Sunday, December 8, 2019

Week-end Wrap – Political Economy – December 8, 2019

Week-end Wrap – Political Economy – December 8, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Reforming Rigged Capitalism
Barry Ritholtz, December 4, 2019 [The Big Picture]
Notable here is the original source: The Financial Times of London, for a century and a half the voice of the financiers of the City of London. The Financial Times is simply inaccessible behind a paywall, but Ritholtz provides a summary of highlights:
• US and UK have succumbed to demagogy. These long-stable democracies are also the most unequal of the western high-income countries. This is no coincidence;
• Rentier capitalism, weakened competition, feeble productivity growth, high inequality and, not coincidentally, an increasingly degraded democracy is is an unstable.
• US markets have become less competitive: concentration is high, leaders are entrenched and profit rates are excessive.
• Unit cost of financial intermediation has not fallen in the US over 140 years, despite technological advances
• The narrow focus on maximizing shareholder value has exacerbated the bad side-effects;
• Money in politics has damaged the idea of one person one vote. Money buys politicians, turns nations into plutocracies, not democracies. Our democracies need refurbishing.
• Finally, In­equality is corrosive.

How money laundering is poisoning American democracy
[Financial Times, via The Big Picture 12-1-19]
 In one of Mr Trump’s towers in Florida, more than 80 per cent of its units are owned by shell companies. The US has 10 times more shell companies than the next 41 jurisdictions combined, according to the World Bank.
NRA, Russia and Trump: How 'dark money' is poisoning American democracy
[CNBC 2-15-18]
One such report found that since Trump secured the Republican nomination in 2016, the fraction of anonymous purchases of his properties through shell companies has "skyrocketed" from 4 to 70 percent.
Here’s what happened when a charity gave $1,000 each to poor households in Kenya
[WeForum, via Naked Capitalism 12-5-19]
The charity gave a total of $10 million to 328 villages. Each of 10,500 households that qualified – by having a thatched-roof home – received $1,000, paid in three transfers.

The total paid out equaled around 75% of mean annual household expenditure in the region.... Economists from Berkeley, Princeton, and the University of California, San Diego analyzed a total of 653 villages. They carried out monthly surveys over 2.5 years, looking at 61 local markets. And they found many people benefitted from the cash – not only those who received it, but people in nearby villages, too.

In fact, every $1 of cash delivered generated $2.60 in additional spending or income in the area, the researchers say.
Freedom Is Meaningless Under Insurmountable Debt
[Atlantic, via Naked Capitalism 12-1-19]
Facing eviction, she took out a loan. She signed over the title to her family’s 2004 Ford F-150 as collateral and agreed to an annual interest rate of 300 percent... Her payment history shows her trying to keep up. Over 13 months, she gave more than a quarter of her take-home pay to the lender—$5,617—on a loan of $1,971. But the lender applied less than $2 of that to the loan principal; the rest vaporized in fees and interest.... 
As the historian Eric Foner and others have described, the Reconstruction Congress adopted a core view of the new Republican Party: that central to freedom is the right to enjoy the fruits of one’s own labor....

In 1867, Congress expressly recognized that it was possible to agree to work and still be enslaved. With its Anti-Peonage Act, Congress outlawed debt peonage—contracts that force someone to labor in order to pay off a debt, whether it is “voluntary” or not.

This and other laws reveal how the Reconstruction Congress saw the labor part of freedom as “not just the right to participate in the market, but the right to participate in a way that frees you from undue coercion,” says Rebecca Zietlow, a founder of the Thirteenth Amendment Project, a group of scholars exploring the history and “untapped potential” of the amendment.... 
As the Thirteenth Amendment scholar Lea VanderVelde writes: "What is the difference between owning a man and owning his services,” if his services—his labor—are all he has? How different is it, truly, to hold and force a woman to work until she pays off her debt, from garnishing the wages of a woman who cannot keep up with a loan at 300 percent interest? 
To be sure, this modern form of debt peonage doesn’t restrain one’s body—one’s physical freedom to move from place to place. But in the eyes of Howe and his fellow Republicans, its power is over something fundamental to liberty: the right to one’s future income.
The Data Show That Socialism Works
[Current Affairs]
....inspired by Nathanial Lewis’s “scale of socialism,” I used data from the Organisation for Economic Co-operation and Development (OECD), the World Inequality Database, and Freedom House to build a “Democratic Socialism Score” for a variety of countries. Due to the limits of their databases, I could only score 36 countries. I would love to apply this score to all countries, but the data limits can’t be avoided.

The score derives from four components, with each made up of several subcomponents. The “State Ownership Score” combines data on the market value of State-Owned Enterprises relative to the overall economy, the share of government financial assets as a percentage of GDP, and the share of total public wealth as a share of total overall wealth. The “Public Goods and Welfare Score” combines government expenditures on welfare transfers, education, housing, etc. as a share of GDP. The “Democracy Score” simply comes from Freedom House’s “Freedom Ratings.” And the “Union Score” combines the percent of the workforce who are members of unions and the percent who are covered by collectively bargained contracts. To appropriately average these scores into a single overall score, I converted them into “standardized t-scores.”

The Carnage of Establishment Neoliberal Economics

Our workforce is dying faster than any other wealthy country, study shows 
[USA Today, via Naked Capitalism 12-3-19]
....new study by researchers at Virginia Commonwealth University [shows] that mortality rates for U.S. adults ages 25-64 continue to increase, driving down the general population’s life expectancy for at least three consecutive years. 
The report, “Life Expectancy and Mortality Rates in the United States, 1959-2017,’’ was published Tuesday in the Journal of the American Medical Association. The study paints a bleak picture of a workforce plagued by drug overdoses, suicides and organ-system diseases while grappling with economic stresses....
  • Between 1999 and 2017, midlife mortality from drug overdoses spiked by 386.5%.
  • In that same age group and time period, deaths from hypertensive diseases increased by 78.9%, and those linked to obesity by 114%.
  • Suicides rose by 38% and climbed 55.9% among those ages 55-64.
Median US Homebuyers Age in 1981 was 31. Today it is 47.
[Deutsche Bank Securities, via The Big Picture 12-5-19]

“The WTO’s trade dispute appeal system could end on Dec. 10. Here’s what you need to know.” [Washington Post, via Naked Capitalism 12-3-19] 
“On Dec. 10, the World Trade Organization appeals tribunal, the Appellate Body, won’t have enough members left to rule on trade disputes between countries. That’s a problem, given ongoing trade wars between the United States, China, and Europe, and some 60 cases pending before the WTO. Without a functioning Appellate Body, countries can block progress on disputes between the organization’s 164 members simply by filing an appeal. How did we get to this point? The U.S. government has blocked all new appointments to the Appellate Body, to protest what it claims to be “persistent overreaching” by Appellate Body members in their rulings.
It's maddening that Trump is doing this and outflanking Democratic Party leaders who are unwilling or unable to admit that free trade as been a disaster for average Americans. There were a number of people in 2016 who warned that on economic issues such as trade, Trump would devastate Clinton was running to the left of her on economic issues. Remember he promised to preserve intact Social Security and Medicare? 

 Less than a year after abandoning HQ2 in New York City, Amazon says it’s opening a new 1,500-employee office in NYC 
[Business Insider, via Naked Capitalism 12-4-19]

[The Hill, via Naked Capitalism 12-4-19]

Economics in the real world

[USA Today, via Naked Capitalism 12-4-19]

Climate and environmental crises

“Poor Potato Crops Could Lead to a North American French Fry Shortage” 
[Smithsonian, via Naked Capitalism 12-4-19]
“The trouble started in October, when cold and wet conditions left potato growing regions covered in frost. Farmers in Alberta and Ohio were able to salvage and store some of their crops, but farmers in other areas, like Manitoba, North Dakota and Minnesota, had no choice but to give up on their beleaguered potatoes. Back in November, the United States Department of Agriculture predicted that production outputs from the country’s top nine potato producing states will fall 6.1 percent in 2019. Crops were down three percent in the autumn season alone, which, according to the United Potato Growers of Canada, ‘is one of the lowest crops on record.'”
[New York Times, via The Big Picture 12-5-19]
...climate change is encroaching on their treehouse paradise. Hurricane Irma in 2017 blew out their screens and pushed water through the windows. Each high tide brings the saltwater a little bit closer, killing the palm trees under the deck and popping the wooden slats off the boardwalk. The couple used to fly down from Long Island in a Cessna, until one day the runway at the island’s airport was underwater. 
“What’s government for? They’re supposed to protect your property,” Mr. Silverman said from behind the wheel of his shallow skiff boat on a recent afternoon.
“The Kaiser Family Foundation/Washington Post Climate Change Survey” 
[Kaiser Family Foundation, via Naked Capitalism 12-5-19] 
“The poll finds that eight in ten U.S. adults believe that human activity is causing changes to the world’s climate, and two-thirds think the U.S. government is doing too little to reduce greenhouse gas emissions. Yet while many see climate change as an urgent issue, most are not discussing it often with their family and friends, and most are not willing to make personal sacrifices such as paying higher taxes at the gas pump or on their electric bills.”

[The Conversation, via Naked Capitalism 12-5-19]

Coal Power Becoming ‘Uninsurable’ As Firms Refuse Cover 
[Guardian, via Naked Capitalism 12-3-19]

“Nitrogen crisis from jam-packed livestock operations has ‘paralyzed’ Dutch economy” 
[Science, via Naked Capitalism 12-6-19] 
“Last week, Dutch farmers across the country parked their tractors along highways in the third such protest since October, when they jammed traffic while driving en masse to The Hague, the nation’s center of government. They are protesting a Dutch high court decision that in May suspended permits for construction projects that pollute the atmosphere with nitrogen compounds and harm nature reserves. The freeze has stalled the expansion of dairy, pig, and poultry farms—major sources of nitrogen in the form of ammonia from animal waste. Also blocked are plans for new homes, roads, and airport runways, because construction machinery emits nitrogen oxides. All told, the shutdown puts some €14 billion worth of projects in jeopardy, according to ABN AMRO Bank. ‘It has really paralyzed the country,’ says Jeroen Candel, a political scientist at Wageningen University and Research.'”
[Nature, via Naked Capitalism 12-6-19]

Creating new economic potential - science and technology

Electrification of vehicles triggering big changes in auto industry
[Wall Street Journal, via Naked Capitalism 12-6-19]
“The electrification of vehicles is triggering bigger changes in automotive supply chains. General Motors Co. and South Korea’s LG Chem plan to jointly build a $2.3 billion battery-cell factory in Ohio… the latest example of how auto makers are plowing big money into technology that is transforming the sector.... “Consultancy AlixPartners LP says auto makers are gearing up to spend $225 billion over the next few years to develop new electric vehicles and are partnering with and investing in battery makers to help provide the power.”
“Toronto’s secret success: Suburban buses”
[Toronto Globe and Mail, via Naked Capitalism 12-6-19] 
“Transit fatalism has meant governments have rarely deigned to provide decent transit service in suburbs…. There are established formulas for transit service that deem many parts of suburban Toronto too low-density to support more than one bus an hour. When I speak to U.S. audiences and show them pictures of Finch Avenue in Toronto, they all say that they’d expect it to have hourly service. And yet, Finch has peak scheduled service every 90 seconds – better than every five minutes off-peak – and those buses are packed. It performs better financially than even busy downtown streetcar routes. These formulas shape policy in countless cities, including in Canada, and they need to be revised in light of Canadian experience.”
How the Koch Brothers Are Killing Public Transit Projects Around the Country
[New York Times, June 19, 2018, via Vicki Boyer on Facebook]

Rivers could generate thousands of nuclear power plants worth of energy, thanks to a new ‘blue’ membrane 
[Science, via Naked Capitalism 12-6-19]
A new membrane could unlock the potential of “blue energy,” which uses chemical differences between fresh- and saltwater to generate electricity. If researchers can scale up the postage stamp–size membrane in an affordable fashion, it could provide carbon-free power to millions of people in coastal nations where freshwater rivers meet the sea.... 
Rivers dump some 37,000 cubic kilometers of freshwater into the oceans every year. This intersection between fresh- and saltwater creates the potential to generate lots of electricity—2.6 terawatts, according to one recent estimate, roughly the amount that can be generated by 2000 nuclear power plants.
How Aviation Is Stepping Up Sustainability
[Aviation Week and Space Technology 12-5-19]
(By Paul Stein, chief technology officer for jet engine manufacturer Rolls-Royce)
The R and D programs underway to transition the aviation industry to a net-zero carbon producer.
  • Maintaining the relentless pursuit of technology to continue to improve airframe/engine efficiency by at least 1% per year on average, which has been achieved for the past 20 years;
  • Working with global fuels companies for a pathway to increase the availability of drop-in (blendable) hydrocarbon SAFs not derived from fossil sources;
  • Developing independent approaches to the third generation of aviation in which electrification will play an increasing role in aircraft propulsion; also, to exploring other radical alternatives such as the use of hydrogen as a fuel.

Predatory Finance

Bombshell Report: The Fed Has Not Rejected One Bank Merger Application Out of
3800 Submitted in Past 11 Years
Pam Martens and Russ Martens: December 6, 2019 [Wall Street On Parade]

Economic disequilibrium

San Francisco has nearly five empty homes per homeless resident 
[Curbed, via Naked Capitalism 12-5-19]

Health Care Crisis

‘An Arm And A Leg’: How Much For Stitches In The ER? Hard To Gauge Upfront
[Kaiser Health News, via Naked Capitalism 12-6-19]
In a system where consumers are encouraged to “shop” for the best deal in health care, why is it so hard to get simple information, like a price?

Information Age Dystopia

[MIT Technology Review, via Naked Capitalism 12-3-19]

Portland Plans To Propose the Strictest Facial Recognition Ban in the Country
[Gizmodo, via Naked Capitalism 12-4-19]
 “Since opening in September 2018, Amazon’s massive fulfillment center on New York’s Staten Island has garnered a reputation as grueling and unsafe, even among a logistics network broadly criticized as such. Now, leaked company documents reveal that injury rates at the warehouse, known as JFK8, are over three times the industry average. What’s unclear is if these numbers are at all anomalous compared to Amazon’s other facilities.”
[Insurance Journal 12-3-19]
In all, the attack crippled more than 30,000 laptop and desktop computers at the global drugmaker, as well as 7,500 servers, according to a person familiar with the matter. Sales, manufacturing, and research units were all hit. One researcher told a colleague she’d lost 15 years of work. Near Dellapena’s suburban office, a manufacturing facility that supplies vaccines for the U.S. market had ground to a halt.... 
By the end of 2017, Merck estimated initially in regulatory filings that the malware did $870 million in damages. Among other things, NotPetya so crippled Merck’s production facilities that it couldn’t meet demand that year for Gardasil 9, the leading vaccine against the human papillomavirus, or HPV, which can cause cervical cancer. Merck had to borrow 1.8 million doses—the entire U.S. emergency supply—from the Pediatric National Stockpile. It took Merck 18 months to replenish the cache, valued at $240 million. 
And what did Merck's insurers do? Rich irony! They denied coverage of the losses because it was an "act of war." 

Disrupting mainstream politics

[Below Twitter, via Naked Capitalism 12-2-19]
Greenwald’s theory of the case:
Lambert Strether adds: "That “pledges” idea is a good one. Does anyone know if Bloomberg was forced to sign the DNC loyalty oath that Sanders was forced to sign?"


Adolph Reed on Movements and Monuments
[Current Affairs, via Naked Capitalism 12-5-19]
Don't miss the section on Obama as "a sort of final triumph of Reaganism"
AR ....among the ways that the class divides are consequential are, for instance, the current obsession with the New Deal as “racist,” and with the idea that universal programs are fundamentally racist because they don’t target black people in particular, and black people don’t get anything out of it. But the fact of the matter is, black people got a lot out of the G.I. Bill, black people got a lot out of the WPA (Works Progress Administration), black people got a lot out of the Civilian Conservation Corps, and that racial disparity isn’t in the distribution of benefits, and good things and bad things, isn’t necessarily, like, the end of the story. This notion that Medicare For All, a single-payer health system, wouldn’t do anything at all for black people, because it’s not race-targeted, the idea that free public college wouldn’t do anything for black people because it’s not race-targeted, are clearly class-based programs. 
AR ....the decline and the transformation of the left in the U.S. since the end of World War II. It attempts to address what it was about what’s happened to the left that even led serious, longtime veteran activists to delude themselves, and to delude themselves as militants. It’s not just that they liked Obama, and supported Obama....

[Interviewer]...I just reviewed the memoirs of these guys that worked in the administration, and one of them says, explicitly, “my friends all started to say ‘you’ve become this unthinking, Obama-bot,’ and it was kind of true.” He says, “I was an evangelist for Obama, I didn’t really know what he stood for, but I just liked him so much, and I became obsessed with him, he just had this incredible power.” I mean, I’m a little sympathetic to this, because some of it comes out of desperation. You point all through your work to things that aren’t political movements that want to be political movements. But some of the time, it’s because no one knows what to do, so they cling to what seems like politics. It seems like it’s advancing justice. And the election of Obama seemed like a very radical transformation, and once it came into the realm of possibility, it’s understandable why people would say, “wow, we can do this incredibly transformative thing.”

AR: True, but that, to me, is the most depressing thing in the world. That’s like, frighteningly depressing. That’s—being in that position, where you feel so desperate, where you have to turn to a fantasy to get some solace, to me, feels like sort of leaping into a religious commitment, because you can’t face the world as it is, which to me feels like the same thing as being buried alive.

Enemy Actions

[New York Magazine, via The Big Picture 12-1-19]

“The Growing Partisan Divide in Views of Higher Education” 
[Pew Research Center, via Naked Capitalism 12-4-19]
“A new Pew Research Center survey finds that only half of American adults think colleges and universities are having a positive effect on the way things are going in the country these days. About four-in-ten (38%) say they are having a negative impact – up from 26% in 2012. The share of Americans saying colleges and universities have a negative effect has increased by 12 percentage points since 2012. The increase in negative views has come almost entirely from Republicans and independents who lean Republican.”
Revealed: Ilhan Omar and Rashida Tlaib targeted in far-right fake news operation 
[Guardian, via Naked Capitalism 12-7-19]

A Tiny Island Exposes Europe’s Failures 
The investigation into the murder of Malta’s most famous journalist has done more than plunge the country into crisis.
[The Atlantic, via Naked Capitalism 12-7-19]
Before she died, Caruana Galizia’s scoops on her blog, Running Commentary, alleged corruption at the highest levels of the Maltese government—kickbacks, dirty banking, offshore accounts in Panama opened by two close aides to the prime minister, sketchy use of the country’s program that sells Maltese passports to wealthy foreigners. (The last sentences she published were: “There are crooks everywhere you look now. The situation is desperate.”) After her murder, police quickly arrested three local men with criminal pasts, but then investigations slowed to “a glacial pace,” as a damning report by the Council of Europe, the Continent’s human-rights watchdog, put it this year. The report also described Malta as a country where the prime minister has too much sway over the appointment of judges and the chief of police. 
The three men were charged this summer with carrying out the murder, but little information emerged about who might have ordered the hit. Until this month, when an alleged middleman came forward with intriguing information. In exchange for immunity in a separate case, he said that one of Malta’s richest men, Yorgen Fenech, whose company had won a public contract to build a power station, had funded the journalist’s assassination; before her death, Caruana Galizia had reported alleged corruption in the deal. The tip-off led to Fenech’s being charged on Saturday. (He pled not guilty.) 
Reuters identified Fenech as the owner of a Dubai-based company that had been established to make payments to two offshore accounts set up by Prime Minister Joseph Muscat’s chief of staff, Keith Schembri, and Konrad Mizzi, Malta’s current tourism minister—accounts whose existence Caruana Galizia had first detailed when she combed through the findings of the Panama Papers reporting in 2016. Fenech declined to confirm to Reuters whether he owned the company. Schembri and Mizzi have acknowledged that they owned the offshore accounts, but deny all wrongdoing. It’s unclear whether Schembri and Mizzi’s accounts received money from the Dubai-based firm....
It is bad enough that a journalist was murdered in broad daylight in an EU country. That members of the current Maltese cabinet are implicated in the investigation and are still in power is a blight not only on Malta but on all of Europe. Malta is not just a Mediterranean backwater; it’s a back door—into Europe’s banking system, into the visa-free travel accorded by its European passports, into the protections of European rule of law and the values of human rights and the free press that the EU was created to uphold. It is hard to imagine the government of any other EU country staying intact under similar circumstances.


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