturing output expanded at an average pace equal to only 12% of the private sector’s average growth.

Capitalism in crisis: U.S. billionaires worry about the survival of the system that made them rich [Washington Post, via Naked Capitalism 4-22-19]

Climate and environmental crises

New Colorado Law Requires State to Consider Health Impacts of Oil Drilling
[Climate Liability News, via Naked Capitalism 4-22-19]

How the plastics industry is hijacking the circular economy .
[TreeHugger, via Naked Capitalism 4-22-19]
These principles were covered in detail in Jon Larson's 1992 book Elegant Technology: Economic Prosperity From an Environmental BlueprintSee especially Chapter Eleven, "Technological Elegance." Larson provides a full and convincing argument that all our environmental problems are really just engineering problems; the real problem is getting the financiers, rentiers, and usurers out of the picture so we have the funding needed to fully implement the engineering solutions. 
1. Design out waste and pollution"Waste and pollution are not accidents, but the consequences made at the design stage, where 80 percent of environmental impacts are decided. By changing our mindset to view waste as a design flaw and harnessing new materials and technologies, we can ensure water and pollution are not created in the first place."

2. Keep products and materials in useIn a true circular economy, products are designed so that they can be reused, repaired and remanufactured. This is a sort of an upgrade of William McDonough & Michael Braungart's Cradle to Cradle, where products are designed so that they can be taken apart and reused, recycled, or composted.
“Four Ways to Reduce the Climate Hit from Plastics” 
[Weather Underground, via Naked Capitalism 4-25-19]  
“Global plastics production has increased at a breakneck pace, from 2 million metric tons in 1950 to 70 million by 1980 and 381 million by 2015, according to a 2017 analysis in Science Advances led by UCSB’s Roland Geyer. Since plastics are growing more rapidly than total greenhouse emissions, ‘business as usual’ means an ever-growing share of the global greenhouse burden will come from plastics… the full life cycle of plastics—from manufacture to disposal—accounted for 3.8% of global greenhouse gas emissions in 2015, expressed as carbon dioxide equivalent. That percentage drops to 3.5% when the benefits of recycling in reducing new plastics are taken into account. More than half (61%) of the emissions arose early on, from using hydrocarbons (usually from fossil fuels) as “feedstocks” to make polymer resins. The heating and shaping of resins into various types of plastics accounted for 30% of the emissions. “End-of-life” processes (landfills, recycling, and especially incineration) led to the remaining 9%.
“Just 10% of U.S. plastic gets recycled. A new kind of plastic could change that” 
[Science, via Naked Capitalism 4-25-19]   
“Most plastics have a chemical history that makes starting a new life a challenge. The dyes and flame retardants that make them perfect for say, a couch cushion or a bottle of detergent, make them tough to transform into a desirable end product—one of the reasons just 10% of plastic in the United States gets recycled. Now, researchers have created a plastic with a special chemical bond that helps it separate out from those additives, turning it back into a pure, valuable product that can be reused again and again. To make the new material, researchers tweaked a type of vitrimer, a glasslike plastic developed in 2011, by adding molecules that change the chemical bonds holding it together. These new bonds, called dynamic covalent diketoenamine bonds, require less energy to break than those in traditional plastics. As a result, the new plastic can be broken down into its constituent partsusing just a solution of water and a strong acid at room temperature.”

“Melting permafrost in Arctic will have $70tn climate impact – study” 
[Guardian, via Naked Capitalism 4-24-19]  
“The release of methane and carbon dioxide from thawing permafrost will accelerate global warming and add up to $70tn (£54tn) to the world’s climate bill, according to the most advanced study yet of the economic consequences of a melting Arctic… The new projections contained a modicum of good news because the impact of land permafrost melt was at the lower range of what had been feared. Previous estimates suggested these Arctic tipping points could add more than 10% to climate costs. Some feared the methane alone could prove catastrophic but the new figures show CO2 remains the greatest concern.”

“‘Global deal for nature’ fleshed out with specific conservation goals” 
[Nature, via Naked Capitalism 4-24-19] 
“Governments around the world must fully protect 30% of Earth’s surface and sustainably manage another 20% by 2030 if they’re to have a hope of saving ecosystems and limiting global warming, researchers have said in a new report. The recommendations are part of a fleshed out ‘global deal for nature’ — initially proposed by researchers in 2017 as a companion to the Paris climate accord — that outlines what it will take to maintain a liveable planet…. The scientists called for doubling the area of fully protected regions on land, such as tropical forests and grasslands, and a roughly five-fold increase in the extent of marine protected areas. Efforts to manage ecosystems sustainably should go beyond governments and involve groups that would be affected by conservation policies, including businesses, local communities and Indigenous people, the researchers write. .IIf humanity moves quickly, it can achieve the goals of the Paris climate accord while also slowing the rate of species extinctions, says lead study author Eric Dinerstein, a wildlife scientist at the conservation group RESOLVE in Washington DC.” 

“An Ecoregion-Based Approach to Protecting Half the Terrestrial Realm” 
[Oxford Bioscience, via Naked Capitalism 4-24-19] 
From the abstract: ” Using a map of Earth’s 846 terrestrial ecoregions, we show that 98 ecoregions (12%) exceed Half Protected; 313 ecoregions (37%) fall short of Half Protected but have sufficient unaltered habitat remaining to reach the target; and 207 ecoregions (24%) are in peril, where an average of only 4% of natural habitat remains. We propose a Global Deal for Nature—a companion to the Paris Climate Deal—to promote increased habitat protection and restoration, national- and ecoregion-scale conservation strategies, and the empowerment of indigenous peoples to protect their sovereign lands. The goal of such an accord would be to protect half the terrestrial realm by 2050 to halt the extinction crisis while sustaining human livelihoods.”

“Just because it’s digital doesn’t mean it’s green” 
[Izabella Kaminska, FT Alphaville, via Naked Capitalism 4-22-19]
“[C]onsuming one euro of digital technology in 2018 induces direct and indirect energy consumption 37% higher than what it was in 2010.This trend is the exact opposite of what is generally attributed to digital technology and runs counter to the objectives of energy and climatic decoupling set by the Paris Agreement.” • This is a must-read, worth the log-in, which is free.
[, April 18, 2019, via]
.... Proterra, an electric bus manufacturer, is rolling out leasing plans that could eliminate this barrier. Proterra and Mitsui & Co. are teaming upto lease the batteries in electric buses so that the upfront costs of an electric bus reaches parity with a traditional diesel bus. In other words, no upfront cost for the battery, just monthly lease payments over the lifespan of the vehicle. The monthly payments would be offset by the fuel savings.
It is the same approach that solar developers began using years ago: no upfront cost, just lease payments over time. 
A 2018 analysis from Bloomberg New Energy Finance (BNEF) predicted that while EVs would capture nearly a third of the total auto market by the 2030 – a bold prediction, to be sure – electric buses would gain acceptance must faster. By 2030, electric buses overwhelm the bus market, taking 84 percent of total sales. In one scenario, BNEF sees ]electric buses reaching upfront cost parity with conventional buses on an unsubsidized basis by the mid-2020s.
Akshat Rathi, April 24, 2019 [Quartz]
Where are the howls about "how will you pay for it?" 

Economics in the real world

“A new lawsuit accuses the “Big Four” beef packers of conspiring to fix cattle prices” 
[New Food Economy, via Naked Capitalism 4-27-19] 
“To understand the argument made in the epic, 121-page complaint filed on Tuesday in the U.S. District Court for the Northern District of Illinois, it helps to recognize one thing: Meatpacking companies live or die by the “meat margin,” or the difference between the cost of live animals and the price they charge for packaged meat. In theory, when supply goes up, retail prices should go down. At least that’s what we learned in Economics 101. But the Big Four meatpackers, who together slaughter more than 80 percent of feedlot cattle in the U.S., wield enormous power over the industry. This suit alleges that, shortly after prices reached record highs in early 2015, and through the present day, these companies used a broad range of coordinated methods to artificially suppress supply while continuing to enjoy the financial benefits of strong demand.”
“The Federal Government Failed Homeowners. How Much Blame Does Julián Castro Deserve?” [HuffPo, via Naked Capitalism 4-24-19] Lembert Strether: "Amazing. Well worth a read. This looks as awful as HAMP."

[Investment News, via Naked Capitalism 4-25-19]
“Claims of Shoddy Production Draw Scrutiny to a Second Boeing Jet” 
[New York Times, via Naked Capitalism 4-24-19] 
Regarding Boeing’s union-busting plant in Charleston, SC, which manufactures the 787: “A New York Times review of hundreds of pages of internal emails, corporate documents and federal records, as well as interviews with more than a dozen current and former employees, reveals a culture that often valued production speed over quality. Facing long manufacturing delays, Boeing pushed its work force to quickly turn out Dreamliners, at times ignoring issues raised by employees…. Qatar Airways stopped accepting planes from the factory after manufacturing mishaps damaged jets and delayed deliveries….. Employees have found a ladder and a string of lights left inside the tails of planes, near the gears of the horizontal stabilizer.” • Well, I’m sure somebody would have heard the ladder rattling around; what’s the issue? More: “Joseph Clayton, a technician at the North Charleston plant, one of two facilities where the Dreamliner is built, said he routinely found debris dangerously close to wiring beneath cockpits. ‘I’ve told my wife that I never plan to fly on it,’ he said. ‘It’s just a safety issue.'” • Recall also that the 737 MAX problems are knock-on effects from the 787 launch debacle. So now, not only Boeing’s cash cow (the 737) but its star (the 787) are in trouble. Which means that Boeing, the national champion, is in trouble.

Boeing Might Represent the Greatest Indictment of 21st-Century Capitalism
Marshall Auerback, April 27, 2019 [Economy for All, a project of the Independent Media Institute., via Naked Capitalism 4-27-19]

[Washington Post, via Naked Capitalism 4-25-19] 
“Seth Seifman, an analyst at JPMorgan, called 2019 a “lost year” for Boeing in terms of financial performance, because sales of the company’s biggest cash generator are on hold until the grounding is lifted. With potentially no sales of 737 Max jets during the entire second quarter, a business that runs on cash flow suddenly has to prepare for the risk of having few funds on hand to make needed investments in its business or insulate itself against unexpected shocks. To free up some cash, Boeing said Wednesday that it paused its plan to buy back $18 billion in stock from investors. It said it expects its to eventually resume the buyback program.”

Predatory Finance

The Criminal Case Against Merrill Lynch: “Sinister,” “Whores,” “Beards”
Pam Martens and Russ Martens: April 24, 2019 [Wall Street on Parade]
What the Financial Crisis Inquiry Commission (FCIC) wanted to see the U.S. Justice Department pursue was a potential criminal prosecution of Stan O’Neal, the CEO of Merrill Lynch in the leadup to the financial crisis, and its then CFO Jeffrey Edwards, for “making materially false and misleading representations and omissions about (a) Merrill’s exposure to retained CDO positions, (b) the value of those positions and (c) the firm’s risk management.” The FCIC also believed that Merrill had lied “in the offering documents for its $1.5 billion Norma CDO that was sold to investors in March of 2007.”
Maxine Waters Needs to Subpoena Details of the Fed’s Dirtiest Bailout
Pam Martens and Russ Martens, April 22, 2019 [Wall Street on Parade]
Based on data that Wall Street On Parade has newly compiled, there is a strong suggestion that the Federal Reserve conspired with at least three of the largest Wall Street firms to hide their teetering condition from the public during the financial crisis, despite the fact that these were all New York Stock Exchange listed companies with a duty to reveal material, adverse financial information to the public in a timely fashion.
If Maxine Waters wants to leave her mark in history as Chairman of the House Financial Services Committee, she will subpoena records from the Federal Reserve on its biggest and dirtiest bailout program, known as the Primary Dealer Credit Facility (PDCF)....
Between the PDCF and its multiple sibling bailout programs, the Fed engaged in 21,000 transactions cumulatively totaling more than $16 trillion from December 2007 through July 21, 2010. And that doesn’t include all of the bailout monies by a long shot. (See the Levy Economics Institute’s $29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient.) 
Just the PDCF alone was a staggering use of the Fed’s emergency lending powers. The program issued 1,376 loans that cumulatively totaled $8.95 trillion, of which Citigroup, Morgan Stanley and Merrill Lynch received $5.7 trillion or 64 percent of the total at a combined mean interest rate of 1.065 percent.
[New York Times, via Naked Capitalism 4-22-19] 
“Ms. Warren’s sweeping plan has several planks. She would pay for it with revenue generated by her proposed increase in taxes for America’s most wealthy families and corporations, which the campaign estimates to be $2.75 trillion over 10 years. In addition to eliminating undergraduate tuition at public colleges and universities, she would expand federal grants to help students with nontuition expenses and create a $50 billion fund to support historically black colleges and universities. She would eliminate up to $50,000 in student loan debt for every person with a household income of less than $100,000; borrowers who make between $100,000 and $250,000 would have a portion of their debt forgiven.”

Creating new economic potential - science and technology

Intel and Cray Will Deliver First Exoscale Supercomputer to National Lab
[Machine Design Today 4-24-19]

Intel Corp. and Cray Inc. will deliver the first supercomputer with a performance of one exaFLOP. It will be named Aurora and be housed at DOE’s Argonne National Laboratory in Chicago in 2021. The contract for the computer is valued at more than $500 million.

Information Age Dystopia

[ACQ, via Naked Capitalism 4-23-19]
[Budget starved schools initially welcomed Facebook's web-based platform and curriculum from Summit Learning.] Then, students started coming home with headaches and hand cramps. Some said they felt more anxious. One child began having a recurrence of seizures. Another asked to bring her dad’s hunting earmuffs to class to block out classmates because work was now done largely alone.
[ZDNet, via Naked Capitalism 4-23-19]
Ah, our old friend securely. The only thing you can be sure about that concept is that it isn't very secure.

Fegan wanted to know how this could have possibly happened so quickly. Could it be that in just a few seconds her biometric data was whipped "securely" around government departments so that she would be allowed on the plane? 
JetBlue referred her to an article on the subject, which was a touch on the happy-PR side. Fegan was moved, but not positively, by the phrase "there is no pre-registration required." Others weighed in to explain that her passport information was already in the database. The only difference here, said the wise, is that the machines look at your face and not your passport picture.... 
Tech companies are quite brilliant at sliding their latest brainwaves into the public sphere before those who implement them -- and those who are forced to be the objects of them -- consider the consequences.... Yet if you extrapolate the use of facial recognition to an everyday occurrence -- which Apple already does with the occasionally erratic Face ID -- a few horrors tend to unfold.

It isn't just that the technology can be inaccurate, especially when it comes to certain skin colors. Imagine that, soon, everywhere you go you'll be immediately recognizable.
It's not just that cameras will know you're there. It's that they'll know precisely who you are. And, given the rivers of data that flow uncontrolled around the web, a store, a restaurant, or an airport will, within seconds, know if you're rich, poor, divorced, angst-ridden, and/or a fan of Ska music.
“Hacker Finds He Can Remotely Kill Car Engines After Breaking Into GPS Tracking Apps” 
[Vice, via Naked Capitalism 4-25-19] 
“A hacker broke into thousands of accounts belonging to users of two GPS tracker apps, giving him the ability to monitor the locations of tens of thousands of vehicles and even turn off the engines for some of them while they were in motion…. By reverse engineering ProTrack and iTrack’s Android apps, [the hacker] said he realized that all customers are given a default password of 123456 when they sign up. At that point, the hacker said he brute-forced ‘millions of usernames’ via the apps’ API. Then, he said he wrote a script to attempt to login using those usernames and the default password.”
“Amazon’s warehouse-worker tracking system can automatically fire people without a human supervisor’s involvement” 
[Business Insider, via Naked Capitalism 4-26-19]  
“Amazon’s system tracks a metric called ‘time off task,’ meaning how much time workers pause or take breaks, The Verge reported. It has been previously reported that some workers feel so pressured that they don’t take bathroom breaks…. If the system determines the employee is failing to meet production targets, it can automatically issue warnings and terminate them without a supervisor’s intervention.”

Disrupting mainstream economics

Barry Ritholtz, April 22, 20419 [The Big Picture]

Disrupting mainstream politics

How The Citizenship Question Could Break The Census 
[FiveThirtyEight, via The Big Picture 4-27-19]
[Guardian, via Naked Capitalism 4-23-19]

“What Would A Left Cabinet Look Like?” 
[Current Affairs, via Naked Capitalism 4-25-19].
Summarizing: Secretary of State: Chris Murphy, Jeff Merkely, Russ Feingold; Secretary of Defense: Ro Khanna, Barbara Lee, Tulsi Gabbard; Secretary of the Treasury: Robert Reich, Stephanie Kelton, Sarah Bloom Raskin, Elizabeth Warren; Attorney General: Vanita Gupta, Larry Krasner, Tom Perez (!), Cory Booker; Secretary of the Interior: Raúl Grijalva, Jay Inslee, Bill McKibben; Secretary of Health & Human Services: Abdul El-Sayed, Don Berwick, Pramila Jayapal, Adam Gaffney, RoseAnn DeMoro, Claudia Fegan; Secretary of Homeland Security: Vanita Gupta, Jeff Merkely, David Cole, Ron Wyden.

Lambert Strether adds: 
"The article goes through the entire cabinet, but those are the ones I’m most interested in. (Then there’s the CIA, and the Fed.) On the domestic side, not unimpressive. On the war machine foreign policy side, not impressive at all, and that’s a problem, since unless those guys are fed some wars and plenty of weapons, they’ll be in open revolt, along with most of official Washington, exactly as with Trump. I’m a little at a loss, here; the left really needs their own equivalent of Rumsfeld and Cheney — the sort who brought a gun to a gunfight — and since this is a very large country, they’re probably out there somewhere (way out, having been driven out of the corridors of power into a second-tier school, for example). A Sanders Administration really would need to do better than Khanna, Lee, or Gabbard, IMNSHO. FDR didn’t rely on the Ivies, let us remember."

The Dark Side

[Politico, via The Big Picture 4-23-19]
A report on a recent party celebrating a PBS airing -- by "publishing executive Steve Forbes, co-author of the book that inspired the evening’s documentary, “In Money We Trust,” which lays out a case for a hard money system, such as the gold standard, that its devotees believe is less susceptible to government manipulation.'
So there's your choices: a return to the gold standard, or MMT. What say ye? 

Republican Strategist Karl Rove says Bernie Sanders could beat Trump in 2020
[Vox, via Naked Capitalism 4-21-19]
So, the Republicans begin preparations to stop Sanders. 

[New York Magazine], via Naked Capitalism 4-25-19]
“(Sinclair Broadcasting Group) currently airs original programming on 193 channels throughout the country, enough to reach 39 percent of all American homes. …. Since the mogul’s election, the media giant has ordered all of its affiliates to air commentary that advances White House talking points, and coerced their own anchors into personally reporting that the mainstream news media is biased against the president… Earlier this year, it launched an ad-free streaming channel called STIRR that aims to deliver local TV news and other entertainment to cord-cutters coast to coast…
Trump wins over big donors who snubbed him in 2016 
[Politico, via Naked Capitalism 4-23-19]

Reporter Sharmine Narwani on the secret history of America’s defeat in Syria 
[Salon, via Naked Capitalism 4-24-19]

1 comment:

  1. I would say 'good stuff' but these links are never to stories about good things, are they?