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may 31, 2020
CAPITALISM REPRESENTED ITSELF AS FREEING SERFS, SLAVES, ETC. FREEDOM BECAME CAPITALISM'S SELF-CELEBRATION WHICH IT LARGELY REMAINS. YET THE REALITY OF CAPITALISM IS DIFFERENT FROM ITS CELEBRATORY SELF-IMAGE. THE MASS OF EMPLOYEES ARE NOT FREE INSIDE CAPITALIST ENTERPRISES TO PARTICIPATE IN THE DECISIONS THAT AFFECT THEIR LIVES (E.G., WHAT THE ENTERPRISE WILL PRODUCE, WHAT TECHNOLOGY IT WILL USE, WHERE PRODUCTION WILL OCCUR, AND WHAT WILL BE DONE WITH THE PROFIT WORKERS' EFFORTS HELP TO PRODUCE). IN THEIR EXCLUSION FROM SUCH DECISIONS, MODERN CAPITALISM'S EMPLOYEES RESEMBLE SLAVES AND SERFS. YES, PARLIAMENTS, UNIVERSAL SUFFRAGE, ETC. HAVE ACCOMPANIED CAPITALISM - AN ADVANCE OVER SERFDOM AND SLAVERY. YET EVEN THAT ADVANCE HAS BEEN LARGELY UNDERMINED BY THE INFLUENCE OF THE HIGHLY UNEQUALLY DISTRIBUTED WEALTH AND INCOME THAT CAPITALISM HAS EVERYWHERE GENERATED.
RICHARD D. WOLFF
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The rapacity of contemporary capitalism is enabled by the weakness,
dishonesty, and cowardice of the flaccid and collaborationist left.
Luciana Bohne
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Socialism for the Rich, Capitalism for the Poor
Noam Chomsky: Consider this: Every time there is a crisis, the taxpayer is called on to bail out the banks and the major financial institutions. If you had a real capitalist economy in place, that would not be happening. Capitalists who made risky investments and failed would be wiped out. But the rich and powerful do not want a capitalist system. They want to be able to run the nanny state so when they are in trouble the taxpayer will bail them out. The conventional phrase is "too big to fail."
The IMF did an interesting study a few years ago on profits of the big US banks. It attributed most of them to the many advantages that come from the implicit government insurance policy -- not just the featured bailouts, but access to cheap credit and much else -- including things the IMF researchers didn't consider, like the incentive to undertake risky transactions, hence highly profitable in the short term, and if anything goes wrong, there's always the taxpayer. Bloomberg Businessweek estimated the implicit taxpayer subsidy at over $80 billion per year.
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“As soon as you're born they make you feel small
By giving you no time instead of it all
'Til the pain is so big you feel nothing at all…
Keep you doped with religion, and sex, and T.V.
And you think you're so clever and classless and free
But you're still fucking peasants as far as I can see…”
— John Lennon, “Working Class Hero
The reason we have poverty is that we have no imagination. There are a great many people accumulating what they think is vast wealth, but it's only money... they don't know how to enjoy it, because they have no imagination.
alan watts
articles
*FORGET “LOOTING.” CAPITALISM IS THE REAL ROBBERY
(ARTICLE BELOW)
*THE NUMBERS ARE IN—THE TRUMP-RADICAL REPUBLICAN RESPONSE HAS BEEN GREAT FOR CORPORATIONS AND THE ONE-PERCENTERS, NOT SO GOOD FOR YOU(ARTICLE BELOW)
*The Bailout Is Working — For the Rich
(ARTICLE BELOW)
*TOP US COMPANIES LAY OFF THOUSANDS OF WORKERS WHILE REWARDING SHAREHOLDERS AMID CORONAVIRUS PANDEMIC(ARTICLE BELOW)
*Robert Reich breaks down the sham of corporate social responsibility
(ARTICLE BELOW)
*BIG COMPANIES THAT GAVE EXECUTIVES HUGE BONUSES, PAID MASSIVE FINES, CASH IN ON SMALL BUSINESS AID(ARTICLE BELOW)
*Bezos, Musk among billionaires gaining net worth in pandemic: report
(ARTICLE BELOW)
*CASH-STRAPPED HOSPITALS LAY OFF THOUSANDS OF HEALTH WORKERS DESPITE COVID-19 STAFF SHORTAGES(ARTICLE BELOW)
*HOW THE FEDERAL RESERVE IS BAILING OUT BIG CORPORATIONS AND WALL STREET BANKS
(ARTICLE BELOW)
*‘WHO CARES? LET ’EM GET WIPED OUT’: STUNNING CNBC ANCHOR, VENTURE CAPITALIST SAYS LET HEDGE FUNDS FAIL AND SAVE MAIN STREET(ARTICLE BELOW)
*Medical Staffing Companies Owned by Rich Investors Cut Doctor Pay and Now Want Bailout Money(ARTICLE BELOW)
*How Private-Equity Firms Squeeze Hospital Patients for Profits
(EXCERPT BELOW)
*U.S. companies criticized for cutting jobs rather than investor payouts
(ARTICLE BELOW)
*ONE REASON CAREGIVERS ARE WEARING TRASH BAGS: A U.S. FIRM HAD TO RECALL 9 MILLION SURGICAL GOWNS(ARTICLE BELOW)
*A PRIVATE EQUITY BARON SITTING ON AN EMPTY PHILADELPHIA HOSPITAL IS IN LINE FOR HUGE TAX GIFT IN THE COVID-19 STIMULUS(ARTICLE BELOW)
*AT LAST: TIME TO KILL "USELESS EATERS"
(EXCERPT BELOW)
*The Virus of Capitalism Has Infected the COVID-19 Fight
(ARTICLE BELOW)
*Failures of American capitalism are laid bare with Coronavirus pandemic
(excerpt BELOW)
*BANKS PRESSURE HEALTH CARE FIRMS TO RAISE PRICES ON CRITICAL DRUGS, MEDICAL SUPPLIES FOR CORONAVIRUS(ARTICLE BELOW)
*Late-stage capitalism primed us for this pandemic
(ARTICLE BELOW)
*FILINGS SHOW TOP HEALTHCARE CEOS RAKED IN COMBINED $300 MILLION IN 2019
(ARTICLE BELOW)
*AT&T To Lay Off More Workers And Cut Costs By Tens Of Billions—Those Tax Breaks Are Working!(ARTICLE BELOW)
*The real global threat to 21st century freedom is authoritarian capitalism — not democratic socialism(ARTICLE BELOW)
*OPINION: THE DISASTER OF UTOPIAN ENGINEERING
(ARTICLE BELOW)
*Influence of Wall Street Donors Has Exploded in Decade Since “Citizens United”
(ARTICLE BELOW)
*Wall Street Superpower Eyes The Electricity Business
(ARTICLE BELOW)
*MEET THE CEOS RAKING IT IN FROM TRUMP’S AGGRESSION TOWARD IRAN
(ARTICLE BELOW)
*How Economists Tricked Us Into Thinking Capitalism Works
(ARTICLE BELOW)
*TRUMP ADMINISTRATION IS QUIETLY “GUTTING” TAX LAW TO GIVE BIG NEW BREAKS TO CORPORATIONS(ARTICLE BELOW)
*WORLD’S 500 RICHEST PEOPLE GAINED $1.2 TRILLION IN WEALTH IN 2019: ANALYSIS
(ARTICLE BELOW)
*The Ongoing Effort to Write Wall Street Out of the 2008 Financial Crisis
(ARTICLE BELOW)
*More tax break winning! AT&T looks into '4% cut in the operator's labor expenses'
(ARTICLE BELOW)
*‘STAGGERING’ NEW DATA SHOWS INCOME OF TOP 1% HAS GROWN 100 TIMES FASTER THAN BOTTOM 50% SINCE 1970(ARTICLE BELOW)
*Nobel laureate economist Joseph Stiglitz: It's time for Congress to do something about the economic mess that private-equity giants have created
(ARTICLE BELOW)
*Off the radar: U.S. CEOs' jet perks add millions to corporate tax bills
(ARTICLE BELOW)
*The monopolization of milk
(ARTICLE BELOW)
*The plutocrats’ most effective secret weapon is the U.S. tax code
(ARTICLE BELOW)
*U.S. company directors compensated more than ever, but now risk backlash
(ARTICLE BELOW)
*Neither Democrats Nor Republicans Will Admit the Problem Is Capitalism Itself
(ARTICLE BELOW)
*Here’s why Capitalism vs Socialism is a false choice
(ARTICLE BELOW)
*Six people who prove capitalism is broken in America
(ARTICLE BELOW)
*Here’s the big problem with American capitalism
(ARTICLE BELOW)
*Capitalism Is Not the “Market System”
(ARTICLE BELOW)
*The Normalization of Corruption
(ARTICLE BELOW)
*'Corporations Are People' Is Built on an Incredible 19th-Century Lie
(ARTICLE BELOW)
*5 BIG MYTHS SOLD BY THE DEFENDERS OF CAPITALISM(excerpt below)
*CAPITALISM: THE NIGHTMARE(excerpt below)
*funnies and charts(below)
*THIS INFOGRAPHIC SHOWS HOW ONLY 10 COMPANIES CONTROL ALL THE WORLD’S BRANDS(ARTICLE BELOW)
The reality of capitalism
George Monbiot sums up well some of the more toxic elements of neoliberalism, which remained largely hidden since it was in the mainstream press less as an ideology than as an economic policy. He writes:
Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning. Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimized, public services should be privatized. The organization of labor and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.
fundamentals of american capitalism
*american capitalists hate socialism until their incompetence and greed exposes their failure.
*a system created by slavery utilized on cotton plantations and have now become corporations.
*keep republicans in power to aide in ripping off american consumers
*always promote patriotism and american exceptionalism so the stupid public will think you are on their side
*nothing is more important than maximizing profits
*Never pass on opportunities to defraud CUSTOMERS
*when you get caught cheating on your taxes, make sure you have bribed enough government officials to minimize damage.
*maintain lobbyists, front groups, think tanks, etc. to lie and cover-up your corporate corruption.
*develop schemes to steal employee wages
*Maximize tax avoidance strategies
*hire part-time workers and deny them benefits
*always look to outsource labor to corrupt 3rd world countries to reduce labor costs
*sell mediocre products that never perform as advertised
*once your company is caught in scandal, mount an ad campaign portraying yourself as a wholesome organiZation
*never acknowledge guilt once your company is fined or sued
*hire lobbyist to bribe local politicians
*always scheme to avoid as many government regulations as possible
*make sure to defeat union organizing
*make sure that employees bare most of the cost of benefit packages
*underfund employees' pension plans
*make sure you can steal pension fund money through bankruptcy
*re-market and re-package old products as new and raise the price
OP-ED RACIAL JUSTICE
Forget “Looting.” Capitalism Is the Real Robbery.
BY William C. Anderson, Truthout
PUBLISHED May 29, 2020
This morning the president of the United States threatened state-sanctioned murder in response to “looting,” laying bare the way in which white supremacy, capitalism and the state work together to violently repress people who defend Black life.
But Trump’s angry outburst is not the only blatantly racist response we should be interrogating. We also must confront the way in which both conservatives and liberals have responded to the Minneapolis uprisings by condemning “looting.”
Protesters in Minneapolis and around the country are rising up against a lynching and state violence. How should we respond to a lynching? Should our goal simply be to publicize it, in the hope that such publicity will generate condemnation and prevent future lynchings? This logic is flawed, in part, because lynchings thrive off of spectatorship. For white supremacists, the act of killing is also an act of fellowship and opportunity for indoctrination.
Simply spreading images of racist killings and asking the state to stop killing us is not going to stop them. (In fact, while it’s important to publicize the fact that these killings are occurring, sometimes the spread of such images also galvanizes white supremacists.)
And so, for some who oppose racist killings, watching the videos, waiting to vote, and marching in protest feels like enough. But for others, more intervention is needed. The murder of George Floyd by Minneapolis police comes on the heels of the killings of Ahmaud Arbery in Brunswick, Georgia, and Breonna Taylor in Louisville, Kentucky. These killings were committed by current and former law enforcement. Understandably, outrage is growing.
We should expect uprisings. We should expect property to be damaged, as people rise up against the racist systems complicit with racist violence. Many of the people taking part in these revolts have decided that respecting property is not more important than respecting Black life. There is an awareness that if the law doesn’t respect Black life, then the law itself cannot be relied on for protection or given undeserving respect. So, as protesters are being accused of “looting” and “rioting” in Minneapolis or anywhere else, this time demands that we reflect on the systematic robbery of Black America.
Corporations in the United States, again, have walked away with an unprecedented and astronomical amount of money in 2020. With no accountability in sight, there was little to no opposition to their monumental robbery. They were handed trillions. Politicians working in service to the corporate elite — and afraid of appearing opposed to a deal that would largely benefit Wall Street — pushed it through. Of course, the deal left many vulnerable people in the dust. No changes were made after the unresolved debt crisis of 2008 that brutalized people around the world with the starvation we know as austerity. Cuts to social needs have fallen on the public undeterred while the rich continuously grow richer than they’ve ever been.
Now, protests breaking out throughout the nation in response to police brutality foreshadow what’s to come. People are likely to take, break and fight because conditions remain miserable. It should not be surprising. Still, the “looting” by the oppressed will always be condemned more than the structural robbery that’s long taken place under capitalism.
There’s this idea that the perpetrators of crises, rather than their victims, deserve our sympathy when their profits decrease. After at least 100,000 people in the U.S. — disproportionately Black, Native and Latinx people — have died from a merciless pandemic, this absurdity is still being trafficked through the media. The corporations that do not pay people a living wage and who are benefiting from skyrocketing prices amid disaster are not deserving of pity. For those of us whose stability is much more uncertain, one missed paycheck could mean eviction,
imprisonment or hunger. These circumstances are increasingly common as unemployment reaches levels not seen since the Great Depression. At least 40 million people in this country are out of work, and people in need are being effectively robbed by the rich.
As they lose their jobs, people are also being robbed of health care — a vulnerability that will kill people and their family members. People have also been robbed of a safe place to live free from state violence, where they can breathe clean air. People have watched the tax money they paid be given away, time and time again, after being told it would come back to workers, but it never does. For Black America, there are more than enough prison beds, but not nearly enough hospital beds for a population that’s being disproportionately crushed by institutional oppression. So, of course, with little to no real infrastructure to protect people who the government has long neglected and abandoned, there will be uprisings and people will take things. They will take because of what’s been taken from them: safety, security, housing, education, food and even their ability to vote. And, of course, protesters are being robbed of the right to express their anger.
This conversation about “looting” always repeats itself. During virtually every Black uprising that has taken place and shaped this country in the last century, the narrative has remained the same. White supremacist assaults on the Black community were dubbed “race riots,” and Black protesters’ self-defense has been framed as senseless violence. People lament the destruction of property because they’ve bought into the idea that it’s another wrong being committed on top of any given white supremacist violence that caused it all. But stealing because you’re being sucked dry by a system that has rendered you disposable is not the same as the ritualistic racist murders of Black people by white supremacists. Decades of “looting” stores during uprisings can’t measure up to what Wall Street has looted through the financial crises it creates.
They are certainly aware of their crimes. Hedge fund capitalists who amass endless amounts of money through slush funds and financial manipulation have many avenues to escape accountability. As the U.S. military prepares for “civil disturbances” and buys riot gear, it’s clear they know that not all people will accept atrocity. In a nation that has never gotten past the civil war it fought over a wealthy class not giving up slavery profits, defending the wealthy is a tradition. The same people who created and currently benefit from the current crisis are intentionally mismanaging plenty of other parts of our existence.
Those interested in liberation should not condemn protesters’ so-called “rioting” and “looting.” Rather, we should be doing all we can to free the imprisoned protesters in Minnesota and wherever else uprisings occur. The robbery we should concern ourselves with is the theft perpetrated by a system that creates desperation where people in need have to go and take for themselves what should be a guaranteed right. Capitalism encourages thievery from the top down. Writing about the Haitian Revolution, the great writer C.L.R. James once said, “The rich are only defeated when running for their lives.” It has certainly been the case time and time again throughout Black history: People have overcome insurmountable odds to claim victories. How should we answer the question, “What do we do in response to a lynching?” We must make the very system that enables it run for its life.
But Trump’s angry outburst is not the only blatantly racist response we should be interrogating. We also must confront the way in which both conservatives and liberals have responded to the Minneapolis uprisings by condemning “looting.”
Protesters in Minneapolis and around the country are rising up against a lynching and state violence. How should we respond to a lynching? Should our goal simply be to publicize it, in the hope that such publicity will generate condemnation and prevent future lynchings? This logic is flawed, in part, because lynchings thrive off of spectatorship. For white supremacists, the act of killing is also an act of fellowship and opportunity for indoctrination.
Simply spreading images of racist killings and asking the state to stop killing us is not going to stop them. (In fact, while it’s important to publicize the fact that these killings are occurring, sometimes the spread of such images also galvanizes white supremacists.)
And so, for some who oppose racist killings, watching the videos, waiting to vote, and marching in protest feels like enough. But for others, more intervention is needed. The murder of George Floyd by Minneapolis police comes on the heels of the killings of Ahmaud Arbery in Brunswick, Georgia, and Breonna Taylor in Louisville, Kentucky. These killings were committed by current and former law enforcement. Understandably, outrage is growing.
We should expect uprisings. We should expect property to be damaged, as people rise up against the racist systems complicit with racist violence. Many of the people taking part in these revolts have decided that respecting property is not more important than respecting Black life. There is an awareness that if the law doesn’t respect Black life, then the law itself cannot be relied on for protection or given undeserving respect. So, as protesters are being accused of “looting” and “rioting” in Minneapolis or anywhere else, this time demands that we reflect on the systematic robbery of Black America.
Corporations in the United States, again, have walked away with an unprecedented and astronomical amount of money in 2020. With no accountability in sight, there was little to no opposition to their monumental robbery. They were handed trillions. Politicians working in service to the corporate elite — and afraid of appearing opposed to a deal that would largely benefit Wall Street — pushed it through. Of course, the deal left many vulnerable people in the dust. No changes were made after the unresolved debt crisis of 2008 that brutalized people around the world with the starvation we know as austerity. Cuts to social needs have fallen on the public undeterred while the rich continuously grow richer than they’ve ever been.
Now, protests breaking out throughout the nation in response to police brutality foreshadow what’s to come. People are likely to take, break and fight because conditions remain miserable. It should not be surprising. Still, the “looting” by the oppressed will always be condemned more than the structural robbery that’s long taken place under capitalism.
There’s this idea that the perpetrators of crises, rather than their victims, deserve our sympathy when their profits decrease. After at least 100,000 people in the U.S. — disproportionately Black, Native and Latinx people — have died from a merciless pandemic, this absurdity is still being trafficked through the media. The corporations that do not pay people a living wage and who are benefiting from skyrocketing prices amid disaster are not deserving of pity. For those of us whose stability is much more uncertain, one missed paycheck could mean eviction,
imprisonment or hunger. These circumstances are increasingly common as unemployment reaches levels not seen since the Great Depression. At least 40 million people in this country are out of work, and people in need are being effectively robbed by the rich.
As they lose their jobs, people are also being robbed of health care — a vulnerability that will kill people and their family members. People have also been robbed of a safe place to live free from state violence, where they can breathe clean air. People have watched the tax money they paid be given away, time and time again, after being told it would come back to workers, but it never does. For Black America, there are more than enough prison beds, but not nearly enough hospital beds for a population that’s being disproportionately crushed by institutional oppression. So, of course, with little to no real infrastructure to protect people who the government has long neglected and abandoned, there will be uprisings and people will take things. They will take because of what’s been taken from them: safety, security, housing, education, food and even their ability to vote. And, of course, protesters are being robbed of the right to express their anger.
This conversation about “looting” always repeats itself. During virtually every Black uprising that has taken place and shaped this country in the last century, the narrative has remained the same. White supremacist assaults on the Black community were dubbed “race riots,” and Black protesters’ self-defense has been framed as senseless violence. People lament the destruction of property because they’ve bought into the idea that it’s another wrong being committed on top of any given white supremacist violence that caused it all. But stealing because you’re being sucked dry by a system that has rendered you disposable is not the same as the ritualistic racist murders of Black people by white supremacists. Decades of “looting” stores during uprisings can’t measure up to what Wall Street has looted through the financial crises it creates.
They are certainly aware of their crimes. Hedge fund capitalists who amass endless amounts of money through slush funds and financial manipulation have many avenues to escape accountability. As the U.S. military prepares for “civil disturbances” and buys riot gear, it’s clear they know that not all people will accept atrocity. In a nation that has never gotten past the civil war it fought over a wealthy class not giving up slavery profits, defending the wealthy is a tradition. The same people who created and currently benefit from the current crisis are intentionally mismanaging plenty of other parts of our existence.
Those interested in liberation should not condemn protesters’ so-called “rioting” and “looting.” Rather, we should be doing all we can to free the imprisoned protesters in Minnesota and wherever else uprisings occur. The robbery we should concern ourselves with is the theft perpetrated by a system that creates desperation where people in need have to go and take for themselves what should be a guaranteed right. Capitalism encourages thievery from the top down. Writing about the Haitian Revolution, the great writer C.L.R. James once said, “The rich are only defeated when running for their lives.” It has certainly been the case time and time again throughout Black history: People have overcome insurmountable odds to claim victories. How should we answer the question, “What do we do in response to a lynching?” We must make the very system that enables it run for its life.
The Rich Are Making Out Like Bandits In This Pandemic
The Numbers Are In—The Trump-Radical Republican Response Has Been Great for Corporations and the One-Percenters, Not So Good for You
By David Cay Johnston, DCReport Editor-in-Chief
5/21/2020
Cash began pouring into money funds in early March, just as the Trump pandemic was escalating.
Tens of millions of Americans are cashless, many desperate to feed their children. Meanwhile the richest Americans merrily float on a rapidly rising tide of money thanks mainly to Trump & Co.
My analysis of Federal Reserve data shows a record flow of greenbacks let the corporate rich pour trillions of dollars into their accounts as they fired tens of millions.
Now that money just sits, idle.
How can it be that as want ravages cash-starved Americans, money wealth rises for the already rich like the tide rushing into the Bay of Fundy?
Part of the answer is as simple as it is awful. The Trump administration and its Radical Republican Senate allies are taking care of those who need help the least while declaring enough already for the unemployed.
One in five families didn’t have enough food to feed their children in April.
At the same time, 36% of adults who lost their jobs to the COVID-19 pandemic or had their hours cut say they couldn’t pay their bills in April. But the Trump administration and the Republican leaders in the Senate say no more, at least not now. Yet they are rolling out proposals to give more to the richest among us.
Donald Trump promised to champion the Forgotten Man when he ran in 2016. Apparently, he forgot about innocent victims of a long-predicted infectious disaster.
But he hasn’t forgotten about the swamp creatures he brought to Washington and the ones still roaming unchecked beyond the nation’s capital.
But the four pandemic relief laws totaling $3 trillion of spending and tax breaks aren’t the only source of all this cash at the top. Not by a long shot.
Cash Deposits Grow
Since the beginning of March, when the coronavirus started killing a rising number of Americans, idle cash parked in institutional money market funds ballooned. The figure grewfrom less than $2.3 trillion to more than $3.3 trillion.
Try to get your head around the scale of that. In just 13 weeks companies parked $1 trillion in institutional money market funds.
Note that T–one-million million dollars. To park that much cash, companies had to deposit $11 billion each and every day.
Institutional money market funds are one of the places where large corporations and other big enterprises park money they don’t need right away. Parked cash doesn’t help revive our economy. It just sits idle like a box in the garage gathering dust.
Cash also gets deposited at commercial banks. Since the economy began its long rebound early in the Obama administration commercial bank deposits grew at 6% annually. Under Trump that fell to 4.6% until mid-March. But since then the growth in bank deposits leaped to a 15.8% rate.
Trump Policy Worsens Inequality
Consider another measure of cash, known as M1. That’s the total of all dollar bills and coins, money held in checking accounts and traveler’s checks.
By this measure the amount of cash in America grew at a 42% annual rate in the 13 weeks from Feb. 3 to May 4, Federal Reserve reports show.
That’s almost twice the highest rate ever previously—22.5% in 2011. It’s also almost seven times the average 6.3% annual growth in the basic money supply since 1976, Federal Reserve reports show.
As these numbers all show, the Trump pandemic makes inequality in America far worse. That’s not because of any unstoppable natural force or immutable principle of economics. It’s because of Trump administration policies supported by obedient Trumpers in our Congress that favor the political donor class.
The result is an abundance of cash everywhere except where it’s needed most. That’s a choice – to favor the rich. It’s not necessary or required. And it can be changed, although there is no evidence Trump will ever do so.
Triple Whammy
But for the refusal of Speaker Nancy Pelosi and House Democrats to go along with Trump & Co., the cash flow to the top would have been even greater. Pelosi’s team rewrote the coronavirus relief bills to ensure the involuntarily jobless got more, but hardly enough.
The numbers I analyzed reveal that during the pandemic the Trump administration is taking good care of the corporate rich while tossing crumbs to the people least able to withstand the economic shock of losing their paycheck and their health insurance.
And these jobless Americans now must cope with the sharpest spike in food prices since 1974, as even Fox News, aka Trump TV, reported last week.
That triple whammy of no paycheck, no health insurance and higher food prices is the reason you see miles-long lines of cars lined up at food banks. Many of those cars are shiny and new, leased or bought with loans that must be paid monthly or the vehicles will get repossessed.
For those whose pockets have been emptied by the pandemic, getting car loans is much harder than last year. At the end of 2019 not a single bank in America was tightening its requirements for auto loans, Fed data shows. Now 16% are.
Sources of Cash
A lot of the cash sitting idle came from two activities beyond the four relief laws.
One was selling stocks. In eight of the last 10 years investors took out more money out of stock funds than they invested.
All told, a net $444 billion was pulled out of the U.S. equity funds and ETFs over the past decade,” financial journalist Mark Hurlbut noted just as the pandemic was taking hold.
When the stock market started to slide many big investors reduced their holdings of company shares, generating cash that had to be parked somewhere until its spent or reinvested.
Second, many companies loaded up on new debt this year, raising cash to ride out whatever economic storms the coronavirus causes. This is not new. Companies have been taking on debt in record amounts, now more than $10 trillion, more than double compared with the turn of the century. But some companies have taken out loans or issued corporate bonds to buy back their own stock. That puts cash in the hands of investors who sell while simultaneously executives’ stock options more valuable because profits per share rise all else being equal.
But that does nothing to invest in new job-creating activities while creating new corporate tax deductions for interest paid on the debt.
All of this is encouraged by Trump, who likes to call himself “the king of debt.”
More for the Already Rich
Trump, in his disjointed and self-pitying way, says what America needs right now is another corporate tax cut. Trump and Congressional Republicans slashed the corporate profits tax rate by 40% starting in 2018.
Huge new tax breaks were included in the Coronavirus Aid Relief and Economics Security (CARES) Act. People with incomes of more than $1 million per year, roughly one in every 500 taxpayers, will get 80% of the tax savings, as we reported last month.
Larry Kudlow, a key Trump economic adviser, proposed cutting in half the corporate tax for companies who bring overseas jobs home.
The White House is also pushing for a payroll tax cut, which would benefit the highest-paid workers most and does nothing for the unemployed.
Tax cuts are the universal solvent for financial ailments in Trump World and its orbiting Republican dependencies. They are to tax cuts as the wacky father in My Big Fat Greek Wedding was to the Windex he sprayed everywhere as an all-purpose solutions to both cleaning glass and treating physical ailments.
A Pause Instead of Relief
Trump and his allies say the unemployed and small business owners whose doors have been ordered shut to block the Grump Reaper don’t need more help, at least not now.
“We need to hit pause for a while, see what has worked, what hasn’t worked and let’s see how much money—additional money—we need after the economy is opened back up,” Sen. John Kennedy, a Louisiana Republican, says. He is parroting the Trump White House line.
Steve Mnuchin, Trump’s Treasury secretary, bobbed and weaved at a Tuesday Senate hearing when Sen. Elizabeth Warren (D-Mass.) tried to pin him down on making sure that cash sent to the corporate rich will be used properly. She wants strong contracts, their terms enforced and audits. Mnuchin complained the questions from Warren and others were unfair, but he never pledged to make sure taxpayers are treated fairly.
Trump and his allies are feeding the rich and the enterprises they control with torrents of cash because they, in turn, take care of the politicians with campaign donations, jobs for politicians and their family and friends.
What did any of those 32 million everyday Americans who lost their jobs do for the politicians except, maybe, cast a vote?
Then again, the only way to change this is by casting votes.
My analysis of Federal Reserve data shows a record flow of greenbacks let the corporate rich pour trillions of dollars into their accounts as they fired tens of millions.
Now that money just sits, idle.
How can it be that as want ravages cash-starved Americans, money wealth rises for the already rich like the tide rushing into the Bay of Fundy?
Part of the answer is as simple as it is awful. The Trump administration and its Radical Republican Senate allies are taking care of those who need help the least while declaring enough already for the unemployed.
One in five families didn’t have enough food to feed their children in April.
At the same time, 36% of adults who lost their jobs to the COVID-19 pandemic or had their hours cut say they couldn’t pay their bills in April. But the Trump administration and the Republican leaders in the Senate say no more, at least not now. Yet they are rolling out proposals to give more to the richest among us.
Donald Trump promised to champion the Forgotten Man when he ran in 2016. Apparently, he forgot about innocent victims of a long-predicted infectious disaster.
But he hasn’t forgotten about the swamp creatures he brought to Washington and the ones still roaming unchecked beyond the nation’s capital.
But the four pandemic relief laws totaling $3 trillion of spending and tax breaks aren’t the only source of all this cash at the top. Not by a long shot.
Cash Deposits Grow
Since the beginning of March, when the coronavirus started killing a rising number of Americans, idle cash parked in institutional money market funds ballooned. The figure grewfrom less than $2.3 trillion to more than $3.3 trillion.
Try to get your head around the scale of that. In just 13 weeks companies parked $1 trillion in institutional money market funds.
Note that T–one-million million dollars. To park that much cash, companies had to deposit $11 billion each and every day.
Institutional money market funds are one of the places where large corporations and other big enterprises park money they don’t need right away. Parked cash doesn’t help revive our economy. It just sits idle like a box in the garage gathering dust.
Cash also gets deposited at commercial banks. Since the economy began its long rebound early in the Obama administration commercial bank deposits grew at 6% annually. Under Trump that fell to 4.6% until mid-March. But since then the growth in bank deposits leaped to a 15.8% rate.
Trump Policy Worsens Inequality
Consider another measure of cash, known as M1. That’s the total of all dollar bills and coins, money held in checking accounts and traveler’s checks.
By this measure the amount of cash in America grew at a 42% annual rate in the 13 weeks from Feb. 3 to May 4, Federal Reserve reports show.
That’s almost twice the highest rate ever previously—22.5% in 2011. It’s also almost seven times the average 6.3% annual growth in the basic money supply since 1976, Federal Reserve reports show.
As these numbers all show, the Trump pandemic makes inequality in America far worse. That’s not because of any unstoppable natural force or immutable principle of economics. It’s because of Trump administration policies supported by obedient Trumpers in our Congress that favor the political donor class.
The result is an abundance of cash everywhere except where it’s needed most. That’s a choice – to favor the rich. It’s not necessary or required. And it can be changed, although there is no evidence Trump will ever do so.
Triple Whammy
But for the refusal of Speaker Nancy Pelosi and House Democrats to go along with Trump & Co., the cash flow to the top would have been even greater. Pelosi’s team rewrote the coronavirus relief bills to ensure the involuntarily jobless got more, but hardly enough.
The numbers I analyzed reveal that during the pandemic the Trump administration is taking good care of the corporate rich while tossing crumbs to the people least able to withstand the economic shock of losing their paycheck and their health insurance.
And these jobless Americans now must cope with the sharpest spike in food prices since 1974, as even Fox News, aka Trump TV, reported last week.
That triple whammy of no paycheck, no health insurance and higher food prices is the reason you see miles-long lines of cars lined up at food banks. Many of those cars are shiny and new, leased or bought with loans that must be paid monthly or the vehicles will get repossessed.
For those whose pockets have been emptied by the pandemic, getting car loans is much harder than last year. At the end of 2019 not a single bank in America was tightening its requirements for auto loans, Fed data shows. Now 16% are.
Sources of Cash
A lot of the cash sitting idle came from two activities beyond the four relief laws.
One was selling stocks. In eight of the last 10 years investors took out more money out of stock funds than they invested.
All told, a net $444 billion was pulled out of the U.S. equity funds and ETFs over the past decade,” financial journalist Mark Hurlbut noted just as the pandemic was taking hold.
When the stock market started to slide many big investors reduced their holdings of company shares, generating cash that had to be parked somewhere until its spent or reinvested.
Second, many companies loaded up on new debt this year, raising cash to ride out whatever economic storms the coronavirus causes. This is not new. Companies have been taking on debt in record amounts, now more than $10 trillion, more than double compared with the turn of the century. But some companies have taken out loans or issued corporate bonds to buy back their own stock. That puts cash in the hands of investors who sell while simultaneously executives’ stock options more valuable because profits per share rise all else being equal.
But that does nothing to invest in new job-creating activities while creating new corporate tax deductions for interest paid on the debt.
All of this is encouraged by Trump, who likes to call himself “the king of debt.”
More for the Already Rich
Trump, in his disjointed and self-pitying way, says what America needs right now is another corporate tax cut. Trump and Congressional Republicans slashed the corporate profits tax rate by 40% starting in 2018.
Huge new tax breaks were included in the Coronavirus Aid Relief and Economics Security (CARES) Act. People with incomes of more than $1 million per year, roughly one in every 500 taxpayers, will get 80% of the tax savings, as we reported last month.
Larry Kudlow, a key Trump economic adviser, proposed cutting in half the corporate tax for companies who bring overseas jobs home.
The White House is also pushing for a payroll tax cut, which would benefit the highest-paid workers most and does nothing for the unemployed.
Tax cuts are the universal solvent for financial ailments in Trump World and its orbiting Republican dependencies. They are to tax cuts as the wacky father in My Big Fat Greek Wedding was to the Windex he sprayed everywhere as an all-purpose solutions to both cleaning glass and treating physical ailments.
A Pause Instead of Relief
Trump and his allies say the unemployed and small business owners whose doors have been ordered shut to block the Grump Reaper don’t need more help, at least not now.
“We need to hit pause for a while, see what has worked, what hasn’t worked and let’s see how much money—additional money—we need after the economy is opened back up,” Sen. John Kennedy, a Louisiana Republican, says. He is parroting the Trump White House line.
Steve Mnuchin, Trump’s Treasury secretary, bobbed and weaved at a Tuesday Senate hearing when Sen. Elizabeth Warren (D-Mass.) tried to pin him down on making sure that cash sent to the corporate rich will be used properly. She wants strong contracts, their terms enforced and audits. Mnuchin complained the questions from Warren and others were unfair, but he never pledged to make sure taxpayers are treated fairly.
Trump and his allies are feeding the rich and the enterprises they control with torrents of cash because they, in turn, take care of the politicians with campaign donations, jobs for politicians and their family and friends.
What did any of those 32 million everyday Americans who lost their jobs do for the politicians except, maybe, cast a vote?
Then again, the only way to change this is by casting votes.
The Bailout Is Working — For the Rich
The economy is in free fall but Wall Street is thriving, and stocks of big private equity firms are soaring dramatically higher. That tells you who investors think is the real beneficiary of the federal government’s massive rescue efforts.
by Jesse Eisinger - propublica
May 10, 5 a.m. EDT
Ten weeks into the worst crisis in 90 years, the government’s effort to save the economy has been both a spectacular success and a catastrophic failure.
The clearest illustration of that came on Friday, when the government reported that 20.5 million people lost their jobs in April. It marked a period of unfathomable pain across the country not seen since the Great Depression. Also on Friday, the stock market rallied.
The S&P 500 is now up 30% from its lows in mid-March and back to where it was last October, when the outlook for 2020 corporate earnings looked sunshiny. Companies have sold record amounts of debt in recent weeks for investment-grade companies. Junk bonds, historically dodgy during an economic swoon, have roared back.
If you’re looking for investors’ verdict on who has won the bailout, consider these returns: Shares of Apollo Group, the giant private equity firm, have soared 80% from their lows. The stock of Blackstone, another private equity behemoth, has risen 50%.
The reason: Asset holders like Apollo and Blackstone — disproportionately the wealthiest and most influential — have been insured by the world’s most powerful central bank. This largess is boundless and without conditions.
“Even if a second wave of outbreaks were to occur,” JPMorgan economists wrote in a celebratory note on Friday, “the Fed has explicitly indicated that there is no dollar limit and no danger of running out of ammunition.”
Many aspects of the coronavirus bailout that assist individuals or small businesses, meanwhile, are short-term or contingent. Aid to small businesses comes with conditions on what they can do with the money. The sums allocated by the CARES Act for stimulus and expanded unemployment insurance are vast by historical standards. But the relief they provide didn’t prevent tens of millions from losing their jobs. The assistance runs out in weeks, and the jobless live at the mercy of a divided Congress, which will decide whether that help gets extended and, if so, for how long.
It’s a bailout of capital. “If the theory is: Let’s make sure companies are solvent and the workers will be OK, that theory could work. But it’s a trickle-down theory,” said Lev Menand, a former New York Fed economist who now teaches at Columbia Law School.
We do know one thing, he said: “It worked for asset holders.”
The Fed’s efforts, universally praised for their boldness and speed, have come in two stages. First, in February and March, the central bank shored up capital market “liquidity,” which marks how willing investors are to buy and sell. The central bank role is to be a “lender of last resort,” working through banks so they can get money to companies and people.
That expanded in the wake of the 2008 global financial crisis. The Federal Reserve, historically viewed as reserved Brahmins who controlled the money supply, stepped into a new job: “the dealer of last resort,” in the words of economist Perry Mehrling. The Fed bought assets and it bailed out the shadow banking system. “Shadow banking” takes many forms and can mean many things, but generally it describes activities that look like classic banking — taking in deposits and lending out that money — that are undertaken by, for example, a private-equity fund or another institution outside the traditional system of federally insured deposits.
The beneficiaries of this Federal Reserve help in 2008 were money market funds, and short-term lending markets for corporations and financial institutions such as the commercial paper and repurchase agreement markets — all of which had seized up and stopped functioning. Then this year, the Fed came to the rescue of these markets again, doing “such a great job with this that everyone has forgotten this has happened,” Menand said.
Those Fed moves were necessary. But they should not be consigned to the memory hole.
Everyone learned in 2008 that those corners of the markets were vulnerable, but the lessons didn’t stick, apparently. The government tried to install new rules governing different pockets of these markets in piecemeal fashion; financial interests bitterly opposed much of that new regulation. And now, just a short 12 years later, the Fed had to step in to protect these markets and interests once again.
The second stage of the Fed’s extraordinary rescue goes beyond liquidity. It has said it will buy assets it has never bought before. For almost 100 years, the Fed purchased only government bonds. Now it has announced a wide variety of programs to buy various forms of corporate and other debt, either by direct lending, by buying bonds, or buying loans.
The mere announcement that the Fed would do this had an immediate effect, spurring the boom in corporate borrowing.
The Fed didn’t stop with the most solid, safest corporate stalwarts. In early April, it also announced something unprecedented. The central bank said it would buy junk bonds, debt issued by fragile companies, many of which already have crushing debt loads. Sure enough, junk bonds roared back and their cousins, leveraged loans, revived.
In doing so, the Fed backstopped the riskiest markets in the world. The most dangerous investments in the world, it should go without saying, are not owned by middle- and working-class Americans, to whom every politician pledges fealty. No, they are owned by the most risk-seeking investors in the world, the ones that need the highest returns: private equity firms and hedge funds.
But wait, there’s more. The riskiest markets only got more so during the long boom era of the last decade. In the past several years, regulators — especially the former chair of the Federal Reserve, Janet Yellen — repeatedly worried that companies had too much debt. They were concerned how lenders had raced to ease conditions, or covenants, on their loans to elbow out their competitors to fork over money, just as they had in the run-up to 2008. At a moment of record profits, the ratio of corporate debt to earnings steadily rose, while corporate stock buybacks hit records. Those cautions were treated like a parental exhortation to their kids to get off TikTok and brush their teeth.
Yet after all that worry, the Fed then stepped in to save the wealthiest speculators. The mere word that the Fed will make some purchases in this market has swelled these investors’ net worth. Meanwhile, images of mile-long food lines have become common.
In some ways, it’s unfair to blame the Fed. The speed of its actions and its ability to deploy groundbreaking new approaches mask the paucity of its tools. It must work through the capital markets. And only through credit, at that. The Fed has no ability to help regular people directly. “It’s really ill-suited to get money to where it’s most needed and on terms that are the most appropriate,” said Kate Judge, a Columbia law professor and expert in the Federal Reserve.
The House and Senate have much greater powers, the power of the purse and of legislation. Congress could have passed laws that directed help in different ways. Europe has essentially nationalized payrolls, a much more direct form of aid to people who have lost the ability to work. But Congress has been reluctant to use sufficient fiscal measures going back to the 2008 rescue.
What happens if the economy doesn’t come back soon? The Fed’s saddle-ʼem-with-more-debt approach is premised on a sharp and rapid recovery. The virus burns itself out, people go back to work, they buy and sell, and everything snaps back. Companies pay back their loans, and all is forgiven and forgotten.
If the health crisis does not pass quickly, or if the economy does not roar back, the Fed’s actions might prove inadequate. But investors shouldn’t be too worried. They have been taught they can count on the government.
The clearest illustration of that came on Friday, when the government reported that 20.5 million people lost their jobs in April. It marked a period of unfathomable pain across the country not seen since the Great Depression. Also on Friday, the stock market rallied.
The S&P 500 is now up 30% from its lows in mid-March and back to where it was last October, when the outlook for 2020 corporate earnings looked sunshiny. Companies have sold record amounts of debt in recent weeks for investment-grade companies. Junk bonds, historically dodgy during an economic swoon, have roared back.
If you’re looking for investors’ verdict on who has won the bailout, consider these returns: Shares of Apollo Group, the giant private equity firm, have soared 80% from their lows. The stock of Blackstone, another private equity behemoth, has risen 50%.
The reason: Asset holders like Apollo and Blackstone — disproportionately the wealthiest and most influential — have been insured by the world’s most powerful central bank. This largess is boundless and without conditions.
“Even if a second wave of outbreaks were to occur,” JPMorgan economists wrote in a celebratory note on Friday, “the Fed has explicitly indicated that there is no dollar limit and no danger of running out of ammunition.”
Many aspects of the coronavirus bailout that assist individuals or small businesses, meanwhile, are short-term or contingent. Aid to small businesses comes with conditions on what they can do with the money. The sums allocated by the CARES Act for stimulus and expanded unemployment insurance are vast by historical standards. But the relief they provide didn’t prevent tens of millions from losing their jobs. The assistance runs out in weeks, and the jobless live at the mercy of a divided Congress, which will decide whether that help gets extended and, if so, for how long.
It’s a bailout of capital. “If the theory is: Let’s make sure companies are solvent and the workers will be OK, that theory could work. But it’s a trickle-down theory,” said Lev Menand, a former New York Fed economist who now teaches at Columbia Law School.
We do know one thing, he said: “It worked for asset holders.”
The Fed’s efforts, universally praised for their boldness and speed, have come in two stages. First, in February and March, the central bank shored up capital market “liquidity,” which marks how willing investors are to buy and sell. The central bank role is to be a “lender of last resort,” working through banks so they can get money to companies and people.
That expanded in the wake of the 2008 global financial crisis. The Federal Reserve, historically viewed as reserved Brahmins who controlled the money supply, stepped into a new job: “the dealer of last resort,” in the words of economist Perry Mehrling. The Fed bought assets and it bailed out the shadow banking system. “Shadow banking” takes many forms and can mean many things, but generally it describes activities that look like classic banking — taking in deposits and lending out that money — that are undertaken by, for example, a private-equity fund or another institution outside the traditional system of federally insured deposits.
The beneficiaries of this Federal Reserve help in 2008 were money market funds, and short-term lending markets for corporations and financial institutions such as the commercial paper and repurchase agreement markets — all of which had seized up and stopped functioning. Then this year, the Fed came to the rescue of these markets again, doing “such a great job with this that everyone has forgotten this has happened,” Menand said.
Those Fed moves were necessary. But they should not be consigned to the memory hole.
Everyone learned in 2008 that those corners of the markets were vulnerable, but the lessons didn’t stick, apparently. The government tried to install new rules governing different pockets of these markets in piecemeal fashion; financial interests bitterly opposed much of that new regulation. And now, just a short 12 years later, the Fed had to step in to protect these markets and interests once again.
The second stage of the Fed’s extraordinary rescue goes beyond liquidity. It has said it will buy assets it has never bought before. For almost 100 years, the Fed purchased only government bonds. Now it has announced a wide variety of programs to buy various forms of corporate and other debt, either by direct lending, by buying bonds, or buying loans.
The mere announcement that the Fed would do this had an immediate effect, spurring the boom in corporate borrowing.
The Fed didn’t stop with the most solid, safest corporate stalwarts. In early April, it also announced something unprecedented. The central bank said it would buy junk bonds, debt issued by fragile companies, many of which already have crushing debt loads. Sure enough, junk bonds roared back and their cousins, leveraged loans, revived.
In doing so, the Fed backstopped the riskiest markets in the world. The most dangerous investments in the world, it should go without saying, are not owned by middle- and working-class Americans, to whom every politician pledges fealty. No, they are owned by the most risk-seeking investors in the world, the ones that need the highest returns: private equity firms and hedge funds.
But wait, there’s more. The riskiest markets only got more so during the long boom era of the last decade. In the past several years, regulators — especially the former chair of the Federal Reserve, Janet Yellen — repeatedly worried that companies had too much debt. They were concerned how lenders had raced to ease conditions, or covenants, on their loans to elbow out their competitors to fork over money, just as they had in the run-up to 2008. At a moment of record profits, the ratio of corporate debt to earnings steadily rose, while corporate stock buybacks hit records. Those cautions were treated like a parental exhortation to their kids to get off TikTok and brush their teeth.
Yet after all that worry, the Fed then stepped in to save the wealthiest speculators. The mere word that the Fed will make some purchases in this market has swelled these investors’ net worth. Meanwhile, images of mile-long food lines have become common.
In some ways, it’s unfair to blame the Fed. The speed of its actions and its ability to deploy groundbreaking new approaches mask the paucity of its tools. It must work through the capital markets. And only through credit, at that. The Fed has no ability to help regular people directly. “It’s really ill-suited to get money to where it’s most needed and on terms that are the most appropriate,” said Kate Judge, a Columbia law professor and expert in the Federal Reserve.
The House and Senate have much greater powers, the power of the purse and of legislation. Congress could have passed laws that directed help in different ways. Europe has essentially nationalized payrolls, a much more direct form of aid to people who have lost the ability to work. But Congress has been reluctant to use sufficient fiscal measures going back to the 2008 rescue.
What happens if the economy doesn’t come back soon? The Fed’s saddle-ʼem-with-more-debt approach is premised on a sharp and rapid recovery. The virus burns itself out, people go back to work, they buy and sell, and everything snaps back. Companies pay back their loans, and all is forgiven and forgotten.
If the health crisis does not pass quickly, or if the economy does not roar back, the Fed’s actions might prove inadequate. But investors shouldn’t be too worried. They have been taught they can count on the government.
Top US companies lay off thousands of workers while rewarding shareholders amid coronavirus pandemic
Companies like Caterpillar and Levi Strauss showered cash on shareholders days after cutting thousands of employees
IGOR DERYSH - salon
MAY 6, 2020 12:04AM (UTC)
Some of the largest companies in the U.S. have rewarded their shareholders amid the coronavirus pandemic after firing thousands of employees.
Companies like heavy machinery manufacturer Caterpillar, denim-maker Levi Strauss, toolmaker Stanley Black & Decker, furniture manufacturer Steelcase and World Wrestling Entertainment have doled out more than $700 million to shareholders in cash dividends while slashing jobs and shuttering facilities, The Washington Post reported. Many other companies have likewise rewarded shareholders while laying off workers.
Caterpillar, for example, announced a $500 million distribution to shareholders in early April, according to the report, about two weeks after it announced that it was "temporarily suspending operations at certain facilities." The company did not say how many workers would be impacted.
"We are taking a variety of actions globally, but we aren't going to discuss the number of impacted people," a spokesperson told the outlet. "We are taking a variety of actions at our global facilities to reduce production due to weaker customer demand, potential supply constraints and the spread of the COVID-19 pandemic and related government actions. These actions include temporary facility shutdowns, indefinite or temporary layoffs."
Levi Strauss announced that it would distribute $32 million to shareholders on April 7, the same day that the company said it would furlough retail workers. About 4,000 workers have been affected, according to The Post.
"As this human and economic tragedy unfolds globally over the coming months, we are taking swift and decisive action that will ensure we remain a winner in our industry," Levi CEO Chip Bergh said at the time, after reporting big earnings in Q1.
Stanley Black & Decker announced in early April that it would furlough and lay off "non-essential" workers. It distributed $106 million in dividends to shareholders just two weeks later, The Post reported.
"Throughout our company's 177-year history, Stanley Black & Decker has weathered a series of exogenous shocks and thrived," CEO James Loree said in the statement last month. "We are in a strong position as we face today's challenges and are taking the necessary actions now to protect our employees and the business while positioning the company to thrive into the future."
Steelcase announced in March that it would cut operations in four states, issuing a statement saying it took "these actions in an effort to avoid permanent headcount reductions so the company and its employees can come through this crisis together."
It announced the same day that it would issue a dividend of roughly $8 million to shareholders. Earlier that month, the company bought back $38 million in stock from shareholders.
The WWE, a company whose longtime former CEO Linda McMahon served in Trump's Cabinet and now works on his re-election campaign, cut 10% of its workers and fired about 20 wrestlers a day before it announced $9 million in dividends for shareholders.
These five companies are far from the only corporations rewarding shareholders while cutting workers, but many other companies took steps to end dividends and buybacks in response to the economic crisis caused by the coronavirus.
The Gap, American Eagle and Darden Restaurants — which owns Olive Garden and LongHorn Steakhouse — announced that they would pause dividends and stop buybacks, according to The Post. Williams Sonoma said it would continue to pay full-time employees after shuttering its stores.
Chris Lu, who served as the Deputy Secretary of Labor under President Obama, called out the Trump administration for pushing to protect companies from being sued by workers who contract COVID-19 while ignoring businesses that reward shareholders at the expense of workers.
"In Trump's economy, these companies won't get punished," he said. "Instead, he wants to give them liability protection."
"In a downturn like this the first thing a company should do is give up any distributions to shareholders," William Lazonick, an economist at the University of Massachusetts Lowell, told The Post. "But in a crisis, companies will differ. Some will care . . . and some will rob the workers, who should expect that their continued employment will be the company's first concern."
Companies like heavy machinery manufacturer Caterpillar, denim-maker Levi Strauss, toolmaker Stanley Black & Decker, furniture manufacturer Steelcase and World Wrestling Entertainment have doled out more than $700 million to shareholders in cash dividends while slashing jobs and shuttering facilities, The Washington Post reported. Many other companies have likewise rewarded shareholders while laying off workers.
Caterpillar, for example, announced a $500 million distribution to shareholders in early April, according to the report, about two weeks after it announced that it was "temporarily suspending operations at certain facilities." The company did not say how many workers would be impacted.
"We are taking a variety of actions globally, but we aren't going to discuss the number of impacted people," a spokesperson told the outlet. "We are taking a variety of actions at our global facilities to reduce production due to weaker customer demand, potential supply constraints and the spread of the COVID-19 pandemic and related government actions. These actions include temporary facility shutdowns, indefinite or temporary layoffs."
Levi Strauss announced that it would distribute $32 million to shareholders on April 7, the same day that the company said it would furlough retail workers. About 4,000 workers have been affected, according to The Post.
"As this human and economic tragedy unfolds globally over the coming months, we are taking swift and decisive action that will ensure we remain a winner in our industry," Levi CEO Chip Bergh said at the time, after reporting big earnings in Q1.
Stanley Black & Decker announced in early April that it would furlough and lay off "non-essential" workers. It distributed $106 million in dividends to shareholders just two weeks later, The Post reported.
"Throughout our company's 177-year history, Stanley Black & Decker has weathered a series of exogenous shocks and thrived," CEO James Loree said in the statement last month. "We are in a strong position as we face today's challenges and are taking the necessary actions now to protect our employees and the business while positioning the company to thrive into the future."
Steelcase announced in March that it would cut operations in four states, issuing a statement saying it took "these actions in an effort to avoid permanent headcount reductions so the company and its employees can come through this crisis together."
It announced the same day that it would issue a dividend of roughly $8 million to shareholders. Earlier that month, the company bought back $38 million in stock from shareholders.
The WWE, a company whose longtime former CEO Linda McMahon served in Trump's Cabinet and now works on his re-election campaign, cut 10% of its workers and fired about 20 wrestlers a day before it announced $9 million in dividends for shareholders.
These five companies are far from the only corporations rewarding shareholders while cutting workers, but many other companies took steps to end dividends and buybacks in response to the economic crisis caused by the coronavirus.
The Gap, American Eagle and Darden Restaurants — which owns Olive Garden and LongHorn Steakhouse — announced that they would pause dividends and stop buybacks, according to The Post. Williams Sonoma said it would continue to pay full-time employees after shuttering its stores.
Chris Lu, who served as the Deputy Secretary of Labor under President Obama, called out the Trump administration for pushing to protect companies from being sued by workers who contract COVID-19 while ignoring businesses that reward shareholders at the expense of workers.
"In Trump's economy, these companies won't get punished," he said. "Instead, he wants to give them liability protection."
"In a downturn like this the first thing a company should do is give up any distributions to shareholders," William Lazonick, an economist at the University of Massachusetts Lowell, told The Post. "But in a crisis, companies will differ. Some will care . . . and some will rob the workers, who should expect that their continued employment will be the company's first concern."
Robert Reich breaks down the sham of corporate social responsibility
Robert Reich / Robert Reich's Blog - alternet
May 6, 2020
Last August, the Business Roundtable – an association of CEOs of America’s biggest corporations – announced with great fanfare a “fundamental commitment to all of our stakeholders” and not just their shareholders.
They said “investing in employees, delivering value to customers, and supporting outside communities“ is now at the forefront of their business goals — not maximizing profits.
Baloney. Corporate social responsibility is a sham.
One Business Roundtable director is Mary Barra, CEO of General Motors. Just weeks after making the Roundtable commitment, and despite GM’s hefty profits and large tax breaks, Barra rejected workers’ demands that GM raise their wages and stop outsourcing their jobs. Earlier in the year GM shut its giant assembly plant in Lordstown, Ohio.
Nearly 50,000 GM workers then staged the longest auto strike in 50 years. They won a few wage gains but didn’t save any jobs. Barra was paid $22 million last year. How’s that for corporate social responsibility?
Another prominent CEO who made the phony Business Roundtable commitment was AT&T’s Randall Stephenson, who promised to use the billions in savings from the Trump tax cut to invest in the company’s broadband network and create at least 7,000 new jobs.
Instead, even before the coronavirus pandemic, AT&T cut more than 23,000 jobs and demanded that employees train lower-wage foreign workers to replace them.
Let’s not forget Jeff Bezos, CEO of Amazon and its Whole Foods subsidiary. Just weeks after Bezos made the Business Roundtable commitment, Whole Foods announced it would be cutting medical benefits for its entire part-time workforce.
The annual saving to Amazon from this cost-cutting move is roughly what Bezos – whose net worth is $117 billion – makes in a few hours. Bezos’ wealth grows so quickly, this number has gone up since you started watching this video.
GE’s CEO Larry Culp is also a member of the Business Roundtable. Two months after he made the commitment to all his stakeholders, General Electric froze the pensions of 20,000 workers in order to cut costs. So much for investing in employees.
Dennis Muilenburg, the former CEO of Boeing, also committed to the phony Business Roundtable pledge. Shortly after making the commitment to “deliver value to customers,” Muilenburg was fired for failing to act to address the safety problems that caused the 737 Max crashes that killed 346 people. After the crashes, he didn’t issue a meaningful apology or even express remorse to the victims’ families and downplayed the severity of the fallout to investors, regulators, airlines, and the public. He was rewarded with a $62 million farewell gift from Boeing on his way out.
Oh, and the chairman of the Business Roundtable is Jamie Dimon, CEO of Wall Street’s largest bank, JPMorgan Chase. Dimon lobbied Congress personally and intensively for the biggest corporate tax cut in history, and got the Business Roundtable to join him. JPMorgan raked in $3.7 billion from the tax cut. Dimon alone made $31 million in 2018.
That tax cut increased the federal debt by almost $2 trillion. This was before Congress spent almost $3 trillion fighting the pandemic – and delivering a hefty portion as bailouts to the biggest corporations, many of whom signed the Business Roundtable pledge.
As usual, almost nothing has trickled down to America’s working class and poor.
The truth is, American corporations are sacrificing workers and communities as never before in order to further boost runaway profits and unprecedented CEO pay. And not even a tragic pandemic is changing that.
Americans know this. A record 76 percent of U.S. adults believe major corporations have too much power.
The only way to make corporations socially responsible is through laws requiring them to be – for example, giving workers a bigger voice in corporate decision making, requiring that corporations pay severance to communities they abandon, raising corporate taxes, busting up monopolies, and preventing dangerous products (including faulty airplanes) from ever reaching the light of day.
If the CEOs of the Business Roundtable and other corporations were truly socially responsible, they’d support such laws, not make phony promises they clearly have no intention of keeping. Don’t hold your breath.
The only way to get such laws enacted is by reducing corporate power and getting big money out of our politics.
The first step is to see corporate social responsibility for the sham it is. The next step is to emerge from this pandemic and economic crisis more resolved than ever to rein in corporate power, and make the economy work for all.
They said “investing in employees, delivering value to customers, and supporting outside communities“ is now at the forefront of their business goals — not maximizing profits.
Baloney. Corporate social responsibility is a sham.
One Business Roundtable director is Mary Barra, CEO of General Motors. Just weeks after making the Roundtable commitment, and despite GM’s hefty profits and large tax breaks, Barra rejected workers’ demands that GM raise their wages and stop outsourcing their jobs. Earlier in the year GM shut its giant assembly plant in Lordstown, Ohio.
Nearly 50,000 GM workers then staged the longest auto strike in 50 years. They won a few wage gains but didn’t save any jobs. Barra was paid $22 million last year. How’s that for corporate social responsibility?
Another prominent CEO who made the phony Business Roundtable commitment was AT&T’s Randall Stephenson, who promised to use the billions in savings from the Trump tax cut to invest in the company’s broadband network and create at least 7,000 new jobs.
Instead, even before the coronavirus pandemic, AT&T cut more than 23,000 jobs and demanded that employees train lower-wage foreign workers to replace them.
Let’s not forget Jeff Bezos, CEO of Amazon and its Whole Foods subsidiary. Just weeks after Bezos made the Business Roundtable commitment, Whole Foods announced it would be cutting medical benefits for its entire part-time workforce.
The annual saving to Amazon from this cost-cutting move is roughly what Bezos – whose net worth is $117 billion – makes in a few hours. Bezos’ wealth grows so quickly, this number has gone up since you started watching this video.
GE’s CEO Larry Culp is also a member of the Business Roundtable. Two months after he made the commitment to all his stakeholders, General Electric froze the pensions of 20,000 workers in order to cut costs. So much for investing in employees.
Dennis Muilenburg, the former CEO of Boeing, also committed to the phony Business Roundtable pledge. Shortly after making the commitment to “deliver value to customers,” Muilenburg was fired for failing to act to address the safety problems that caused the 737 Max crashes that killed 346 people. After the crashes, he didn’t issue a meaningful apology or even express remorse to the victims’ families and downplayed the severity of the fallout to investors, regulators, airlines, and the public. He was rewarded with a $62 million farewell gift from Boeing on his way out.
Oh, and the chairman of the Business Roundtable is Jamie Dimon, CEO of Wall Street’s largest bank, JPMorgan Chase. Dimon lobbied Congress personally and intensively for the biggest corporate tax cut in history, and got the Business Roundtable to join him. JPMorgan raked in $3.7 billion from the tax cut. Dimon alone made $31 million in 2018.
That tax cut increased the federal debt by almost $2 trillion. This was before Congress spent almost $3 trillion fighting the pandemic – and delivering a hefty portion as bailouts to the biggest corporations, many of whom signed the Business Roundtable pledge.
As usual, almost nothing has trickled down to America’s working class and poor.
The truth is, American corporations are sacrificing workers and communities as never before in order to further boost runaway profits and unprecedented CEO pay. And not even a tragic pandemic is changing that.
Americans know this. A record 76 percent of U.S. adults believe major corporations have too much power.
The only way to make corporations socially responsible is through laws requiring them to be – for example, giving workers a bigger voice in corporate decision making, requiring that corporations pay severance to communities they abandon, raising corporate taxes, busting up monopolies, and preventing dangerous products (including faulty airplanes) from ever reaching the light of day.
If the CEOs of the Business Roundtable and other corporations were truly socially responsible, they’d support such laws, not make phony promises they clearly have no intention of keeping. Don’t hold your breath.
The only way to get such laws enacted is by reducing corporate power and getting big money out of our politics.
The first step is to see corporate social responsibility for the sham it is. The next step is to emerge from this pandemic and economic crisis more resolved than ever to rein in corporate power, and make the economy work for all.
screwing the taxpayer!!!
Big companies that gave executives huge bonuses, paid massive fines, cash in on small business aid
More than 200 publicly-traded companies have received more than $750 million intended to help small businesses
IGOR DERYSH - salon
APRIL 28, 2020 9:00AM (UTC)
Companies that paid millions in fines, doled out big executive bonuses, and donated to the Trump campaign were among the firms that received millions of dollars in aid aimed at helping small businesses weather the coronavirus crisis.
The Paycheck Protection Program was created in the $2.2 trillion stimulus bill to help small businesses that could no longer sustain themselves after large swaths of the economy shut down to contain the spread of the coronavirus. But the program quickly ran out of money and needed to be replenished after dozens of large companies secured millions in low-interest loans, which would be forgiven if the companies retain their employees.
Though some restaurant chains like Shake Shack and Ruth's Chris Steakhouse returned tens of millions they got from the program after public outcry, about 200 publicly traded companies have disclosed that they received more than $750 million in total from the program, according to The New York Times. Other companies secured loans even though they were able to raise millions from private investors.
At least seven companies that received a combined $45 million in loans from the program recently had to pay big fines to the federal government.
MiMedx Group, a Georgia pharmaceutical company, received a $10 million loan just days after it agreed to pay the Justice Department $6.5 million after allegedly overcharging the Department of Veterans Affairs for medical supplies. The company also paid a $1.5 million settlement to the Securities and Exchange Commission.
US Auto Parts Network received a $4.1 million loan even though Customs and Border Protection recently seized some of the company's products because they were reportedly counterfeit, according to the Times.
Companies that have paid their executives big bonuses have also cashed in on the program.
AutoWeb received a $1.4 million loan just days after disclosing that CEO Jared Rowe got a $1.7 million bonus in 2019, despite the company's stock price having plunged by more than 70%.
Manning & Napier, a New York investment firm, received a $6.7 million loan after disclosing last month that it paid CEO Marc Mayer nearly $5 million last year, according to the Times. The company received the loans even after it vowed to pay out quarterly dividends to shareholders.
Applicants for loans are not required to show that they have been affected by the pandemic and must only certify that "current economic uncertainty makes this loan request necessary." As a result, companies that have recently secured big investments pounced on the program.
Legacy Housing, a Texas home manufacturer, announced that it received $6.5 million from the program just weeks after it announced that it had secured a new $25 million credit line. After drawing scrutiny from the Times, top executive Curtis Hodgson told the paper that the company would pay back the money.
Escalade Sports, a sporting goods manufacturer, received a $5.6 million loan despite already securing a $50 million credit line from JPMorgan Chase, according to the Times. The company told the Times that it "fully met all required conditions" for the loan even though CEO Dave Fetherman told investors earlier this month the company had a "strong balance sheet."
Several companies with ties to President Trump also received big loans.
Phunware, a data-collection company that works with the Trump campaign and Fox News, received a $2.9 million loan.
Continental Materials, a construction supply company, received $5.5 million in loans after CEO James Gidwitz contributed to the Trump campaign. His brother Ronald was tapped to serve as Trump's ambassador to Belgium after serving as the Illinois campaign finance chairman for the president's 2016 campaign.
The Main Street Alliance, an advocacy group for small businesses, said the funds were not going to the companies Congress ostensibly set out to help.
"It's outrageous," Amanda Ballantyne, the group's executive director, told the Times, adding that there were countless small business owners "who have laid off all their staff, are trying to file for unemployment and will go bankrupt because of the problems with the way this Paycheck Protection Program was designed."
The Trump administration has refused to disclose which companies have received the aid, so most information about recipients has come from the companies themselves. Trump and Treasury Secretary Steven Mnuchin have said they hope that companies that should not have gotten the loans will voluntarily return the money.
Banks distributing the aid have also pocketed some $10 billion in fees. Several of the banks have been accused of prioritizing large corporate customers ahead of small businesses that desperately need the aid to stay afloat.
Democrats and Republicans alike have criticized the program for misdirecting the funds.
"Many businesses with thousands of employees have found loopholes to qualify for these loans meant for small businesses. Unfortunately, when it comes to the PPP, millions of dollars are being wasted," Sen. Rick Scott, R-Fla., told CNN. "Right now, companies that are not being harmed at all by the coronavirus crisis have the ability to receive taxpayer-funded loans that can be forgiven. That's wrong, and it takes money out of the hands of those Americans who really need it."
The Paycheck Protection Program was created in the $2.2 trillion stimulus bill to help small businesses that could no longer sustain themselves after large swaths of the economy shut down to contain the spread of the coronavirus. But the program quickly ran out of money and needed to be replenished after dozens of large companies secured millions in low-interest loans, which would be forgiven if the companies retain their employees.
Though some restaurant chains like Shake Shack and Ruth's Chris Steakhouse returned tens of millions they got from the program after public outcry, about 200 publicly traded companies have disclosed that they received more than $750 million in total from the program, according to The New York Times. Other companies secured loans even though they were able to raise millions from private investors.
At least seven companies that received a combined $45 million in loans from the program recently had to pay big fines to the federal government.
MiMedx Group, a Georgia pharmaceutical company, received a $10 million loan just days after it agreed to pay the Justice Department $6.5 million after allegedly overcharging the Department of Veterans Affairs for medical supplies. The company also paid a $1.5 million settlement to the Securities and Exchange Commission.
US Auto Parts Network received a $4.1 million loan even though Customs and Border Protection recently seized some of the company's products because they were reportedly counterfeit, according to the Times.
Companies that have paid their executives big bonuses have also cashed in on the program.
AutoWeb received a $1.4 million loan just days after disclosing that CEO Jared Rowe got a $1.7 million bonus in 2019, despite the company's stock price having plunged by more than 70%.
Manning & Napier, a New York investment firm, received a $6.7 million loan after disclosing last month that it paid CEO Marc Mayer nearly $5 million last year, according to the Times. The company received the loans even after it vowed to pay out quarterly dividends to shareholders.
Applicants for loans are not required to show that they have been affected by the pandemic and must only certify that "current economic uncertainty makes this loan request necessary." As a result, companies that have recently secured big investments pounced on the program.
Legacy Housing, a Texas home manufacturer, announced that it received $6.5 million from the program just weeks after it announced that it had secured a new $25 million credit line. After drawing scrutiny from the Times, top executive Curtis Hodgson told the paper that the company would pay back the money.
Escalade Sports, a sporting goods manufacturer, received a $5.6 million loan despite already securing a $50 million credit line from JPMorgan Chase, according to the Times. The company told the Times that it "fully met all required conditions" for the loan even though CEO Dave Fetherman told investors earlier this month the company had a "strong balance sheet."
Several companies with ties to President Trump also received big loans.
Phunware, a data-collection company that works with the Trump campaign and Fox News, received a $2.9 million loan.
Continental Materials, a construction supply company, received $5.5 million in loans after CEO James Gidwitz contributed to the Trump campaign. His brother Ronald was tapped to serve as Trump's ambassador to Belgium after serving as the Illinois campaign finance chairman for the president's 2016 campaign.
The Main Street Alliance, an advocacy group for small businesses, said the funds were not going to the companies Congress ostensibly set out to help.
"It's outrageous," Amanda Ballantyne, the group's executive director, told the Times, adding that there were countless small business owners "who have laid off all their staff, are trying to file for unemployment and will go bankrupt because of the problems with the way this Paycheck Protection Program was designed."
The Trump administration has refused to disclose which companies have received the aid, so most information about recipients has come from the companies themselves. Trump and Treasury Secretary Steven Mnuchin have said they hope that companies that should not have gotten the loans will voluntarily return the money.
Banks distributing the aid have also pocketed some $10 billion in fees. Several of the banks have been accused of prioritizing large corporate customers ahead of small businesses that desperately need the aid to stay afloat.
Democrats and Republicans alike have criticized the program for misdirecting the funds.
"Many businesses with thousands of employees have found loopholes to qualify for these loans meant for small businesses. Unfortunately, when it comes to the PPP, millions of dollars are being wasted," Sen. Rick Scott, R-Fla., told CNN. "Right now, companies that are not being harmed at all by the coronavirus crisis have the ability to receive taxpayer-funded loans that can be forgiven. That's wrong, and it takes money out of the hands of those Americans who really need it."
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Bezos, Musk among billionaires gaining net worth in pandemic: report
APRIL 23, 2020 / 7:51 AM
(Reuters) - The combined wealth of America’s billionaires, including Amazon.com (AMZN.O) Inc founder Jeff Bezos and Tesla Inc (TSLA.O) chief Elon Musk, increased nearly 10% during the ongoing COVID-19 pandemic, according to a report published by the Institute for Policy Studies (IPS).
The wealth surge of America’s richest men happened during a period that saw as many as 22 million Americans file for unemployment.
Even as the broader economy faced a recession, tech and stay-at-home stocks like Zoom (ZM.O) have rallied in recent weeks, due to a surge in usage of video conferencing and remote work technology, thus boosting the net worth of billionaire founders with holdings in those companies.
“This is the tale of two pandemics, with very unequal sacrifice,” said Chuck Collins, a co-author of the report.
During the period between January 1 to April 10 this year, 34 of the nation’s wealthiest billionaires have seen their net worth increase by tens of millions of dollars, the report said.
According to the IPS report, eight of these billionaires including Bezos, Zoom Video Communications Inc founder Eric Yuan and Musk saw a $1-billion jump in their total net worth.
Musk holds an 18.5% stake in Tesla shares, which has soared over 73% since the beginning of the year as traders looked beyond the short-term impact of the coronavirus pandemic.
Bezos owns about 15.1% in Amazon stock, which has gained nearly 31% this year as online orders on its platform have surged due to people staying indoors.
In the last decade, wealth of U.S. billionaires jumped over 80.6% adjusted for inflation, the report added.
The wealth surge of America’s richest men happened during a period that saw as many as 22 million Americans file for unemployment.
Even as the broader economy faced a recession, tech and stay-at-home stocks like Zoom (ZM.O) have rallied in recent weeks, due to a surge in usage of video conferencing and remote work technology, thus boosting the net worth of billionaire founders with holdings in those companies.
“This is the tale of two pandemics, with very unequal sacrifice,” said Chuck Collins, a co-author of the report.
During the period between January 1 to April 10 this year, 34 of the nation’s wealthiest billionaires have seen their net worth increase by tens of millions of dollars, the report said.
According to the IPS report, eight of these billionaires including Bezos, Zoom Video Communications Inc founder Eric Yuan and Musk saw a $1-billion jump in their total net worth.
Musk holds an 18.5% stake in Tesla shares, which has soared over 73% since the beginning of the year as traders looked beyond the short-term impact of the coronavirus pandemic.
Bezos owns about 15.1% in Amazon stock, which has gained nearly 31% this year as online orders on its platform have surged due to people staying indoors.
In the last decade, wealth of U.S. billionaires jumped over 80.6% adjusted for inflation, the report added.
Cash-strapped hospitals lay off thousands of health workers despite COVID-19 staff shortages
Thousands of medical workers are out of a job as the crisis exposes the perils of the for-profit health care system
IGOR DERYSH - salon
APRIL 18, 2020 2:00PM (UTC)
Hospitals across the country are laying off thousands of medical workers despite facing severe staff shortages as they treat an influx of patients infected with the coronavirus.
Hospitals have been feeling the effects of the pandemic for weeks as the number of coronavirus infections continued to rise, overwhelming medical systems and exhausting protective equipment stockpiles. But as the economic crisis continues to grow due to social distancing restrictions, for-profit hospitals are increasingly unable to maintain their staffing levels.
The Department of Veterans Affairs is racing to find enough new medical workers to staff hospitals in hard-hit areas like Detroit and New Orleans. It recently even sought to bring medical personnel out of retirement to assist with the crisis.
New York City Mayor Bill de Blasio pleaded for the federal government to assist his hard-hit city with staffing its hospital system.
"Unless there is a national effort to enlist doctors, nurses, hospital workers of all kinds and get them where they are needed most in the country in time, I don't see, honestly, how we're going to have the professionals we need to get through this crisis," he told MSNBC earlier this month.
Despite the growing need to find enough able medical workers to staff hospitals seeing an unprecedented number of patients, tens of thousands of medical workers have lost their jobs, in part due to state restrictions imposed to contain the virus spread.
Altarum, a nonprofit health research and consulting firm, reported last week that 43,000 health workers lost their jobs in just the first month of the crisis. Most of the losses were among non-hospital workers that are employed at physician and dentist offices that closed amid statewide lockdowns. However, the trend has now expanded to hospitals.
In Michigan, one of the areas hit hardest by the outbreak, Beaumont Health announced that it would lay off at least 300 workers at a Detroit-area hospital while the Detroit Medical Center furloughed about 480 employees.
The Medical University of South Carolina is laying off about 900 workers and asking full-time staff to take a 15% pay cut, according to the Charleston Post & Courier. Mercy Health, the largest medical system in Ohio, is temporarily cutting 700 workers, according to the Cincinnati Enquirer. Essentia Health, a top medical provider in Minnesota, is laying off 500 workers, according to the Duluth News Tribune. Two hospital systems in West Virginia will furlough about 1,000 workers, according to the Associated Press. The biggest health system in eastern Kentucky is cutting 500 workers, according to the Lexington Herald-Leader.
These layoffs are just the tip of the iceberg as hospitals face rising costs coupled with plummeting revenues. Hospitals have been forced to purchase unprecedented numbers of ventilators and personal protective equipment at exorbitant prices while also setting up drive-through testing sites. At the same time, many states and Surgeon General Jerome Adams directed hospitals to halt non-urgent surgeries in order to conserve protective equipment and bed space and prevent the spread of the virus to non-infected patients.
Elective surgeries make up a large part of hospital revenues. Beaumont Health, for example, earns about $16 million more than it spends in a typical month; now, it is losing about $100 million per month since the elective surgery ban, according to The Washington Post. Mercy First is also losing about $100 million each month. Virginia hospitals are expected to lose a combined $600 million in just 30 days.
"Elective surgeries are the cornerstone of our hospital system's operating model — and the negative impact due to the cancellations of these procedures cannot be overstated," Texas-based Steward Health Care said in a statement to NPR. "In addition, patients are understandably cautious and choosing to defer any non-emergency treatments or routine visits until this crisis has passed."
Many of the layoffs have hit workers who are not directly involved in treating coronavirus patients, executives told the Post, but the reduced staff has put a "strain" on health systems dealing with a surge of patients.
---
The $2.2 trillion stimulus bill approved by Congress last month allocated $100 billion to help hospitals alleviate the pain. Yet experts say that is not enough, since the hospital industry sees about $100 billion in revenues in just a single month.
The Trump administration has also taken steps that could leave the worst-off hospitals out of luck. Seema Verma, the administrator of the Centers for Medicare and Medicaid, said that the first $30 billion of the aforementioned allocation will be doled out based on the volume of Medicare recipients billed by hospitals. That could leave hospitals that treat higher numbers of Medicaid recipients and the uninsured without any assistance, as those patients are left out of the aid calculation.
The rest of the money would theoretically go to the other hospitals, but President Donald Trump announced earlier this month that the administration would dip into the hospital fund to cover the cost of coronavirus testing and treatment for uninsured patients after he refused to open a special Obamacare enrollment period instead. The Kaiser Family Foundation estimated that the plan will cost up to $42 billion of the remaining $70 billion allocation.
This could leave hospitals that primarily treat low-income workers and uninsured patients "in the greatest need of funding support," warned Bruce Siegel, the head of America's Essential Hospitals.
The American Hospital Association called on Verma and HHS Secretary Alex Azar to allocate funds based on need by providing $30,000 per every occupied bed in "hot spots" like New York and Detroit, and $25,000 per bed to every other hospital.
"In addition, all types of hospitals, including rural and urban short-term acute-care, long-term care and critical access hospitals, as well as inpatient rehabilitation and inpatient psychiatric facilities, are incurring expenses related to COVID-19 as they work to treat patients and expand the capacity of the health care system," the organization said. "Thus, all types of hospitals must be eligible for funds."
Fox told The Post that even this massive expenditure would only "take care of April."
Asked how much he believed hospitals needed to ride out the crisis, he replied, "tell me how long the virus lasts, and I can answer that."
The uncertainty has left many health workers, who have been accurately praised as heroes during the crisis, stuck in limbo. Colby Pacheco, a contract nurse in Oklahoma, said he was considering traveling to a hotspot to find work as he faces a potential furlough.
"It's a weird position to be in as a nurse, not knowing if you'll have a job during a pandemic," Pacheco told ABC News. "I just hope big business doesn't get in the way of nurses doing their jobs and helping people."
Hospitals have been feeling the effects of the pandemic for weeks as the number of coronavirus infections continued to rise, overwhelming medical systems and exhausting protective equipment stockpiles. But as the economic crisis continues to grow due to social distancing restrictions, for-profit hospitals are increasingly unable to maintain their staffing levels.
The Department of Veterans Affairs is racing to find enough new medical workers to staff hospitals in hard-hit areas like Detroit and New Orleans. It recently even sought to bring medical personnel out of retirement to assist with the crisis.
New York City Mayor Bill de Blasio pleaded for the federal government to assist his hard-hit city with staffing its hospital system.
"Unless there is a national effort to enlist doctors, nurses, hospital workers of all kinds and get them where they are needed most in the country in time, I don't see, honestly, how we're going to have the professionals we need to get through this crisis," he told MSNBC earlier this month.
Despite the growing need to find enough able medical workers to staff hospitals seeing an unprecedented number of patients, tens of thousands of medical workers have lost their jobs, in part due to state restrictions imposed to contain the virus spread.
Altarum, a nonprofit health research and consulting firm, reported last week that 43,000 health workers lost their jobs in just the first month of the crisis. Most of the losses were among non-hospital workers that are employed at physician and dentist offices that closed amid statewide lockdowns. However, the trend has now expanded to hospitals.
In Michigan, one of the areas hit hardest by the outbreak, Beaumont Health announced that it would lay off at least 300 workers at a Detroit-area hospital while the Detroit Medical Center furloughed about 480 employees.
The Medical University of South Carolina is laying off about 900 workers and asking full-time staff to take a 15% pay cut, according to the Charleston Post & Courier. Mercy Health, the largest medical system in Ohio, is temporarily cutting 700 workers, according to the Cincinnati Enquirer. Essentia Health, a top medical provider in Minnesota, is laying off 500 workers, according to the Duluth News Tribune. Two hospital systems in West Virginia will furlough about 1,000 workers, according to the Associated Press. The biggest health system in eastern Kentucky is cutting 500 workers, according to the Lexington Herald-Leader.
These layoffs are just the tip of the iceberg as hospitals face rising costs coupled with plummeting revenues. Hospitals have been forced to purchase unprecedented numbers of ventilators and personal protective equipment at exorbitant prices while also setting up drive-through testing sites. At the same time, many states and Surgeon General Jerome Adams directed hospitals to halt non-urgent surgeries in order to conserve protective equipment and bed space and prevent the spread of the virus to non-infected patients.
Elective surgeries make up a large part of hospital revenues. Beaumont Health, for example, earns about $16 million more than it spends in a typical month; now, it is losing about $100 million per month since the elective surgery ban, according to The Washington Post. Mercy First is also losing about $100 million each month. Virginia hospitals are expected to lose a combined $600 million in just 30 days.
"Elective surgeries are the cornerstone of our hospital system's operating model — and the negative impact due to the cancellations of these procedures cannot be overstated," Texas-based Steward Health Care said in a statement to NPR. "In addition, patients are understandably cautious and choosing to defer any non-emergency treatments or routine visits until this crisis has passed."
Many of the layoffs have hit workers who are not directly involved in treating coronavirus patients, executives told the Post, but the reduced staff has put a "strain" on health systems dealing with a surge of patients.
---
The $2.2 trillion stimulus bill approved by Congress last month allocated $100 billion to help hospitals alleviate the pain. Yet experts say that is not enough, since the hospital industry sees about $100 billion in revenues in just a single month.
The Trump administration has also taken steps that could leave the worst-off hospitals out of luck. Seema Verma, the administrator of the Centers for Medicare and Medicaid, said that the first $30 billion of the aforementioned allocation will be doled out based on the volume of Medicare recipients billed by hospitals. That could leave hospitals that treat higher numbers of Medicaid recipients and the uninsured without any assistance, as those patients are left out of the aid calculation.
The rest of the money would theoretically go to the other hospitals, but President Donald Trump announced earlier this month that the administration would dip into the hospital fund to cover the cost of coronavirus testing and treatment for uninsured patients after he refused to open a special Obamacare enrollment period instead. The Kaiser Family Foundation estimated that the plan will cost up to $42 billion of the remaining $70 billion allocation.
This could leave hospitals that primarily treat low-income workers and uninsured patients "in the greatest need of funding support," warned Bruce Siegel, the head of America's Essential Hospitals.
The American Hospital Association called on Verma and HHS Secretary Alex Azar to allocate funds based on need by providing $30,000 per every occupied bed in "hot spots" like New York and Detroit, and $25,000 per bed to every other hospital.
"In addition, all types of hospitals, including rural and urban short-term acute-care, long-term care and critical access hospitals, as well as inpatient rehabilitation and inpatient psychiatric facilities, are incurring expenses related to COVID-19 as they work to treat patients and expand the capacity of the health care system," the organization said. "Thus, all types of hospitals must be eligible for funds."
Fox told The Post that even this massive expenditure would only "take care of April."
Asked how much he believed hospitals needed to ride out the crisis, he replied, "tell me how long the virus lasts, and I can answer that."
The uncertainty has left many health workers, who have been accurately praised as heroes during the crisis, stuck in limbo. Colby Pacheco, a contract nurse in Oklahoma, said he was considering traveling to a hotspot to find work as he faces a potential furlough.
"It's a weird position to be in as a nurse, not knowing if you'll have a job during a pandemic," Pacheco told ABC News. "I just hope big business doesn't get in the way of nurses doing their jobs and helping people."
How The Federal Reserve Is Bailing Out Big Corporations And Wall Street Banks
Panicked by Trump’s Crashing Economy, the Central Bank Is ‘Money Washing’ Billions of Dollars Worth of Junk Company Bonds
By Erik Sherman - dc report
4/13/2020
Money laundering is a dirty word. Shady characters move illicit wealth to make it look legitimately gained. Think “Breaking Bad,” but for embezzlers, extortionists and tax evaders as well as drug traffickers.
Regulators, mostly in the United States, fined large banks almost $10 billion over a recent 15-month period for violating anti-money laundering rules.
Now we’re seeing a new kind of activity involving hiding the real value of money held not in greenbacks but in the usually more durable paper known as corporate bonds. In the end, you will almost certainly pay the price as your 401(k) or other retirement or investment account gets dinged and perhaps deeply gouged for the immediate benefit of big Wall Street clients.
Now, think of a variation of money laundering that we’ll call money washing. Instead of trying to cleanse away criminality, money washing removes a kind of financial dirt that reduces the value of corporate bonds just like dirt reduces the value of most other things.
Unlike money laundering, this new technique is perfectly legal.
Pretend that last year you bought a single bond from a company with a sterling financial record. You paid $1,000 and expected to collect interest for 20 years and then get your $1,000 back.
Then, the coronavirus came this year and the company’s revenues have shriveled. The likelihood that you will ever get your full $1,000 back, let alone all the interest payments, has gone from near certainty to highly unlikely.
A Money-Back Guarantee
You could sell your bond but, understandably, buyers won’t give you $1,000 for it. Whether you get a discounted price of $990 or $900 or just $90 will depend on how Wall Street traders rate the chance of recouping the interest and principal from the company.
Now, a buyer comes along willing to pay you the full $1,000. If you’re smart, you sell the bond, take the cash and run.
If you were not just smart but big enough and rich enough, you’d buy all the bonds you could at those discounted prices, sell them to this generous (or crazy) buyer at $1,000 each and turn a quick guaranteed profit.
While you don’t have the money to buy up millions of these distressed bonds, Wall Street does.
Ladies and gentlemen meet this generous (or crazy) bond buyer: The Federal Reserve.
The Fed has been visibly panicked by the economy plummeting.
‘Investment-Grade’ vs. Junk
Since March 23, the central bank has been buying high-grade corporate bonds issued by companies with a solid history of paying their debts. Think household brand names.
Fed purchases of those quality bonds inject dollars into the economy. That provides banks, businesses and pension plans with cash to pay to employees, retirees and vendors. This bond-buying spree is officially unlimited. It will be multiples of the Fed’s bond purchases in the depths of the Great Recession just a few years ago.
The Fed did restrict the exchange of corporate bonds at their full face value for dollars to what’s known as investment-grade debt. Investment grade means the face value of the bond and the interest are likely to be paid on time and in full.
Last week, the Fed did what was previously unthinkable. It started buying bonds now worth far less than they were just weeks ago—some of the riskiest corporate debt in existence. It started buying junk.
Fallen Angels
When investment-grade companies get into trouble their credit ratings drop—as happened with the likes of Ford, Macy’s, and The Gap as sales collapsed due to the coronavirus. Companies in this situation are called “fallen angels.” These once sound companies—which suffer in part from bad past decisions like overexpansion and highly leveraged acquisitions—find themselves in need of raising money just when their borrowing costs increase because lenders demand higher interest rates. That’s a prescription for unhealthy finances.
When corporate credit ratings fall, the bonds these companies issued in the past start to trade at lower prices because of the increased risk that bondholders will not be paid off in full.
So, what happened when the Fed said on Thursday that it would pay good money for risky bonds? Deeply discounted Ford bonds jumped 22% overnight by midday Friday. Other junk debt suddenly rose in value, too, as savvy Wall Streeters cashed in by buying bonds cheap and selling them at their much higher face value.
Legal Loan Sharking
While once-solid bonds issued by companies like Ford have fallen to junk status, there also exists a market for risky corporate debt on the day that bonds are sold. In personal deals, we call such lenders loan sharks and make their activity a crime. In the corporate world, however, we call the sellers of these risky loans investment banks and declare it legal.
Because junk bonds are sold with a significant chance of never being repaid in full, buyers insist on high rates of interest. Junk bonds are currently yielding investors more than 8% annually compared with as little as 2% on the most trustworthy corporate debt and less than 1% for some U.S. government debt.
Junk bonds were popularized in the 1980s by Michael Milken, the financial manipulator who went to prison after he confessed to six securities fraud charges. The companies that turned to Milken to sell their junk bonds were seen by banks as unworthy of loans.
Junk bonds financed Donald Trump’s brief and personally lucrative rise in the Atlantic City casino business. He walked away with hundreds of millions while buyers of Trump’s junk bonds lost their shirts. Trump’s worst bonds were sold in 1990 by Merrill Lynch, now part of Bank of America.
Many Hazards
Maybe this Fed move to swap damaged paper for clean cash is necessary to stave off a Great Depression 2.0. But it has predictable consequences.
One is that corporations and high net-worth individuals, who are supposed to understand the risks they take, escape the consequences for their decisions. That’s a form of socialism for the rich and corporations, but it’s also the smallest problem.
Next is “moral hazard.” When companies get bailed out, they began figuring they can keep doing what they’ve always done, even if dangerous and risky. This encourages more and worse risky behavior instead of prudence.
“As painful as failure and recessions are, we keep putting bigger and bigger band-aids on our problems, expecting them to change,” says Craig Kirsner, president of Stuart Estate Planning Wealth Advisors in South Florida. “When will we learn?”
Given past performance, apparently never.
‘Fictional Value’
Another problem is that ordinary investors will have no idea what their investments are worth without Fed props. “It’s fictional value,” says Allen Sukholitsky, chief macro strategist for Xallarap Advisory in New York. “It’s not fact-based.”
That problem worsens as the props may not stop. Like a junkie needing larger doses of a drug to get high, markets will require ongoing and larger intervention for satisfaction. The result is a dilemma because market capitalism depends on reliable price information.
Price is crucial to a market economy as opposed to one run by the government, as in the old Soviet system. While people have an idea of what a gallon of gas or milk or distilled water costs from experience, without deep education in finance and accounting they have no independent way to value the stocks, bonds and other financial investments in an era of self-managed retirement savings.
This Fed interference with market prices infects more than bonds. Sukholitsky noted that you might eventually see higher prices at the grocery store in the future. As the Fed artificially inflates the value of assets like troubled corporate bonds, there’s additional perceived money to pay for products so sellers raise prices to capture more of the value.
The ultimate irony is the wealthy regularly lecture those who aren’t about responsibility and actions having consequences while getting their own bailouts.
This is a real American exceptionalism: Everyone wants their own exceptions, but only the select get exceptional Fed favors.
Regulators, mostly in the United States, fined large banks almost $10 billion over a recent 15-month period for violating anti-money laundering rules.
Now we’re seeing a new kind of activity involving hiding the real value of money held not in greenbacks but in the usually more durable paper known as corporate bonds. In the end, you will almost certainly pay the price as your 401(k) or other retirement or investment account gets dinged and perhaps deeply gouged for the immediate benefit of big Wall Street clients.
Now, think of a variation of money laundering that we’ll call money washing. Instead of trying to cleanse away criminality, money washing removes a kind of financial dirt that reduces the value of corporate bonds just like dirt reduces the value of most other things.
Unlike money laundering, this new technique is perfectly legal.
Pretend that last year you bought a single bond from a company with a sterling financial record. You paid $1,000 and expected to collect interest for 20 years and then get your $1,000 back.
Then, the coronavirus came this year and the company’s revenues have shriveled. The likelihood that you will ever get your full $1,000 back, let alone all the interest payments, has gone from near certainty to highly unlikely.
A Money-Back Guarantee
You could sell your bond but, understandably, buyers won’t give you $1,000 for it. Whether you get a discounted price of $990 or $900 or just $90 will depend on how Wall Street traders rate the chance of recouping the interest and principal from the company.
Now, a buyer comes along willing to pay you the full $1,000. If you’re smart, you sell the bond, take the cash and run.
If you were not just smart but big enough and rich enough, you’d buy all the bonds you could at those discounted prices, sell them to this generous (or crazy) buyer at $1,000 each and turn a quick guaranteed profit.
While you don’t have the money to buy up millions of these distressed bonds, Wall Street does.
Ladies and gentlemen meet this generous (or crazy) bond buyer: The Federal Reserve.
The Fed has been visibly panicked by the economy plummeting.
‘Investment-Grade’ vs. Junk
Since March 23, the central bank has been buying high-grade corporate bonds issued by companies with a solid history of paying their debts. Think household brand names.
Fed purchases of those quality bonds inject dollars into the economy. That provides banks, businesses and pension plans with cash to pay to employees, retirees and vendors. This bond-buying spree is officially unlimited. It will be multiples of the Fed’s bond purchases in the depths of the Great Recession just a few years ago.
The Fed did restrict the exchange of corporate bonds at their full face value for dollars to what’s known as investment-grade debt. Investment grade means the face value of the bond and the interest are likely to be paid on time and in full.
Last week, the Fed did what was previously unthinkable. It started buying bonds now worth far less than they were just weeks ago—some of the riskiest corporate debt in existence. It started buying junk.
Fallen Angels
When investment-grade companies get into trouble their credit ratings drop—as happened with the likes of Ford, Macy’s, and The Gap as sales collapsed due to the coronavirus. Companies in this situation are called “fallen angels.” These once sound companies—which suffer in part from bad past decisions like overexpansion and highly leveraged acquisitions—find themselves in need of raising money just when their borrowing costs increase because lenders demand higher interest rates. That’s a prescription for unhealthy finances.
When corporate credit ratings fall, the bonds these companies issued in the past start to trade at lower prices because of the increased risk that bondholders will not be paid off in full.
So, what happened when the Fed said on Thursday that it would pay good money for risky bonds? Deeply discounted Ford bonds jumped 22% overnight by midday Friday. Other junk debt suddenly rose in value, too, as savvy Wall Streeters cashed in by buying bonds cheap and selling them at their much higher face value.
Legal Loan Sharking
While once-solid bonds issued by companies like Ford have fallen to junk status, there also exists a market for risky corporate debt on the day that bonds are sold. In personal deals, we call such lenders loan sharks and make their activity a crime. In the corporate world, however, we call the sellers of these risky loans investment banks and declare it legal.
Because junk bonds are sold with a significant chance of never being repaid in full, buyers insist on high rates of interest. Junk bonds are currently yielding investors more than 8% annually compared with as little as 2% on the most trustworthy corporate debt and less than 1% for some U.S. government debt.
Junk bonds were popularized in the 1980s by Michael Milken, the financial manipulator who went to prison after he confessed to six securities fraud charges. The companies that turned to Milken to sell their junk bonds were seen by banks as unworthy of loans.
Junk bonds financed Donald Trump’s brief and personally lucrative rise in the Atlantic City casino business. He walked away with hundreds of millions while buyers of Trump’s junk bonds lost their shirts. Trump’s worst bonds were sold in 1990 by Merrill Lynch, now part of Bank of America.
Many Hazards
Maybe this Fed move to swap damaged paper for clean cash is necessary to stave off a Great Depression 2.0. But it has predictable consequences.
One is that corporations and high net-worth individuals, who are supposed to understand the risks they take, escape the consequences for their decisions. That’s a form of socialism for the rich and corporations, but it’s also the smallest problem.
Next is “moral hazard.” When companies get bailed out, they began figuring they can keep doing what they’ve always done, even if dangerous and risky. This encourages more and worse risky behavior instead of prudence.
“As painful as failure and recessions are, we keep putting bigger and bigger band-aids on our problems, expecting them to change,” says Craig Kirsner, president of Stuart Estate Planning Wealth Advisors in South Florida. “When will we learn?”
Given past performance, apparently never.
‘Fictional Value’
Another problem is that ordinary investors will have no idea what their investments are worth without Fed props. “It’s fictional value,” says Allen Sukholitsky, chief macro strategist for Xallarap Advisory in New York. “It’s not fact-based.”
That problem worsens as the props may not stop. Like a junkie needing larger doses of a drug to get high, markets will require ongoing and larger intervention for satisfaction. The result is a dilemma because market capitalism depends on reliable price information.
Price is crucial to a market economy as opposed to one run by the government, as in the old Soviet system. While people have an idea of what a gallon of gas or milk or distilled water costs from experience, without deep education in finance and accounting they have no independent way to value the stocks, bonds and other financial investments in an era of self-managed retirement savings.
This Fed interference with market prices infects more than bonds. Sukholitsky noted that you might eventually see higher prices at the grocery store in the future. As the Fed artificially inflates the value of assets like troubled corporate bonds, there’s additional perceived money to pay for products so sellers raise prices to capture more of the value.
The ultimate irony is the wealthy regularly lecture those who aren’t about responsibility and actions having consequences while getting their own bailouts.
This is a real American exceptionalism: Everyone wants their own exceptions, but only the select get exceptional Fed favors.
‘Who cares? Let ’em get wiped out’: Stunning CNBC anchor, venture capitalist says let hedge funds fail and save Main Street
April 10, 2020
By Jake Johnson, Common Dreams - raw story
“A hedge fund that serves a bunch of billionaire family offices? Who cares? They don’t get to summer in the Hamptons? Who cares!”
Venture capitalist Chamath Palihapitiya stunned CNBC anchor Scott Wapner and generated widespread applause on social media by declaring in a television interview Thursday that the U.S. government should let hedge funds and billionaire CEOs “get wiped out” by the coronavirus-induced economic collapse and instead focus its attention on rescuing Main Street.
“On Main Street today, people are getting wiped out. And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are.”
—Chamath Palihapitiya, CEO of Social Capital
When Wapner, seemingly incredulous at what he was hearing, asked Palihapitiya why he would support the collapse of large companies, the Social Capital CEO said “this is a lie that’s been purported by Wall Street.”
“When a company fails, it does not fire their employees, it goes through a packaged bankruptcy,” said Palihapitiya. “If anything what happens is the people who have the pensions inside the companies, the employees of these companies, end up owning more of the company. The people that get wiped out are the speculators that own the unsecured tranches of debt or the folks that own the equity. And by the way, those are the rules of the game. That’s right. These are the people that purport to be the most sophisticated investors in the world. They deserve to get wiped out.”
“Why does anybody ‘deserve,’ using your word, to get wiped out from a crisis created like this?” replied Wapner.
“Just be clear, like, who are we talking about?” said Palihapitiya, himself a billionaire. “A hedge fund that serves a bunch of billionaire family offices? Who cares? Let ’em get wiped out. Who cares? They don’t get to summer in the Hamptons? Who cares!”
After Wapner suggested it would be “immoral” to let any company get wiped out in the economic crisis, Palihapitiya responded that “on Main Street today, people are getting wiped out.”
“And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are,” said Palihapitiya. “Six million people just this week alone basically saying, ‘Holy mackerel, I don’t know how I’m going to make my own expenses for the next few weeks, days, months. So it’s happening today to individual Americans. And what we’ve done is disproportionately prop up and protect poor performing CEOs, companies, and boards. And you have to wash these people out.”
Palihapitiya’s interview quickly went viral on social media.
“This guy is great, hilarious, and right,” tweeted Matt Bruenig, founder of the People’s Policy Project, “though it is better to wipe them out through equity dilution (bailouts-for-equity) than through bankruptcy restructuring.”
Venture capitalist Chamath Palihapitiya stunned CNBC anchor Scott Wapner and generated widespread applause on social media by declaring in a television interview Thursday that the U.S. government should let hedge funds and billionaire CEOs “get wiped out” by the coronavirus-induced economic collapse and instead focus its attention on rescuing Main Street.
“On Main Street today, people are getting wiped out. And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are.”
—Chamath Palihapitiya, CEO of Social Capital
When Wapner, seemingly incredulous at what he was hearing, asked Palihapitiya why he would support the collapse of large companies, the Social Capital CEO said “this is a lie that’s been purported by Wall Street.”
“When a company fails, it does not fire their employees, it goes through a packaged bankruptcy,” said Palihapitiya. “If anything what happens is the people who have the pensions inside the companies, the employees of these companies, end up owning more of the company. The people that get wiped out are the speculators that own the unsecured tranches of debt or the folks that own the equity. And by the way, those are the rules of the game. That’s right. These are the people that purport to be the most sophisticated investors in the world. They deserve to get wiped out.”
“Why does anybody ‘deserve,’ using your word, to get wiped out from a crisis created like this?” replied Wapner.
“Just be clear, like, who are we talking about?” said Palihapitiya, himself a billionaire. “A hedge fund that serves a bunch of billionaire family offices? Who cares? Let ’em get wiped out. Who cares? They don’t get to summer in the Hamptons? Who cares!”
After Wapner suggested it would be “immoral” to let any company get wiped out in the economic crisis, Palihapitiya responded that “on Main Street today, people are getting wiped out.”
“And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are,” said Palihapitiya. “Six million people just this week alone basically saying, ‘Holy mackerel, I don’t know how I’m going to make my own expenses for the next few weeks, days, months. So it’s happening today to individual Americans. And what we’ve done is disproportionately prop up and protect poor performing CEOs, companies, and boards. And you have to wash these people out.”
Palihapitiya’s interview quickly went viral on social media.
“This guy is great, hilarious, and right,” tweeted Matt Bruenig, founder of the People’s Policy Project, “though it is better to wipe them out through equity dilution (bailouts-for-equity) than through bankruptcy restructuring.”
CORONAVIRUS
Medical Staffing Companies Owned by Rich Investors Cut Doctor Pay and Now Want Bailout Money
Companies that employ emergency room medical personnel, many owned by private equity firms, say they are reeling from vanishing demand for non-coronavirus care. But critics worry that bailout money would be a windfall for rich investors.
by Isaac Arnsdorf - propublica
April 10, 10:40 a.m. EDT
Medical staffing companies — some of which are owned by some of the country’s richest investors and have been cutting pay for doctors on the front lines of the coronavirus pandemic — are seeking government bailout money.
Private equity firms have increasingly bought up doctors’ practices that contract with hospitals to staff emergency rooms and other departments. These staffing companies say the coronavirus pandemic is, counterintuitively, bad for business because most everyone who isn’t critically ill with COVID-19 is avoiding the ER. The companies have responded with pay cuts, reduced hours and furloughs for doctors.
Emergency room visits across the country have fallen roughly 30%, and the patients who are coming tend to be sicker and costlier to treat, the American College of Emergency Physicians said in an April 3 letter to Health and Human Services Secretary Alex Azar. The professional group asked the Trump administration to provide $3.6 billion of aid to emergency physician practices.
“Without immediate federal financial resources and support separate from what is provided to hospitals, fewer emergency physicians will be left to care for patients, a shortfall which will only be further exacerbated as they try to make preparations for the COVID-19 surge,” the organization said in the letter.
The American College of Emergency Physicians’ 38,000 members include employees of large staffing firms as well as academic medical centers and small doctor-owned practice groups. The letter was signed by the group’s president, William P. Jaquis, whose day job is as a senior vice president at Envision Healthcare, a top staffing firm owned by private equity giant KKR.
Envision, which has 27,000 clinicians, said it’s cutting doctors’ pay in areas that are seeing fewer patients, as well as delaying bonuses and profit-sharing, retirement contributions, raises and promotions. The company also cut senior executives’ salaries in half and will impose pay cuts or furloughs for nonclinical employees. However, Envision said that it’s adding doctors in hard-hit New York and other coronavirus hot spots.
“Where they lose their normal billing revenue, medical groups are losing money. Where medical groups are losing money, they have to reduce salaries and furlough workers,” Envision CEO Jim Rechtin said in a statement. “Unfortunately, we are no different.”
KKR didn’t respond to requests for comment. Co-founders Henry Kravis and George Roberts said they’ll donate $50 million to first responders and health workers, as well as forgoing bonuses and the rest of their salaries for the year, Forbes reported. Forbes estimates Kravis’ wealth at $5.6 billion and Roberts’ at $5.8 billion.
Before the pandemic, Envision made a lucrative business out of buying practice groups in specialties where patients don’t choose their provider, such as ER physicians and anesthesiologists, according to Dr. Marty Makary, a surgical oncologist at Johns Hopkins Medicine who studies health care costs. Envision could then charge patients high prices for out-of-network care, a practice known as “surprise billing.” The model was profitable until a public backlash led lawmakers to investigate the practice, according to Makary.
“Private equity consolidated large physician groups in an unprecedented financial gamble using capital and banking on revenue not skipping a beat,” Makary said. “When the investment model works, investors get rich. When the investment goes sour, who bears the risk? As in the mortgage crisis of 2008, taxpayers are bearing the risk of financial gambles of investors.”
Envision won’t send surprise bills to COVID-19 patients, the company said; patients will be responsible only for in-network copays.
Health insurance companies, which are often at odds with doctors and staffing companies over payment disputes, have said they support government aid to hospitals and doctors, but they specified that relief should go to “small and independent practices.” A lobbying group representing insurers and business groups raised concerns about the potential for investors to benefit from the emergency physicians’ request for $3.6 billion.
“We need to do everything to support health care workers on the frontlines of this pandemic, and we want to make sure they get the resources they need to care for patients and protect themselves,” the Coalition Against Surprise Medical Billing said in a statement to ProPublica. “At the same time, federal funds should not be used to bail out private equity firms during a public health emergency, especially when there are no federal surprise billing protections in place to protect consumers at their most vulnerable.”
The top lobbyist for the American College of Emergency Physicians, Laura Wooster, warned that efforts to single out companies with rich backers could catch patients in the crossfire. “If you start trying to parse big or small, independent or not, it’s going to get messy really quickly,” Wooster said in an interview. “This isn’t the time to figure out too late that unintended consequences left a rural emergency department understaffed because it happened to be staffed by one of the bigger groups.”
Wooster noted that it’s not only big private equity-backed staffing firms that are hurting, and she provided data from small practice groups that are also losing business and scaling back. She said she couldn’t commit to conditions on receiving aid — such as restricting “surprise billing,” investor payouts or executive bonuses — without seeing how the terms are structured. She said the administration hasn’t offered a proposal at that level of detail nor asked for one.
Katy Talento, a health adviser to President Donald Trump from 2017 to 2019, offered a different view. “If they’re private equity-owned, I have no sympathy, and I don’t think any patient out there struggling paycheck to paycheck — if they have a paycheck — is remotely interested in the crocodile tears of private equity firms and their revenue losses,” she said. “We have to target rescue funds to the hardest-hit areas, and emergency physicians are not the hardest-hit target of our charity.”
The administration hasn’t said much about how it plans to distribute a $100 billion fund for health care providers that was part of the $2 trillion coronavirus stimulus package. Last Friday, Azar said “a portion” of the money would reimburse hospitals for caring for uninsured patients. He said providers would get paid at Medicare rates and prohibited from billing patients beyond that.
Lawmakers have spent months working on legislation to address surprise billing, attempting to accommodate the interests of patients, doctors and insurers. Medical staffing companies including Envision launched attack ads against some proposals but agreed to a provider-friendly bill advanced by Sen. Bill Cassidy, R-La. (who is a gastroenterologist). A bipartisan compromise failed to make it into the December spending deal because of a turf war between congressional committees. Lawmakers briefly considered reviving the compromise as part of the coronavirus stimulus package but didn’t want to slow down getting relief into the economy quickly, according to congressional aides.
Medical staffing companies said they have benefited from tax relief and advance Medicare payments included in the stimulus package. Still, Envision and other private equity-backed staffing firms have swiftly responded to lost income by cutting pay and hours for doctors.
One Envision anesthesiologist in the mid-Atlantic region said his base salary was cut by 30% even as he’s being asked to intubate COVID-19 patients — a procedure that puts providers at high risk of exposure to the virus.
“My hope in any type of bailout going toward health care providers is it should go to them,” said the anesthesiologist, who spoke on the condition of anonymity for fear of losing his job. “It should not be going toward rewarding executives or shareholder profits. Anybody actually coming in physical contact is taking all the risk, so that’s where the relief should be going.”
Private equity firms have increasingly bought up doctors’ practices that contract with hospitals to staff emergency rooms and other departments. These staffing companies say the coronavirus pandemic is, counterintuitively, bad for business because most everyone who isn’t critically ill with COVID-19 is avoiding the ER. The companies have responded with pay cuts, reduced hours and furloughs for doctors.
Emergency room visits across the country have fallen roughly 30%, and the patients who are coming tend to be sicker and costlier to treat, the American College of Emergency Physicians said in an April 3 letter to Health and Human Services Secretary Alex Azar. The professional group asked the Trump administration to provide $3.6 billion of aid to emergency physician practices.
“Without immediate federal financial resources and support separate from what is provided to hospitals, fewer emergency physicians will be left to care for patients, a shortfall which will only be further exacerbated as they try to make preparations for the COVID-19 surge,” the organization said in the letter.
The American College of Emergency Physicians’ 38,000 members include employees of large staffing firms as well as academic medical centers and small doctor-owned practice groups. The letter was signed by the group’s president, William P. Jaquis, whose day job is as a senior vice president at Envision Healthcare, a top staffing firm owned by private equity giant KKR.
Envision, which has 27,000 clinicians, said it’s cutting doctors’ pay in areas that are seeing fewer patients, as well as delaying bonuses and profit-sharing, retirement contributions, raises and promotions. The company also cut senior executives’ salaries in half and will impose pay cuts or furloughs for nonclinical employees. However, Envision said that it’s adding doctors in hard-hit New York and other coronavirus hot spots.
“Where they lose their normal billing revenue, medical groups are losing money. Where medical groups are losing money, they have to reduce salaries and furlough workers,” Envision CEO Jim Rechtin said in a statement. “Unfortunately, we are no different.”
KKR didn’t respond to requests for comment. Co-founders Henry Kravis and George Roberts said they’ll donate $50 million to first responders and health workers, as well as forgoing bonuses and the rest of their salaries for the year, Forbes reported. Forbes estimates Kravis’ wealth at $5.6 billion and Roberts’ at $5.8 billion.
Before the pandemic, Envision made a lucrative business out of buying practice groups in specialties where patients don’t choose their provider, such as ER physicians and anesthesiologists, according to Dr. Marty Makary, a surgical oncologist at Johns Hopkins Medicine who studies health care costs. Envision could then charge patients high prices for out-of-network care, a practice known as “surprise billing.” The model was profitable until a public backlash led lawmakers to investigate the practice, according to Makary.
“Private equity consolidated large physician groups in an unprecedented financial gamble using capital and banking on revenue not skipping a beat,” Makary said. “When the investment model works, investors get rich. When the investment goes sour, who bears the risk? As in the mortgage crisis of 2008, taxpayers are bearing the risk of financial gambles of investors.”
Envision won’t send surprise bills to COVID-19 patients, the company said; patients will be responsible only for in-network copays.
Health insurance companies, which are often at odds with doctors and staffing companies over payment disputes, have said they support government aid to hospitals and doctors, but they specified that relief should go to “small and independent practices.” A lobbying group representing insurers and business groups raised concerns about the potential for investors to benefit from the emergency physicians’ request for $3.6 billion.
“We need to do everything to support health care workers on the frontlines of this pandemic, and we want to make sure they get the resources they need to care for patients and protect themselves,” the Coalition Against Surprise Medical Billing said in a statement to ProPublica. “At the same time, federal funds should not be used to bail out private equity firms during a public health emergency, especially when there are no federal surprise billing protections in place to protect consumers at their most vulnerable.”
The top lobbyist for the American College of Emergency Physicians, Laura Wooster, warned that efforts to single out companies with rich backers could catch patients in the crossfire. “If you start trying to parse big or small, independent or not, it’s going to get messy really quickly,” Wooster said in an interview. “This isn’t the time to figure out too late that unintended consequences left a rural emergency department understaffed because it happened to be staffed by one of the bigger groups.”
Wooster noted that it’s not only big private equity-backed staffing firms that are hurting, and she provided data from small practice groups that are also losing business and scaling back. She said she couldn’t commit to conditions on receiving aid — such as restricting “surprise billing,” investor payouts or executive bonuses — without seeing how the terms are structured. She said the administration hasn’t offered a proposal at that level of detail nor asked for one.
Katy Talento, a health adviser to President Donald Trump from 2017 to 2019, offered a different view. “If they’re private equity-owned, I have no sympathy, and I don’t think any patient out there struggling paycheck to paycheck — if they have a paycheck — is remotely interested in the crocodile tears of private equity firms and their revenue losses,” she said. “We have to target rescue funds to the hardest-hit areas, and emergency physicians are not the hardest-hit target of our charity.”
The administration hasn’t said much about how it plans to distribute a $100 billion fund for health care providers that was part of the $2 trillion coronavirus stimulus package. Last Friday, Azar said “a portion” of the money would reimburse hospitals for caring for uninsured patients. He said providers would get paid at Medicare rates and prohibited from billing patients beyond that.
Lawmakers have spent months working on legislation to address surprise billing, attempting to accommodate the interests of patients, doctors and insurers. Medical staffing companies including Envision launched attack ads against some proposals but agreed to a provider-friendly bill advanced by Sen. Bill Cassidy, R-La. (who is a gastroenterologist). A bipartisan compromise failed to make it into the December spending deal because of a turf war between congressional committees. Lawmakers briefly considered reviving the compromise as part of the coronavirus stimulus package but didn’t want to slow down getting relief into the economy quickly, according to congressional aides.
Medical staffing companies said they have benefited from tax relief and advance Medicare payments included in the stimulus package. Still, Envision and other private equity-backed staffing firms have swiftly responded to lost income by cutting pay and hours for doctors.
One Envision anesthesiologist in the mid-Atlantic region said his base salary was cut by 30% even as he’s being asked to intubate COVID-19 patients — a procedure that puts providers at high risk of exposure to the virus.
“My hope in any type of bailout going toward health care providers is it should go to them,” said the anesthesiologist, who spoke on the condition of anonymity for fear of losing his job. “It should not be going toward rewarding executives or shareholder profits. Anybody actually coming in physical contact is taking all the risk, so that’s where the relief should be going.”
the bloodsuckers and surprise medical billing!!!
How Private-Equity Firms Squeeze Hospital Patients for Profits
“As sick people come to hospital E.R.s, and as they are admitted to hospitals, we can expect the number of people getting surprise medical bills to explode,” she said. “Our representatives in Congress really need to get their act together.”
By Sheelah Kolhatkar - the new yorker
April 9, 2020
...Outrage over surprise billing transcended partisan lines. A poll conducted by the Kaiser Family Foundation indicated that more than seventy-five per cent of the public wanted the government to do something to prevent it. Congress members starting hearing complaints from their constituents. In early May, 2019, even President Trump expressed a desire to address the practice, saying during a speech, “We are determined to end surprise medical billing.” That July, Democrats and Republicans in the House Energy and Commerce Committee introduced a bill, called the No Surprises Act, that would require medical providers to give patients twenty-four hours’ notice if they were going to be treated by a medical provider who was outside their insurance network, and would create a benchmark to restrict how far above the median price out-of-network providers could charge. In June, senators had introduced a similar bill, called the Lower Health Care Costs Act, which included an arbitration provision that would help manage disputes over how much out-of-network providers would be permitted to charge. One of the bill’s sponsors, Lamar Alexander, Republican of Tennessee, had been contacted by a father in Knoxville who had taken his son to an emergency room after a bicycle accident; the father paid a hundred-and-fifty-dollar co-pay but later received a bill for eighteen hundred dollars from the doctor, who was out of network.
The legislation seemed sure to pass. But, soon after the Senate version was introduced, a barrage of television ads criticizing the bills appeared across the country. The ads were slickly produced and ominous-sounding; they described the bills as “government rate-setting” that was likely to shutter hospitals and endanger lives. In one, a pair of emergency responders rush a bloody sixteen-year-old strapped to a gurney through the doors of a hospital, only to find that it has closed. Some highlighted the profits that insurance companies made in 2018—in the billions of dollars—and suggested that these companies were responsible for the surprise bills, and that they should be the ones to face increased regulation. At the same time, mailers were sent to people’s homes, and hundreds of thousands of dollars’ worth of ads appeared on Facebook. The ads all urged people to tell their representatives in Congress to vote against the bills. The campaign was paid for by an organization called Doctor Patient Unity, which was classified as a dark-money group and did not disclose its staff or where it got its money.
Eileen Appelbaum, an economist, had been following the saga, and thought she knew who might be behind the ads. Appelbaum has hazel eyes and speaks with passion about the intricacies of financial engineering. She taught for many years at Rutgers University and is now the co-director of the Center for Economic and Policy Research, a Washington, D.C., economic-policy think tank. Much of her research has focussed on the ways that private-equity firms—investment funds that purchase companies and try to increase their profitability—reshape the businesses that they buy. Appelbaum and her frequent collaborator, Rosemary Batt, a management and labor-relations expert at Cornell University, were in the midst of a research project looking at the role of private equity in health care. They knew that two of the largest private-equity firms, Blackstone and K.K.R., owned Envision Healthcare and TeamHealth, large physician groups that staff hospitals around the country with doctors; they found that bills from doctors within those groups were responsible for much of the sudden increase in surprise medical bills. (A spokesperson from TeamHealth said that the company does not send out-of-network charges directly to patients, but litigates them with insurance companies. A spokesperson from Envision Healthcare declined to comment.) “We already knew a lot about P.E. buying up doctors’ practices,” Appelbaum told me recently. “Now surprise medical bills were out of sight. That’s their business model.” Appelbaum suspected that the P.E. companies were behind the practice, as well as behind the ad campaign to stop the legislation.
Appelbaum grew up in Philadelphia, where her father ran an appliance store. Neither of her parents had gone to college; Appelbaum earned a master’s in mathematics and a Ph.D. in economics from the University of Pennsylvania. Her research centered on the relationship between workers and a company’s management. When Appelbaum started out, the prevailing view was that companies could make themselves more productive by investing in their workers. In the nineteen-nineties, she and Batt undertook a study and found that, for example, giving workers more decision-making authority over how work got done led to increased company profits.
The book that they produced from this research, “The New American Workplace,” was published in 1993. But in the years after, the thinking in the business world shifted. A newly dominant business philosophy, called “shareholder value theory,” held that companies exist primarily to deliver profits to their shareholders, and that managers should increase revenue and cut costs, with little regard for the long-term effects. Appelbaum and Batt saw this playing out in the real world. In many cases, companies were sending work to other countries where labor costs were lower. In others, they were practicing “domestic outsourcing”: subcontracting out parts of their businesses to other U.S.-based companies, to run their accounting departments, corporate cafeterias, or janitorial services, among others, rather than employing those workers directly. “They moved away from the idea of, How do we make our current workforce more productive? and to, How do we move workers off our payroll and onto a contract company? And then they can do whatever they want with the workers,” Appelbaum said. “And, if you’re a contract company, how do you get the contract? By being the lowest bidder. You’re at rock bottom, offering just barely enough to attract any workers at all.”
Appelbaum and Batt found that the pressure for these practices seemed to be coming from Wall Street analysts and shareholders. “People had a very old view of what the corporation was, as a kind of stand-alone, publicly traded entity, free to make decisions on its own,” Batt told me. “We understood globalization, deregulation, and labor markets, but we didn’t understand capital markets. There was this big hole in the academic research.” The 2008 financial crisis made the issue seem even more pressing, and they decided to focus their research on private-equity funds. “You needed to look at the most extreme example if you wanted to understand the idea,” she said. They endeavored to write a book about private equity aimed at people who dealt with labor issues, including union leaders, who often didn’t realize that, when they were negotiating with corporations over contracts and working conditions, the managers of private-equity firms were actually pulling the strings.
---
Appelbaum and Batt found that private-equity firms often engaged in financial maneuvers that brought them profits but weakened their target companies. Firms usually borrowed heavily to finance takeovers; the new debt was put on the books of whatever company was being purchased, and that company was responsible for making the interest payments. The firms sometimes used a strategy called “dividend recapitalization,” in which the target company borrows even more money and uses it to pay “dividends” to the private-equity owners. The target company was also often made to pay fees to its private-equity owners for consulting and other services. These strategies meant that the investors made returns right away, but they increased the debt load on companies that were often already heavily in debt. In 2005, for example, Toys R Us was taken over by K.K.R., Bain Capital, and Vornado Realty Trust, which put five billion dollars of debt on the company’s books to finance the takeover. In 2017, the company posted eleven billion dollars in sales, but much of that had to go toward interest payments on loans. In September of that year, Toys R Us filed for bankruptcy, went into liquidation, closed hundreds of stores, and laid off thirty-three thousand workers.
Appelbaum and Batt tried to acknowledge when they felt that private equity played a positive role—for example, when P.E. firms took over small companies that didn’t have access to more traditional business loans and helped them grow. Over all, though, they concluded that the firms encouraged short-term thinking that damaged industries. They found that the method that the firms used to report their returns also made them sound better than they actually were. The firms then used the inflated projections to pitch themselves to pension funds, which invest money for workers. Teachers, police officers, and firefighters all ended up providing capital to funds that were implementing layoffs or sending jobs overseas.[...]
The legislation seemed sure to pass. But, soon after the Senate version was introduced, a barrage of television ads criticizing the bills appeared across the country. The ads were slickly produced and ominous-sounding; they described the bills as “government rate-setting” that was likely to shutter hospitals and endanger lives. In one, a pair of emergency responders rush a bloody sixteen-year-old strapped to a gurney through the doors of a hospital, only to find that it has closed. Some highlighted the profits that insurance companies made in 2018—in the billions of dollars—and suggested that these companies were responsible for the surprise bills, and that they should be the ones to face increased regulation. At the same time, mailers were sent to people’s homes, and hundreds of thousands of dollars’ worth of ads appeared on Facebook. The ads all urged people to tell their representatives in Congress to vote against the bills. The campaign was paid for by an organization called Doctor Patient Unity, which was classified as a dark-money group and did not disclose its staff or where it got its money.
Eileen Appelbaum, an economist, had been following the saga, and thought she knew who might be behind the ads. Appelbaum has hazel eyes and speaks with passion about the intricacies of financial engineering. She taught for many years at Rutgers University and is now the co-director of the Center for Economic and Policy Research, a Washington, D.C., economic-policy think tank. Much of her research has focussed on the ways that private-equity firms—investment funds that purchase companies and try to increase their profitability—reshape the businesses that they buy. Appelbaum and her frequent collaborator, Rosemary Batt, a management and labor-relations expert at Cornell University, were in the midst of a research project looking at the role of private equity in health care. They knew that two of the largest private-equity firms, Blackstone and K.K.R., owned Envision Healthcare and TeamHealth, large physician groups that staff hospitals around the country with doctors; they found that bills from doctors within those groups were responsible for much of the sudden increase in surprise medical bills. (A spokesperson from TeamHealth said that the company does not send out-of-network charges directly to patients, but litigates them with insurance companies. A spokesperson from Envision Healthcare declined to comment.) “We already knew a lot about P.E. buying up doctors’ practices,” Appelbaum told me recently. “Now surprise medical bills were out of sight. That’s their business model.” Appelbaum suspected that the P.E. companies were behind the practice, as well as behind the ad campaign to stop the legislation.
Appelbaum grew up in Philadelphia, where her father ran an appliance store. Neither of her parents had gone to college; Appelbaum earned a master’s in mathematics and a Ph.D. in economics from the University of Pennsylvania. Her research centered on the relationship between workers and a company’s management. When Appelbaum started out, the prevailing view was that companies could make themselves more productive by investing in their workers. In the nineteen-nineties, she and Batt undertook a study and found that, for example, giving workers more decision-making authority over how work got done led to increased company profits.
The book that they produced from this research, “The New American Workplace,” was published in 1993. But in the years after, the thinking in the business world shifted. A newly dominant business philosophy, called “shareholder value theory,” held that companies exist primarily to deliver profits to their shareholders, and that managers should increase revenue and cut costs, with little regard for the long-term effects. Appelbaum and Batt saw this playing out in the real world. In many cases, companies were sending work to other countries where labor costs were lower. In others, they were practicing “domestic outsourcing”: subcontracting out parts of their businesses to other U.S.-based companies, to run their accounting departments, corporate cafeterias, or janitorial services, among others, rather than employing those workers directly. “They moved away from the idea of, How do we make our current workforce more productive? and to, How do we move workers off our payroll and onto a contract company? And then they can do whatever they want with the workers,” Appelbaum said. “And, if you’re a contract company, how do you get the contract? By being the lowest bidder. You’re at rock bottom, offering just barely enough to attract any workers at all.”
Appelbaum and Batt found that the pressure for these practices seemed to be coming from Wall Street analysts and shareholders. “People had a very old view of what the corporation was, as a kind of stand-alone, publicly traded entity, free to make decisions on its own,” Batt told me. “We understood globalization, deregulation, and labor markets, but we didn’t understand capital markets. There was this big hole in the academic research.” The 2008 financial crisis made the issue seem even more pressing, and they decided to focus their research on private-equity funds. “You needed to look at the most extreme example if you wanted to understand the idea,” she said. They endeavored to write a book about private equity aimed at people who dealt with labor issues, including union leaders, who often didn’t realize that, when they were negotiating with corporations over contracts and working conditions, the managers of private-equity firms were actually pulling the strings.
---
Appelbaum and Batt found that private-equity firms often engaged in financial maneuvers that brought them profits but weakened their target companies. Firms usually borrowed heavily to finance takeovers; the new debt was put on the books of whatever company was being purchased, and that company was responsible for making the interest payments. The firms sometimes used a strategy called “dividend recapitalization,” in which the target company borrows even more money and uses it to pay “dividends” to the private-equity owners. The target company was also often made to pay fees to its private-equity owners for consulting and other services. These strategies meant that the investors made returns right away, but they increased the debt load on companies that were often already heavily in debt. In 2005, for example, Toys R Us was taken over by K.K.R., Bain Capital, and Vornado Realty Trust, which put five billion dollars of debt on the company’s books to finance the takeover. In 2017, the company posted eleven billion dollars in sales, but much of that had to go toward interest payments on loans. In September of that year, Toys R Us filed for bankruptcy, went into liquidation, closed hundreds of stores, and laid off thirty-three thousand workers.
Appelbaum and Batt tried to acknowledge when they felt that private equity played a positive role—for example, when P.E. firms took over small companies that didn’t have access to more traditional business loans and helped them grow. Over all, though, they concluded that the firms encouraged short-term thinking that damaged industries. They found that the method that the firms used to report their returns also made them sound better than they actually were. The firms then used the inflated projections to pitch themselves to pension funds, which invest money for workers. Teachers, police officers, and firefighters all ended up providing capital to funds that were implementing layoffs or sending jobs overseas.[...]
dividend payouts vs workers, guess who losses!!!
U.S. companies criticized for cutting jobs rather than investor payouts
Alwyn Scott, Ross Kerber, Jessica DiNapoli, Rebecca Spalding - reuters
APRIL 8, 2020 / 7:37 AM
NEW YORK/BOSTON (Reuters) - U.S. companies laying off workers in response to the coronavirus pandemic but still paying dividends and buying back shares are drawing criticism from labor unions, pension fund advisers, lawmakers and corporate governance experts.
While most U.S. companies are scaling back payouts after a decade in which the amount of money paid to investors through buybacks and dividends more than tripled, some are maintaining their policies despite the economic pain.
Royal Caribbean Cruises Ltd (RCL.N), Halliburton Co (HAL.N), General Motors Co (GM.N) and McDonald’s Corp (MCD.N) have all laid off staff, cut their hours, or slashed salaries while maintaining payouts, according to a Reuters review of regulatory filings, company announcements and company officials.
“This is the time for large companies to try to help, for systemic reasons, to keep things flowing,” said Ken Bertsch, executive director of the Council of Institutional Investors. The council’s members include public pension funds and endowments that manage assets worth about $4 trillion.
Royal Caribbean, which has halted its cruises in response to the pandemic and borrowed to boost its liquidity to more than $3.6 billion, said it began laying off contract workers in mid-March, though the moves did not affect its full-time employees.
The company has not suspended its remaining $600 million share buyback program, which expires in May, or its dividend, which totaled $602 million last year and is set quarterly.
“We continue to take decisive actions to protect (our) financial and liquidity positions,” Royal Caribbean spokesman Jonathon Fishman said. He declined to comment specifically on the layoffs or shareholder payouts.
While Royal Caribbean’s rival Carnival Corp (CCL.N) has also laid off contract workers, it has suspended dividends and buybacks as it raised more than $6 billion in capital markets to weather the coronavirus storm.
UNEMPLOYMENT SURGE
Goldman Sachs analysts forecast this week that S&P 500 companies would cut dividends in 2020 by an average of 50% because of the fallout from the coronavirus pandemic.
For a graphic on S&P 500 shareholder payouts from 2009 to 2018, please click on: reut.rs/349G2JV
While there has been criticism of companies maintaining investor payouts, only those receiving financial support from the U.S. government under a $2.3 trillion stimulus package are obliged to suspend share buybacks.
Layoffs contributed to U.S. unemployment skyrocketing last month. Jobless claims topped 6.6 million in the week ended March 28 - double the record set the prior week and far above the previous record of 695,000 set in 1982.
Companies say job cuts are necessary to offset a plunge in revenue but their critics say they should consider turning off the spigots to shareholders before letting employees go.
“If companies are paying dividends and doing buybacks, they do not have to lay off workers,” said William Lazonick, a corporate governance expert at the University of Massachusetts.
Workers at franchised McDonald’s restaurants say they are getting fewer shifts since dining areas were closed in March, leaving only carry-out and drive-through services open.
Alma Ceballos, 31, who has worked at a franchised McDonald’s near San Francisco for 14 years, said she could not pay her rent after her schedule was cut to 16 hours from 40 and her husband, a janitor at Apple Inc’s (AAPL.O) Cupertino, California, campus was laid off.
McDonald’s, which has suspended buybacks but maintained its annual dividend, worth $3.6 billion in 2019, told Reuters its staffing and opening hours were not related to “making a choice between employees and dividends”.
About 95% of its U.S. restaurants are run by franchisees who decide staffing. McDonald’s said it was offering rent deferrals and other help to keep franchises open and employing workers.
“McDonald’s could commit to 30 days of income for all workers,” Mary Kay Henry, president of the labor union SEIU which has 2 million members, said in an interview with Reuters. “Corporations need to pay their fair share here.”
‘IT’S JUST WRONG’
General Motors has halted normal production in North America and temporarily reduced cash pay for salaried workers by 20%. It paid its first-quarter dividend on March 20 and has a month before declaring its next dividend, a spokeswoman said, adding that GM would assess economic conditions before deciding.
“Our focus in the near term is to protect the health of our employees and customers, ensure we have ample liquidity for a very wide range of scenarios, and implement austerity measures to preserve cash,” spokeswoman Lauren Langille said.
Oilfield services firm Halliburton furloughed about 3,500 workers in its Houston office starting on March 23, according to a letter sent to the Texas Workforce Commission obtained by Reuters. It has also cut 350 positions in Oklahoma.
Halliburton cited disruption from the coronavirus as well as plunging oil prices as the reason for the furlough. In March, it paid its first-quarter dividend to shareholders as planned.
A Halliburton spokeswoman declined to comment on the furlough and the company’s dividend policy.
Some of the companies laying off workers while still paying out shareholders, such as General Motors, signed an initiative last year from the Business Roundtable, a group of chief executives, pledging to make business decisions in the interest of employees and other stakeholders, not just shareholders.
Large asset managers such as BlackRock and Vanguard have cited managing “human capital” as a priority for companies in which they invest. Yet they have been reluctant to publicly press companies to avoid layoffs during the crisis.
Vanguard told Reuters it “recognizes the need for companies to exercise judgment and flexibility as they balance short- and long-term business considerations”.
BlackRock did not respond with a statement when contacted for comment.
“Profits should be shared with the workers who actually create them,” U.S. Senator Tammy Baldwin, a long-standing critic of share buybacks, told Reuters in an email.
“It’s just wrong for big corporations to reward the wealthy or top executives with more stock buybacks, while closing facilities and laying off workers.”
While most U.S. companies are scaling back payouts after a decade in which the amount of money paid to investors through buybacks and dividends more than tripled, some are maintaining their policies despite the economic pain.
Royal Caribbean Cruises Ltd (RCL.N), Halliburton Co (HAL.N), General Motors Co (GM.N) and McDonald’s Corp (MCD.N) have all laid off staff, cut their hours, or slashed salaries while maintaining payouts, according to a Reuters review of regulatory filings, company announcements and company officials.
“This is the time for large companies to try to help, for systemic reasons, to keep things flowing,” said Ken Bertsch, executive director of the Council of Institutional Investors. The council’s members include public pension funds and endowments that manage assets worth about $4 trillion.
Royal Caribbean, which has halted its cruises in response to the pandemic and borrowed to boost its liquidity to more than $3.6 billion, said it began laying off contract workers in mid-March, though the moves did not affect its full-time employees.
The company has not suspended its remaining $600 million share buyback program, which expires in May, or its dividend, which totaled $602 million last year and is set quarterly.
“We continue to take decisive actions to protect (our) financial and liquidity positions,” Royal Caribbean spokesman Jonathon Fishman said. He declined to comment specifically on the layoffs or shareholder payouts.
While Royal Caribbean’s rival Carnival Corp (CCL.N) has also laid off contract workers, it has suspended dividends and buybacks as it raised more than $6 billion in capital markets to weather the coronavirus storm.
UNEMPLOYMENT SURGE
Goldman Sachs analysts forecast this week that S&P 500 companies would cut dividends in 2020 by an average of 50% because of the fallout from the coronavirus pandemic.
For a graphic on S&P 500 shareholder payouts from 2009 to 2018, please click on: reut.rs/349G2JV
While there has been criticism of companies maintaining investor payouts, only those receiving financial support from the U.S. government under a $2.3 trillion stimulus package are obliged to suspend share buybacks.
Layoffs contributed to U.S. unemployment skyrocketing last month. Jobless claims topped 6.6 million in the week ended March 28 - double the record set the prior week and far above the previous record of 695,000 set in 1982.
Companies say job cuts are necessary to offset a plunge in revenue but their critics say they should consider turning off the spigots to shareholders before letting employees go.
“If companies are paying dividends and doing buybacks, they do not have to lay off workers,” said William Lazonick, a corporate governance expert at the University of Massachusetts.
Workers at franchised McDonald’s restaurants say they are getting fewer shifts since dining areas were closed in March, leaving only carry-out and drive-through services open.
Alma Ceballos, 31, who has worked at a franchised McDonald’s near San Francisco for 14 years, said she could not pay her rent after her schedule was cut to 16 hours from 40 and her husband, a janitor at Apple Inc’s (AAPL.O) Cupertino, California, campus was laid off.
McDonald’s, which has suspended buybacks but maintained its annual dividend, worth $3.6 billion in 2019, told Reuters its staffing and opening hours were not related to “making a choice between employees and dividends”.
About 95% of its U.S. restaurants are run by franchisees who decide staffing. McDonald’s said it was offering rent deferrals and other help to keep franchises open and employing workers.
“McDonald’s could commit to 30 days of income for all workers,” Mary Kay Henry, president of the labor union SEIU which has 2 million members, said in an interview with Reuters. “Corporations need to pay their fair share here.”
‘IT’S JUST WRONG’
General Motors has halted normal production in North America and temporarily reduced cash pay for salaried workers by 20%. It paid its first-quarter dividend on March 20 and has a month before declaring its next dividend, a spokeswoman said, adding that GM would assess economic conditions before deciding.
“Our focus in the near term is to protect the health of our employees and customers, ensure we have ample liquidity for a very wide range of scenarios, and implement austerity measures to preserve cash,” spokeswoman Lauren Langille said.
Oilfield services firm Halliburton furloughed about 3,500 workers in its Houston office starting on March 23, according to a letter sent to the Texas Workforce Commission obtained by Reuters. It has also cut 350 positions in Oklahoma.
Halliburton cited disruption from the coronavirus as well as plunging oil prices as the reason for the furlough. In March, it paid its first-quarter dividend to shareholders as planned.
A Halliburton spokeswoman declined to comment on the furlough and the company’s dividend policy.
Some of the companies laying off workers while still paying out shareholders, such as General Motors, signed an initiative last year from the Business Roundtable, a group of chief executives, pledging to make business decisions in the interest of employees and other stakeholders, not just shareholders.
Large asset managers such as BlackRock and Vanguard have cited managing “human capital” as a priority for companies in which they invest. Yet they have been reluctant to publicly press companies to avoid layoffs during the crisis.
Vanguard told Reuters it “recognizes the need for companies to exercise judgment and flexibility as they balance short- and long-term business considerations”.
BlackRock did not respond with a statement when contacted for comment.
“Profits should be shared with the workers who actually create them,” U.S. Senator Tammy Baldwin, a long-standing critic of share buybacks, told Reuters in an email.
“It’s just wrong for big corporations to reward the wealthy or top executives with more stock buybacks, while closing facilities and laying off workers.”
in the name of profits: poor quality, cheap wages, greed!!
One Reason Caregivers Are Wearing Trash Bags: A U.S. Firm Had to Recall 9 Million Surgical Gowns
Cardinal Health withdrew the gowns just before the pandemic because a Chinese supplier failed to sterilize them properly. The recall has created what a hospital association official called a “ripple effect.”
by David Armstrong and Topher Sanders - propublica
April 3, 10:08 a.m. EDT
There’s an overlooked reason why hospitals treating COVID-19 patients are so short of protective gear. In January, just before the pandemic hit the United States, a key distributor recalled more than 9 million gowns produced by a Chinese supplier because they had not been properly sterilized.
“At this time, we cannot provide sterility assurances with respect to the gowns or the packs containing the gowns because of the potential for cross-contamination,” Cardinal Health wrote to customers on Jan. 15. It added, “We recognize the criticality of our gowns and procedure packs to performing surgeries, and we apologize for the challenges this supply disruption will cause.”
The recall immediately forced the canceling of some elective surgeries. It also meant that supplies of medical gowns were already low when hospitals and state governments began desperately searching for protective gear to cope with the pandemic. Most gowns are supposed to be worn once and not reused. As some doctors and nurses have resorted to covering themselves with trash bags, raincoats and hazardous materials suits bought online, many health care workers have contracted the virus, further taxing already overwhelmed hospitals.
“Demand has gone up at a time when supply was already constrained,” said Bindiya Vakil, the chief executive of Resilinc, a Milpitas, California, firm that monitors supply chain disruptions worldwide. “Coronavirus made what was already a bad situation a lot worse.”
Colin Milligan, a spokesman for the American Hospital Association, said that the group’s members continue to experience shortages of medical gowns and that the Cardinal recall “has had a ripple effect.”
A Cardinal spokeswoman said that “the supply of surgical gowns should not impact the supply of PPE,” or personal protective equipment, for health care workers because they usually wear another type of outer garment, isolation gowns, when tending to coronavirus patients.
Cardinal received approval Tuesday from the federal government to donate the 2.2 million recalled gowns that remain in its inventory to the Strategic National Stockpile for distribution as isolation gowns. Each pallet must be “labeled in with a warning that the articles are for use for non-sterile apparel purposes only,” according to the approval letter.
The company is “working around the clock to meet the needs of healthcare providers so they can safely serve the patients who depend on them,” a Cardinal spokeswoman wrote in an email.
The shortage of gowns even before the coronavirus outbreak highlights the vulnerabilities of a U.S. health care system that depends on protective equipment largely made in other countries, led by China. The quality of gowns and other gear has been a recurring problem, including a dead insect in the packaging of a Cardinal gown, complaint records show. Replacing an overseas supplier can take months, and even if a new one is found quickly, it still has to ramp up production and arrange shipping.
“Unfortunately, like others, we are learning in this crisis that overdependence on other countries as a source of cheap medical products and supplies has created a strategic vulnerability to our economy,” U.S. Trade Representative Robert Lighthizer said at a meeting Monday. “For the United States, we are encouraging diversification of supply chains and seeking to promote more manufacturing at home.”
The recall also exposes flaws in how both companies and government regulators monitor the overseas manufacturers that produce much of the country’s inventory of protective medical gear. Because surgical gowns are considered a medical device, their quality is monitored by the U.S. Food and Drug Administration, which inspects manufacturing plants every two years.
A spokeswoman for Cardinal, which is based in Dublin, Ohio, said that it has a “broad and diverse manufacturing and supplier network” that includes the U.S. and is not dependent on any one locale. Cardinal is also one of the largest prescription drug distributors in the world. It had revenues in 2019 of more than $145 billion, making it the 16th largest company in the U.S., according to Fortune.
Cardinal chief executive Mike Kaufmann told Wall Street analysts in February that the company understood “the gravity” of the recall. He said it had hired outside experts to review Cardinal’s quality assurance procedures.
The company’s board has established a special committee to review management’s actions pertaining to the recall, according to Cardinal’s website. The outside experts continue to scrutinize the company’s practices, a spokeswoman said.
Of the recalled gowns, Cardinal had already distributed almost 8 million to health care facilities; the others had not reached customers. Some had been manufactured as early as the fall of 2018, the company has said. Cardinal does not have information on how many of the gowns were used but believes a majority of them were, a spokeswoman told ProPublica. Asked if any health workers or patients were infected as a result, she said that “we continue to track and analyze complaint data.”
The FDA last inspected the problematic Chinese plant in April 2018 and did not identify any violations, an agency spokeswoman said. Manufacturers are responsible for detecting problems and reporting them to the FDA, she said, adding that the Chinese company did not report any such issues during the period covered by the recall.
The January recall was not the first time Cardinal had a problem with the supplier, which it has identified as Siyang HolyMed Products Co. in Jiangsu province on China’s coast. Cardinal disclosed in a January press release that in the spring of 2018, around the same time the FDA was inspecting the Chinese company’s manufacturing facility, the company learned that Siyang outsourced some of its production to an unqualified facility. Cardinal tested products at the time and determined there was no reason to take further action such as a recall, it said.
Then, last Dec. 10, Cardinal received a tip that Siyang was making gowns at two sites that weren’t approved by the U.S. company or registered with the FDA, a Cardinal spokeswoman said. Ten days later, an on-site investigation confirmed the tip, she said.
In a Jan. 21 letter to customers, Cardinal said it couldn’t guarantee that the gowns were sterile because Siyang made some of them at locations that “did not maintain proper environmental conditions as required by law.” They were “commingled with properly manufactured gowns,” Cardinal said.[..] read more
“At this time, we cannot provide sterility assurances with respect to the gowns or the packs containing the gowns because of the potential for cross-contamination,” Cardinal Health wrote to customers on Jan. 15. It added, “We recognize the criticality of our gowns and procedure packs to performing surgeries, and we apologize for the challenges this supply disruption will cause.”
The recall immediately forced the canceling of some elective surgeries. It also meant that supplies of medical gowns were already low when hospitals and state governments began desperately searching for protective gear to cope with the pandemic. Most gowns are supposed to be worn once and not reused. As some doctors and nurses have resorted to covering themselves with trash bags, raincoats and hazardous materials suits bought online, many health care workers have contracted the virus, further taxing already overwhelmed hospitals.
“Demand has gone up at a time when supply was already constrained,” said Bindiya Vakil, the chief executive of Resilinc, a Milpitas, California, firm that monitors supply chain disruptions worldwide. “Coronavirus made what was already a bad situation a lot worse.”
Colin Milligan, a spokesman for the American Hospital Association, said that the group’s members continue to experience shortages of medical gowns and that the Cardinal recall “has had a ripple effect.”
A Cardinal spokeswoman said that “the supply of surgical gowns should not impact the supply of PPE,” or personal protective equipment, for health care workers because they usually wear another type of outer garment, isolation gowns, when tending to coronavirus patients.
Cardinal received approval Tuesday from the federal government to donate the 2.2 million recalled gowns that remain in its inventory to the Strategic National Stockpile for distribution as isolation gowns. Each pallet must be “labeled in with a warning that the articles are for use for non-sterile apparel purposes only,” according to the approval letter.
The company is “working around the clock to meet the needs of healthcare providers so they can safely serve the patients who depend on them,” a Cardinal spokeswoman wrote in an email.
The shortage of gowns even before the coronavirus outbreak highlights the vulnerabilities of a U.S. health care system that depends on protective equipment largely made in other countries, led by China. The quality of gowns and other gear has been a recurring problem, including a dead insect in the packaging of a Cardinal gown, complaint records show. Replacing an overseas supplier can take months, and even if a new one is found quickly, it still has to ramp up production and arrange shipping.
“Unfortunately, like others, we are learning in this crisis that overdependence on other countries as a source of cheap medical products and supplies has created a strategic vulnerability to our economy,” U.S. Trade Representative Robert Lighthizer said at a meeting Monday. “For the United States, we are encouraging diversification of supply chains and seeking to promote more manufacturing at home.”
The recall also exposes flaws in how both companies and government regulators monitor the overseas manufacturers that produce much of the country’s inventory of protective medical gear. Because surgical gowns are considered a medical device, their quality is monitored by the U.S. Food and Drug Administration, which inspects manufacturing plants every two years.
A spokeswoman for Cardinal, which is based in Dublin, Ohio, said that it has a “broad and diverse manufacturing and supplier network” that includes the U.S. and is not dependent on any one locale. Cardinal is also one of the largest prescription drug distributors in the world. It had revenues in 2019 of more than $145 billion, making it the 16th largest company in the U.S., according to Fortune.
Cardinal chief executive Mike Kaufmann told Wall Street analysts in February that the company understood “the gravity” of the recall. He said it had hired outside experts to review Cardinal’s quality assurance procedures.
The company’s board has established a special committee to review management’s actions pertaining to the recall, according to Cardinal’s website. The outside experts continue to scrutinize the company’s practices, a spokeswoman said.
Of the recalled gowns, Cardinal had already distributed almost 8 million to health care facilities; the others had not reached customers. Some had been manufactured as early as the fall of 2018, the company has said. Cardinal does not have information on how many of the gowns were used but believes a majority of them were, a spokeswoman told ProPublica. Asked if any health workers or patients were infected as a result, she said that “we continue to track and analyze complaint data.”
The FDA last inspected the problematic Chinese plant in April 2018 and did not identify any violations, an agency spokeswoman said. Manufacturers are responsible for detecting problems and reporting them to the FDA, she said, adding that the Chinese company did not report any such issues during the period covered by the recall.
The January recall was not the first time Cardinal had a problem with the supplier, which it has identified as Siyang HolyMed Products Co. in Jiangsu province on China’s coast. Cardinal disclosed in a January press release that in the spring of 2018, around the same time the FDA was inspecting the Chinese company’s manufacturing facility, the company learned that Siyang outsourced some of its production to an unqualified facility. Cardinal tested products at the time and determined there was no reason to take further action such as a recall, it said.
Then, last Dec. 10, Cardinal received a tip that Siyang was making gowns at two sites that weren’t approved by the U.S. company or registered with the FDA, a Cardinal spokeswoman said. Ten days later, an on-site investigation confirmed the tip, she said.
In a Jan. 21 letter to customers, Cardinal said it couldn’t guarantee that the gowns were sterile because Siyang made some of them at locations that “did not maintain proper environmental conditions as required by law.” They were “commingled with properly manufactured gowns,” Cardinal said.[..] read more
a bloodsucker operates while biden dodges!!!
A PRIVATE EQUITY BARON SITTING ON AN EMPTY PHILADELPHIA HOSPITAL IS IN LINE FOR HUGE TAX GIFT IN THE COVID-19 STIMULUS
Akela Lacy - the intercept
April 1 2020, 6:55 a.m.
AS PHILADELPHIA SEARCHES for a place to house its growing number of coronavirus patients, a millionaire health care and private equity executive is effectively holding a hospital he owns hostage — and is in line for a massive tax break under the coronavirus stimulus plan signed into law last week.
Joel Freedman bought Philadelphia’s Hahnemann University Hospital, which primarily served low-income residents, along with St. Christopher Children Hospital, in 2018 for a total of $170 million. Despite community protests that captured national attention, he shuttered it in September, hoping to turn a profit by selling the building, possibly to turn it into luxury condos. Amid the coronavirus pandemic, city officials said they could not afford Freedman’s offer for the building, which he said was a fraction of market value. They were negotiating its use until last week, when they said Freedman’s offer to rent the building to the city for just under $1 million a month, including necessary improvements and expenses was “unreasonable.”
Meanwhile, the Los Angeles-based Freedman could benefit from the $2 trillion stimulus, which temporarily and retroactively lifts a cap on the property-related depreciation real estate investors are allowed to use to lessen their tax bill. Depreciation is a paper cost that real estate investors can use to factor in losses to offset other income and reduce what they pay in taxes. In Freedman’s case, that means he can use recent “losses” from the hospital as it depreciates to offset his overall taxable income and, as a result, what he owes in taxes. A spokesperson for Freedman did not respond to requests for comment.
“Depreciation on the real estate from Hahnemann from the last two years plus this year can be used to offset any tax liabilities for his household, to the extent that he’s got profit from other things that he’s done” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research in Washington, D.C.
Under the stimulus, Freedman would no longer be limited in the amount of business losses he could use to offset wages or investment income, according to a professor at the University of Pennsylvania Law School.
Other hospitals are benefiting from the 800-page stimulus, which includes a $100 billion allocation for hospitals, in part to help fight the coronavirus. Easton hospital, another private equity-owned hospital in Pennsylvania, got one of the first payouts of the coronavirus stimulus plan for $8 million after threatening to shut down on Friday at midnight. “They’re just shameless,” said Appelbaum. “The very first payment out of that stimulus package went to a hospital owned by private equity that was blackmailing the governor of Pennsylvania.”
HAHNEMANN, WHICH HAD served the city’s poorest and most critically ill residents since 1848, was acquired in 2018 by a subsidiary of American Academic Health System LLC, of which Freedman is the founder and chief executive officer. That subsidiary, Philadelphia Academic Health Systems, filed for bankruptcy in June. Freedman said Hahnemann had been losing millions of dollars a month, but the hospital’s real estate was not included in the bankruptcy filing. Rather, it was redistributed to another of Freedman’s companies, Broad Street Health Care Properties.
Under the federal stimulus, which passed unanimously in the Senate and by a voice vote in the House, corporations and businesses will still see the bulk of dollars allocated, while workers get modest increases in unemployment benefits and a one-time check of up to $1,200 per individual. At least one provision benefitting real estate investors, which increases the amount of nonbusiness income and capital gains they can protect from taxation, could result in tax breaks up to $170 billion over 10 years.
“That group comprises the top 1 percent of taxpayers, according to Internal Revenue Service data,” the New York Times reported. “The result is that people can enjoy big tax breaks stemming from only-on-paper losses, even if they enjoy big cash profits in the real world.”
Philadelphia’s St. Christopher Hospital, which Freedman acquired along with Hahnemann in 2018, was purchased earlier this year. Affiliates of Freedman’s company, a number of which he also owns, have run facilities across the country including the Howard University Hospital in Washington, D.C. After Hahnemann’s closing last year, Freedman listed his Rittenhouse Square home for $3.5 million.
“We’d have to know more about his personal situation to know if he will personally benefit,” Appelbaum said. “But if he owns businesses that have made a profit anywhere in the last two years or this year, he can use the paper losses from depreciation on real estate to offset that profit and reduce any taxes he would have to pay.”
Since it’s retroactive, Freedman could be in for a substantial rebate if the paper losses can offset taxes he paid in previous years.
Hahnemann’s parent company is an LLC, which are treated as partnerships for tax purposes. That means income from the company is partially Freedman’s own and would qualify for the new stimulus tax break. Freedman is also the president and founder of Paladin Healthcare, AAHS’s parent company.
PENNSYLVANIA SO FAR has 4,843 confirmed Covid-19 cases, and 63 deaths, including 1,315 cases and 14 deaths in Philadelphia. The city is preparing to face a rapid increase in cases and deaths already seen in New York City, the epicenter of the pandemic, where health care workers have already begun to face the impacts of shortages in hospital space and supplies, and are bracing to run out of space in city morgues.
City officials last week said Freedman was using his position to profit while the city was trying to deal with a public health crisis. “I think he’s looking at this as a business transaction rather than providing an imminent and important aid to the city and our residents,” City Managing Director Brian Abernathy told reporters. A representative for Freedman has cited having an interested buyer as one reason he can’t allow the city to use the hospital. Freedman also said he offered the city a rate at a fraction of market cost.
Officials seeking additional space to treat patients said last week that they had scrapped attempts to negotiate with Freedman to use the 496-bed facility because they couldn’t accept his offer. Philadelphia Mayor Jim Kenney said during a press conference last week that the city needed “to find facilities that could contain several hundred hospital beds.” Kenney said the city had offered to pay a smaller amount in rent and to cover costs of what would be time-consuming repair and upkeep to make the hospital usable again, which Freedman refused.
The next day, the city announced that Temple University would allow use of its Liacouras Center as an overflow hospital, free of charge. In Philadelphia, which has the highest poverty rate of the nation’s 10 most populous cities, experts have expressed concern that the coronavirus could disproportionately impact poor residents.
Philadelphia City Council Member Helen Gym, who has been an outspoken voice in efforts to save Hahnemann and prevent similar financial mismanagement in the future, called last week for the city to acquire Hahnemann through eminent domain. “We cannot allow unconscionable greed to get in the way of saving lives,” Gym tweeted last week. Kenney said the city had determined that proposal to be too costly and time consuming.
“It is outrageous that a Philadelphia real estate investor who closed a hospital is now trying to gouge the city to re-open it,” Democratic presidential candidate Bernie Sanders tweeted Monday. “@HelenGymPHL is right: the city should reopen Hahnemann hospital immediately.” In July, Sanders joined a demonstration protesting Hahnemann’s closing.
Former Vice President Joe Biden, a Pennsylvania native whose campaign headquarters is in Philadelphia, has not taken a position on the issue. Biden’s campaign did not respond to a request for comment.
Days after Kenney announced the city was ending attempts to use the hospital, Freedman’s Rittenhouse Square-area residence was vandalized with the phrases “JOEL KILLS,” and “FREE HAHNEMANN.”
At least “many of the hospitals owned by private equity are in very bad shape,” Appelbaum said. “I imagine we’re gonna see a lot more of what just happened with Hahnemann, and what just happened at Easton.”
Joel Freedman bought Philadelphia’s Hahnemann University Hospital, which primarily served low-income residents, along with St. Christopher Children Hospital, in 2018 for a total of $170 million. Despite community protests that captured national attention, he shuttered it in September, hoping to turn a profit by selling the building, possibly to turn it into luxury condos. Amid the coronavirus pandemic, city officials said they could not afford Freedman’s offer for the building, which he said was a fraction of market value. They were negotiating its use until last week, when they said Freedman’s offer to rent the building to the city for just under $1 million a month, including necessary improvements and expenses was “unreasonable.”
Meanwhile, the Los Angeles-based Freedman could benefit from the $2 trillion stimulus, which temporarily and retroactively lifts a cap on the property-related depreciation real estate investors are allowed to use to lessen their tax bill. Depreciation is a paper cost that real estate investors can use to factor in losses to offset other income and reduce what they pay in taxes. In Freedman’s case, that means he can use recent “losses” from the hospital as it depreciates to offset his overall taxable income and, as a result, what he owes in taxes. A spokesperson for Freedman did not respond to requests for comment.
“Depreciation on the real estate from Hahnemann from the last two years plus this year can be used to offset any tax liabilities for his household, to the extent that he’s got profit from other things that he’s done” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research in Washington, D.C.
Under the stimulus, Freedman would no longer be limited in the amount of business losses he could use to offset wages or investment income, according to a professor at the University of Pennsylvania Law School.
Other hospitals are benefiting from the 800-page stimulus, which includes a $100 billion allocation for hospitals, in part to help fight the coronavirus. Easton hospital, another private equity-owned hospital in Pennsylvania, got one of the first payouts of the coronavirus stimulus plan for $8 million after threatening to shut down on Friday at midnight. “They’re just shameless,” said Appelbaum. “The very first payment out of that stimulus package went to a hospital owned by private equity that was blackmailing the governor of Pennsylvania.”
HAHNEMANN, WHICH HAD served the city’s poorest and most critically ill residents since 1848, was acquired in 2018 by a subsidiary of American Academic Health System LLC, of which Freedman is the founder and chief executive officer. That subsidiary, Philadelphia Academic Health Systems, filed for bankruptcy in June. Freedman said Hahnemann had been losing millions of dollars a month, but the hospital’s real estate was not included in the bankruptcy filing. Rather, it was redistributed to another of Freedman’s companies, Broad Street Health Care Properties.
Under the federal stimulus, which passed unanimously in the Senate and by a voice vote in the House, corporations and businesses will still see the bulk of dollars allocated, while workers get modest increases in unemployment benefits and a one-time check of up to $1,200 per individual. At least one provision benefitting real estate investors, which increases the amount of nonbusiness income and capital gains they can protect from taxation, could result in tax breaks up to $170 billion over 10 years.
“That group comprises the top 1 percent of taxpayers, according to Internal Revenue Service data,” the New York Times reported. “The result is that people can enjoy big tax breaks stemming from only-on-paper losses, even if they enjoy big cash profits in the real world.”
Philadelphia’s St. Christopher Hospital, which Freedman acquired along with Hahnemann in 2018, was purchased earlier this year. Affiliates of Freedman’s company, a number of which he also owns, have run facilities across the country including the Howard University Hospital in Washington, D.C. After Hahnemann’s closing last year, Freedman listed his Rittenhouse Square home for $3.5 million.
“We’d have to know more about his personal situation to know if he will personally benefit,” Appelbaum said. “But if he owns businesses that have made a profit anywhere in the last two years or this year, he can use the paper losses from depreciation on real estate to offset that profit and reduce any taxes he would have to pay.”
Since it’s retroactive, Freedman could be in for a substantial rebate if the paper losses can offset taxes he paid in previous years.
Hahnemann’s parent company is an LLC, which are treated as partnerships for tax purposes. That means income from the company is partially Freedman’s own and would qualify for the new stimulus tax break. Freedman is also the president and founder of Paladin Healthcare, AAHS’s parent company.
PENNSYLVANIA SO FAR has 4,843 confirmed Covid-19 cases, and 63 deaths, including 1,315 cases and 14 deaths in Philadelphia. The city is preparing to face a rapid increase in cases and deaths already seen in New York City, the epicenter of the pandemic, where health care workers have already begun to face the impacts of shortages in hospital space and supplies, and are bracing to run out of space in city morgues.
City officials last week said Freedman was using his position to profit while the city was trying to deal with a public health crisis. “I think he’s looking at this as a business transaction rather than providing an imminent and important aid to the city and our residents,” City Managing Director Brian Abernathy told reporters. A representative for Freedman has cited having an interested buyer as one reason he can’t allow the city to use the hospital. Freedman also said he offered the city a rate at a fraction of market cost.
Officials seeking additional space to treat patients said last week that they had scrapped attempts to negotiate with Freedman to use the 496-bed facility because they couldn’t accept his offer. Philadelphia Mayor Jim Kenney said during a press conference last week that the city needed “to find facilities that could contain several hundred hospital beds.” Kenney said the city had offered to pay a smaller amount in rent and to cover costs of what would be time-consuming repair and upkeep to make the hospital usable again, which Freedman refused.
The next day, the city announced that Temple University would allow use of its Liacouras Center as an overflow hospital, free of charge. In Philadelphia, which has the highest poverty rate of the nation’s 10 most populous cities, experts have expressed concern that the coronavirus could disproportionately impact poor residents.
Philadelphia City Council Member Helen Gym, who has been an outspoken voice in efforts to save Hahnemann and prevent similar financial mismanagement in the future, called last week for the city to acquire Hahnemann through eminent domain. “We cannot allow unconscionable greed to get in the way of saving lives,” Gym tweeted last week. Kenney said the city had determined that proposal to be too costly and time consuming.
“It is outrageous that a Philadelphia real estate investor who closed a hospital is now trying to gouge the city to re-open it,” Democratic presidential candidate Bernie Sanders tweeted Monday. “@HelenGymPHL is right: the city should reopen Hahnemann hospital immediately.” In July, Sanders joined a demonstration protesting Hahnemann’s closing.
Former Vice President Joe Biden, a Pennsylvania native whose campaign headquarters is in Philadelphia, has not taken a position on the issue. Biden’s campaign did not respond to a request for comment.
Days after Kenney announced the city was ending attempts to use the hospital, Freedman’s Rittenhouse Square-area residence was vandalized with the phrases “JOEL KILLS,” and “FREE HAHNEMANN.”
At least “many of the hospitals owned by private equity are in very bad shape,” Appelbaum said. “I imagine we’re gonna see a lot more of what just happened with Hahnemann, and what just happened at Easton.”
*AT LAST: TIME TO KILL "USELESS EATERS"
Trump's death cult finally says it: Time to kill the "useless eaters" for capitalism
Republicans say the quiet part out loud: Americans must die of the coronavirus in order to save capitalism
CHAUNCEY DEVEGA - SALON
MARCH 27, 2020 11:00AM (UTC)
...On Wednesday, Trump said the quiet part loud, basically admitting on Twitter that his electoral fortunes are tied to the pandemic's impact on the American economy:
The LameStream Media is the dominant force in trying to get me to keep our Country closed as long as possible in the hope that it will be detrimental to my election success. The real people want to get back to work ASAP. We will be stronger than ever before!
To paraphrase the character Ivan Drago in the movie "Rocky IV": "If they die, they die". Or as another famous Russian, Joseph Stalin, is reported to have said: "One death is a tragedy. A million deaths is a statistic."
For Trump and his allies, worsening the coronavirus pandemic, even at the risk of many lives, is of little importance compared to keeping him in office to continue a regime of looting, extortion and massive corruption.
The Democratic Party needs new slogans for the 2020 presidential election. I would suggest these:
These calls by Trump and his allies for millions of Americans to sacrifice themselves for such abstractions as "the country," "the economy" and "the market" should not be a surprise. Such madness and cruelty are the logical and inevitable results of decades of right-wing strategy and policies.
These plans were never hidden. Indeed, they were clumsily obvious. Since the 1970s, predatory gangster capitalism has been accepted as either "normal" or "inevitable" in the United States (as well as the United Kingdom and elsewhere). To that end, the "free market" was presented by the news media, many Democrats, virtually all Republicans, and most of the educational system as somehow synonymous or interchangeable with "freedom" and "democracy."
This form of predatory gangster capitalism, now often called "neoliberalism," rests upon several basic tenets.
Of course the harsh realities and negative consequences of predatory gangster capitalism have been effectively concealed from the public, which has come to accept this ideology through the use of anodyne language like "entrepreneurship," "efficiency," "transparency," "accountability," "public-private" and "opportunity."
All claims that this system has been successful are dubious. Serious economists and other intellectually honest policy experts have repeatedly proven that its premises are fundamentally incorrect.
Gangster capitalists exploit system shocks and other crises (sometimes crises they themselves have caused) as a means of advancing their agenda.
Consider the coronavirus relief bill as originally submitted by the Republicans, which proposed creating a $500 billion slush fund to subsidize the richest corporations and wealthiest Americans, with no accountability and no oversight – a fund that Donald Trump and his vassals could loot at will — while handing out much smaller sums to ordinary Americans who are struggling to survive in a moment of economic calamity.
The moral obscenity of that bill even included petty cruelty: The poorest Americans would receive little if any money in direct payments, while money flowed to corporations and the ultra-rich by the billions.
These disparities have been somewhat painted over in the Democrats' counterproposals in the House and Senate. But on a grand scale, the picture is not that different: The largest corporations will still receive at least $500 billion — with minor oversight and a few insignificant restraints — that they will inevitably use to enrich their shareholders at the expense of their employees and the public.
In practice, neoliberalism amounts to socialism for the rich and the powerful and the harsh medicine of the "free market" for everyone else. The coronavirus relief bill is more proof of that fact.
This is the logic of "too big to fail." It's also a function of the moral hazard that allows a plutocrat like Donald Trump to gain control over a so-called democracy with the goal of funneling resources (through tax policies, government subsidies and other laws) to themselves and other members of his class, while denying resources and opportunities to the vast majority of Americans.
Donald Trump's proposed 2021 federal budget is a statement of values. As with the coronavirus relief bill, it punishes the poor and vulnerable by gutting the social safety net and transferring more money, both in the form of tax cuts and direct subsidies, to huge corporations and the richest Americans.
As documented by Dr. James Gilligan in his book "Why Some Politicians Are More Dangerous Than Others," the policies of the Republican Party on issues ranging from health care to guns, the environment and tax policy have shortened the American people's lifespans and caused other forms of physical harm.
Predatory gangster capitalism needs agents and other actors to advance its goals. The corporation is one of the primary means through which this form of capitalism wages its "revolutionary" struggle against a humane and democratic society.
As has been widely noted, if the corporation was a person, it would be a sociopath. This makes the corporation an indispensable part of Donald Trump's coronavirus death cult.
James Gamble, a retired corporate attorney who is now director of the National Center for Access to Justice, offered a warning, in a recent article at Medium, about "the extraordinary power of corporate 'persons' who are legally obligated to act like sociopaths":
Sociopath? Yes. The corporate entity is obligated to care only about itself and to define what is good as what makes it more money. Pretty close to a textbook case of antisocial personality disorder. And corporate persons are the most powerful people in our world.
The "maximize rule" does its damage in two ways. Corporate entities are direct actors in the world. A decision to build a factory in a place with weak environmental laws, low wages and poor worker protection matters. Preferring share buybacks to increased wages or lower prices matters. Lobbying for taxpayer subsidies that transfer wealth from poor to rich matters. They contribute to the problems listed in paragraph one in obvious ways. More damaging: the maximize rule infects real people with tragic faith in the magic of markets.[...]
(Read complete article)
The LameStream Media is the dominant force in trying to get me to keep our Country closed as long as possible in the hope that it will be detrimental to my election success. The real people want to get back to work ASAP. We will be stronger than ever before!
To paraphrase the character Ivan Drago in the movie "Rocky IV": "If they die, they die". Or as another famous Russian, Joseph Stalin, is reported to have said: "One death is a tragedy. A million deaths is a statistic."
For Trump and his allies, worsening the coronavirus pandemic, even at the risk of many lives, is of little importance compared to keeping him in office to continue a regime of looting, extortion and massive corruption.
The Democratic Party needs new slogans for the 2020 presidential election. I would suggest these:
- Trump wants you to die — so he can stay in office forever.
- Trump and the Republicans are trying to kill you — for money.
- Are you 60 or older? Have a pre-existing health condition? Donald Trump and his Republican Party don't care if you die from the coronavirus.
- Donald Trump could have stopped the coronavirus. He lied, and people died.
- Yes, Trump and the right are embracing and celebrating death. It is ghoulish. It is also one more illustration that the Age of Trump is an American dystopia where what was previously unimaginable (for most decent people) has become "normal."
- Yes, Trump and his movement's death impulses are part of a natural progression in which an authoritarian regime maximizes its power by terrorizing the public.
These calls by Trump and his allies for millions of Americans to sacrifice themselves for such abstractions as "the country," "the economy" and "the market" should not be a surprise. Such madness and cruelty are the logical and inevitable results of decades of right-wing strategy and policies.
These plans were never hidden. Indeed, they were clumsily obvious. Since the 1970s, predatory gangster capitalism has been accepted as either "normal" or "inevitable" in the United States (as well as the United Kingdom and elsewhere). To that end, the "free market" was presented by the news media, many Democrats, virtually all Republicans, and most of the educational system as somehow synonymous or interchangeable with "freedom" and "democracy."
This form of predatory gangster capitalism, now often called "neoliberalism," rests upon several basic tenets.
- Profits are more important than people.
- Every part of human life and existence should become a commodity or a financial instrument.
- Society should be organized around the "survival of the fittest," in Malthusian or social-Darwinist terms: Those who cannot survive and prosper under "free markets" will be abandoned, quite likely to die.
- Notions of the collective good, the commons, the social safety net and other aspects of social democracy, as well as the very idea of government and collective action, are to be undermined and eventually eliminated in service to "freedom" and "individual liberty."
- There should be few if any restrictions on the behavior of corporations, banks and the ultra-rich, or on the financier class.
- There are "winners" and "losers" in society, "makers" and "takers" in society.
- These are natural and almost inexorable categories. The winners are to be subsidized by the state and the public. The losers are to be punished, and if possible eliminated.
- Capitalism and democracy are the same thing.
Of course the harsh realities and negative consequences of predatory gangster capitalism have been effectively concealed from the public, which has come to accept this ideology through the use of anodyne language like "entrepreneurship," "efficiency," "transparency," "accountability," "public-private" and "opportunity."
All claims that this system has been successful are dubious. Serious economists and other intellectually honest policy experts have repeatedly proven that its premises are fundamentally incorrect.
Gangster capitalists exploit system shocks and other crises (sometimes crises they themselves have caused) as a means of advancing their agenda.
Consider the coronavirus relief bill as originally submitted by the Republicans, which proposed creating a $500 billion slush fund to subsidize the richest corporations and wealthiest Americans, with no accountability and no oversight – a fund that Donald Trump and his vassals could loot at will — while handing out much smaller sums to ordinary Americans who are struggling to survive in a moment of economic calamity.
The moral obscenity of that bill even included petty cruelty: The poorest Americans would receive little if any money in direct payments, while money flowed to corporations and the ultra-rich by the billions.
These disparities have been somewhat painted over in the Democrats' counterproposals in the House and Senate. But on a grand scale, the picture is not that different: The largest corporations will still receive at least $500 billion — with minor oversight and a few insignificant restraints — that they will inevitably use to enrich their shareholders at the expense of their employees and the public.
In practice, neoliberalism amounts to socialism for the rich and the powerful and the harsh medicine of the "free market" for everyone else. The coronavirus relief bill is more proof of that fact.
This is the logic of "too big to fail." It's also a function of the moral hazard that allows a plutocrat like Donald Trump to gain control over a so-called democracy with the goal of funneling resources (through tax policies, government subsidies and other laws) to themselves and other members of his class, while denying resources and opportunities to the vast majority of Americans.
Donald Trump's proposed 2021 federal budget is a statement of values. As with the coronavirus relief bill, it punishes the poor and vulnerable by gutting the social safety net and transferring more money, both in the form of tax cuts and direct subsidies, to huge corporations and the richest Americans.
As documented by Dr. James Gilligan in his book "Why Some Politicians Are More Dangerous Than Others," the policies of the Republican Party on issues ranging from health care to guns, the environment and tax policy have shortened the American people's lifespans and caused other forms of physical harm.
Predatory gangster capitalism needs agents and other actors to advance its goals. The corporation is one of the primary means through which this form of capitalism wages its "revolutionary" struggle against a humane and democratic society.
As has been widely noted, if the corporation was a person, it would be a sociopath. This makes the corporation an indispensable part of Donald Trump's coronavirus death cult.
James Gamble, a retired corporate attorney who is now director of the National Center for Access to Justice, offered a warning, in a recent article at Medium, about "the extraordinary power of corporate 'persons' who are legally obligated to act like sociopaths":
Sociopath? Yes. The corporate entity is obligated to care only about itself and to define what is good as what makes it more money. Pretty close to a textbook case of antisocial personality disorder. And corporate persons are the most powerful people in our world.
The "maximize rule" does its damage in two ways. Corporate entities are direct actors in the world. A decision to build a factory in a place with weak environmental laws, low wages and poor worker protection matters. Preferring share buybacks to increased wages or lower prices matters. Lobbying for taxpayer subsidies that transfer wealth from poor to rich matters. They contribute to the problems listed in paragraph one in obvious ways. More damaging: the maximize rule infects real people with tragic faith in the magic of markets.[...]
(Read complete article)
op - ed: The Virus of Capitalism Has Infected the COVID-19 Fight
BY William Rivers Pitt, Truthout
PUBLISHED March 23, 2020
Around two weeks ago, when the first wave of closures — the schools, the ballgames, the bars — began to roll across the country, a clock began ticking in my head. How long will it be, I wondered, before some rich person goes on TV and starts quacking about “getting the country going again” because they’re losing money?
Flash-forward to this past Sunday morning, and wouldn’t you know it, some self-satisfied capitalist was on one of the cable networks arguing that “low-risk,” low-wage workers (who are the economy even as they seldom benefit from the economy) should go back to work and just let the virus “burn through” their ranks.
He labeled them “low risk” because the workers he referred to are younger and allegedly less likely to fall deeply ill if infected, but new data from the Centers for Disease Control and Prevention (CDC) shows that about 40 percent of COVID-19 patients requiring hospitalization are between 20 and 54 years old. That is not a small number of patients.
Under vastly different circumstances, perhaps it would have been possible to argue for a different path of action than dramatic physical-distancing measures, following from the idea that to develop a herd immunity to COVID-19, a certain number of people have to contract it and recover (assuming we are even capable of developing an immunity, which is not yet confirmed). To even countenance this idea, however, we would need a robust and fully functional health care system to aid in the recovery process.
In point of fact, the U.S. health care system lags far behind much of the developed world. Even countries with strong systems, such as Germany, are at risk of being subsumed by COVID-19 for the same reason the U.S. system is perhaps days away from collapse: The for-profit commodification of health care itself has thoroughly denuded the ability of those systems to react to this crisis.
“Germany is home to one of the most modern, richest and most powerful health-care systems in the world,” reports Der Spiegel. “The coronavirus is mercilessly exposing the problems that have been burdening the German health-care system for years: the pitfalls of profit-driven hospital financing. The pressure to cut spending. The chronic shortage of nursing staff. The often poor equipping of public health departments. The lag in digitalization.”
Yet the absence of a health care infrastructure capable of absorbing and treating thousands of patients — even “low-risk” ones — did not stop Captain Capitalist from going on TV and suggesting that maybe it’s about time workers started feeding the beast again. The machine is groaning for lack of lubrication, see. Can’t shut it down and be kind to each other, share our vast yet vastly imbalanced resources, and simply be for awhile until this thing runs its course, saving lives every step of the way. There’s no money in it.
On Sunday night, in yet another Twitter rant, Donald Trump indicated he may be edging toward ignoring the advice of the experts and lift the social distancing strictures intended to thwart the spread of COVID-19:
Donald J. Trump✔
@realDonaldTrump
WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!
8:50 PM - Mar 22, 2020
Why? Money.
There’s money to be made elsewhere, to be sure. “Over the past few weeks, investment bankers have been candid on investor calls and during health care conferences about the opportunity to raise drug prices,” reports Lee Fang for The Intercept. As media outlets focus on individuals hoarding toilet paper and hand sanitizer, the real money hoarders are leaning into this once-in-a-lifetime opportunity to peel massive profit from a desperate land.
Partnership for America’s Health Care Future (PAHCF), a major health care industry lobbying group that is stoutly opposed to Medicare for All, launched a multimillion-dollar ad campaign last week to push back against any effort to fix our broken for-profit system. This comes on the heels of insurance industry efforts against waiving costs for COVID-19 treatments.
Meanwhile, mayors and governors are screaming at Trump to use the Defense Production Act, a law that allows the president to essentially nationalize privately held portions of the means of production in order to churn out needed materials. Those mayors and governors need ventilators, masks and coronavirus test kits. They needed them a month ago. Trump has invoked the law, but he steadfastly refuses to actually use it.
Why? Because we have reached the apotheosis of Ronald Reagan’s most rancid gift to the nation: “Government is the problem.” This pestiferous ethos, voiced during Reagan’s first inaugural address, has become holy Republican writ over the course of the last 40 years.
Now, in Trump, it has its greatest champion. Trump is refusing to let government influence business, even in this moment of life-and-death crisis, because the advisers who have his ear worship at the altar of Reagan. For them, right-wing ideology and the profit margin are more important than your life, or mine.
Of course, there is also an angle to be played. “In declining to actually make use of the Korean War-era production act that he invoked last week,” reports The New York Times, “Mr. Trump is also avoiding taking personal responsibility for how fast the acute shortages of personal protective gear and lifesaving equipment are addressed.”
And then there is the currently stalled $1.8 trillion COVID-19 relief bill, which hit the reef in Congress over the weekend. Democrats are balking at the Senate GOP’s version of the bill because it is far too top-heavy with financial assistance to corporations and lacks sufficient assistance for working families.
The main sticking point, however, is a $500 billion slush fund included in the bill, which was originally a $208 billion slush fund until the lobbyists dogpiled the process. This money would be disbursed by Treasury Secretary Steve Mnuchin, presumably at the behest of Trump, with no oversight.
“The Treasury Department would have broad discretion over where the money would go,” reports The Washington Post. “President Trump already has said he wants the money to be used to rescue the cruise ship and hotel industries, making his preferences clear, but at a press conference on Sunday refused to say whether his own hotel properties would apply for the funding.”
Natch. These fellows never, ever, ever miss an opportunity to loot the till.
And therein lies the rub. The priority of the people (for the most part) is to stay safe, to get well if they fall ill, and to do what must be done to eventually return to some semblance of a normal life. The priority of the capitalists is to get the money machine going again, to take full advantage of the crisis in the name of profit, and to defend their well-staked financial turf from any reforms that may be proposed in the aftermath.
U.S.-style capitalism is also a virus, and it has infected every aspect of this situation. Worker safety, insurance coverage and costs, medical preparedness, and vital supplies — even the bill intended to rescue the country from some final financial calamity: All have been perverted and disrupted by the profit motive that never, ever, ever sleeps.
Flash-forward to this past Sunday morning, and wouldn’t you know it, some self-satisfied capitalist was on one of the cable networks arguing that “low-risk,” low-wage workers (who are the economy even as they seldom benefit from the economy) should go back to work and just let the virus “burn through” their ranks.
He labeled them “low risk” because the workers he referred to are younger and allegedly less likely to fall deeply ill if infected, but new data from the Centers for Disease Control and Prevention (CDC) shows that about 40 percent of COVID-19 patients requiring hospitalization are between 20 and 54 years old. That is not a small number of patients.
Under vastly different circumstances, perhaps it would have been possible to argue for a different path of action than dramatic physical-distancing measures, following from the idea that to develop a herd immunity to COVID-19, a certain number of people have to contract it and recover (assuming we are even capable of developing an immunity, which is not yet confirmed). To even countenance this idea, however, we would need a robust and fully functional health care system to aid in the recovery process.
In point of fact, the U.S. health care system lags far behind much of the developed world. Even countries with strong systems, such as Germany, are at risk of being subsumed by COVID-19 for the same reason the U.S. system is perhaps days away from collapse: The for-profit commodification of health care itself has thoroughly denuded the ability of those systems to react to this crisis.
“Germany is home to one of the most modern, richest and most powerful health-care systems in the world,” reports Der Spiegel. “The coronavirus is mercilessly exposing the problems that have been burdening the German health-care system for years: the pitfalls of profit-driven hospital financing. The pressure to cut spending. The chronic shortage of nursing staff. The often poor equipping of public health departments. The lag in digitalization.”
Yet the absence of a health care infrastructure capable of absorbing and treating thousands of patients — even “low-risk” ones — did not stop Captain Capitalist from going on TV and suggesting that maybe it’s about time workers started feeding the beast again. The machine is groaning for lack of lubrication, see. Can’t shut it down and be kind to each other, share our vast yet vastly imbalanced resources, and simply be for awhile until this thing runs its course, saving lives every step of the way. There’s no money in it.
On Sunday night, in yet another Twitter rant, Donald Trump indicated he may be edging toward ignoring the advice of the experts and lift the social distancing strictures intended to thwart the spread of COVID-19:
Donald J. Trump✔
@realDonaldTrump
WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!
8:50 PM - Mar 22, 2020
Why? Money.
There’s money to be made elsewhere, to be sure. “Over the past few weeks, investment bankers have been candid on investor calls and during health care conferences about the opportunity to raise drug prices,” reports Lee Fang for The Intercept. As media outlets focus on individuals hoarding toilet paper and hand sanitizer, the real money hoarders are leaning into this once-in-a-lifetime opportunity to peel massive profit from a desperate land.
Partnership for America’s Health Care Future (PAHCF), a major health care industry lobbying group that is stoutly opposed to Medicare for All, launched a multimillion-dollar ad campaign last week to push back against any effort to fix our broken for-profit system. This comes on the heels of insurance industry efforts against waiving costs for COVID-19 treatments.
Meanwhile, mayors and governors are screaming at Trump to use the Defense Production Act, a law that allows the president to essentially nationalize privately held portions of the means of production in order to churn out needed materials. Those mayors and governors need ventilators, masks and coronavirus test kits. They needed them a month ago. Trump has invoked the law, but he steadfastly refuses to actually use it.
Why? Because we have reached the apotheosis of Ronald Reagan’s most rancid gift to the nation: “Government is the problem.” This pestiferous ethos, voiced during Reagan’s first inaugural address, has become holy Republican writ over the course of the last 40 years.
Now, in Trump, it has its greatest champion. Trump is refusing to let government influence business, even in this moment of life-and-death crisis, because the advisers who have his ear worship at the altar of Reagan. For them, right-wing ideology and the profit margin are more important than your life, or mine.
Of course, there is also an angle to be played. “In declining to actually make use of the Korean War-era production act that he invoked last week,” reports The New York Times, “Mr. Trump is also avoiding taking personal responsibility for how fast the acute shortages of personal protective gear and lifesaving equipment are addressed.”
And then there is the currently stalled $1.8 trillion COVID-19 relief bill, which hit the reef in Congress over the weekend. Democrats are balking at the Senate GOP’s version of the bill because it is far too top-heavy with financial assistance to corporations and lacks sufficient assistance for working families.
The main sticking point, however, is a $500 billion slush fund included in the bill, which was originally a $208 billion slush fund until the lobbyists dogpiled the process. This money would be disbursed by Treasury Secretary Steve Mnuchin, presumably at the behest of Trump, with no oversight.
“The Treasury Department would have broad discretion over where the money would go,” reports The Washington Post. “President Trump already has said he wants the money to be used to rescue the cruise ship and hotel industries, making his preferences clear, but at a press conference on Sunday refused to say whether his own hotel properties would apply for the funding.”
Natch. These fellows never, ever, ever miss an opportunity to loot the till.
And therein lies the rub. The priority of the people (for the most part) is to stay safe, to get well if they fall ill, and to do what must be done to eventually return to some semblance of a normal life. The priority of the capitalists is to get the money machine going again, to take full advantage of the crisis in the name of profit, and to defend their well-staked financial turf from any reforms that may be proposed in the aftermath.
U.S.-style capitalism is also a virus, and it has infected every aspect of this situation. Worker safety, insurance coverage and costs, medical preparedness, and vital supplies — even the bill intended to rescue the country from some final financial calamity: All have been perverted and disrupted by the profit motive that never, ever, ever sleeps.
a corrupt, greed-based system exposed!!!
Failures of American capitalism are laid bare with Coronavirus pandemic
March 22, 2020
By Bob Hennelly, Salon- Commentary -raw story
As it turns out, American capitalism doesn’t hold up all that well under the stresses and strains of a virulent pandemic.
In the face of the coronavirus, that stingy “real time delivery” dictum taught in business school to guide how we deploy labor and distribute stuff can be a recipe for needlessly high body counts and wealth destruction on the scale of the Great Depression.
Currently, Senate Majority Leader Mitch McConnell is fashioning a coronavirus pandemic stimulus package that is fashioned after the Trump/ GOP $1.7 trillion tax cut — meaning, weighted to favor corporations and the wealthiest Americans.
To be fair, this was the same impulse we saw in the Bush/Obama response to the Great Recession. Their remedy led to Wall Street’s pillaging of MLK Boulevard and Main Street, the destruction of $20 trillion in household wealth, and accelerated wealth concentration. It also left tens of millions of households in a precarious position to face this pandemic.
And while President Franklin Delano Roosevelt’s response to the Great Depression in the form of the New Deal was widely praised for uplifting working-class Americans, we must remember that it left out Americans of color. Consider the Faustian bargain that FDR made with the Dixiecrats to get basic labor protections and standards for workers that expressly left out domestic and agricultural workers.
Greed dies hard.Now that the wolf (COVID-19) is at the door, we can see the reflex that many political leaders have to put wealth preservation above the common good. Four senators, including Sen. Richard Barr (R.-NC), chair of the Senate’s Intelligence Committee, sold off significant stock holdings after being briefed on the impending coronavirus pandemic.
These guys can’t help themselves. When destiny asks them to choose between money or life, they pause to make a trade.
This is what happens when you organize every aspect of your society to promote wealth accumulation and nothing else. It’s really just physics. You invest everything in accumulating gold or money for security and all of the sudden your life gets cut short as your lungs no longer function because you caught coronavirus from some other person who accidentally became the real sculptor of your destiny.
This will come as a real downer for the wealthy elites who have structured their lives around pre-coronavirus social distancing behind the gated walls of privilege that won’t protect them now.
But it’s our grocers, postal workers, trash collectors, nurses and emergency medical technicians who hold the jobs that are the most essential and need protecting.
Similarly, our vaunted American health care system — which is designed to maximize shareholder profits and discourage patients from using it — turns out to be antithetical to promoting the public health. This for-profit model is based on scarcity, which rations access to care, ventilators and personal protection equipment for medical staff, all to feed the insatiable bottom line.
Works great until that doomsday scenario when everybody needs it.
Our whole socioeconomic framework was predicated on the notion that our society could function and feed off vast inequality, and that the day-in and day-out misery of tens of millions of American families was their problem.
It turns out that the country’s economic deprivation — reflected in hunger and homelessness — significantly complicates our ability to end the pandemic. And as this more vulnerable cohort falls ill as a consequence the inadequacy of this existing system puts the broader society at a greater risk.
Poverty may not be contagious. But COVID-19 is.
--
As Rev. Dr. William Barber and Rev. Dr. Liz Theoharis of the Poor People’s Campaign wrote, “millions of people are in dire need of critical attention immediately. We call on you to fulfill your moral and Constitutional responsibilities: expand the COVID-19 emergency provisions to care for us all and enact our Moral Agenda immediately.”
They continue: “We cannot return to normal. Addressing the depth of the crises that have been revealed in this pandemic means enacting universal health care, expanding social welfare programs, ensuring access to water and sanitation, cash assistance to poor and low-income families, good jobs, living wages and an annual income and protecting our democracy.”
And this real-time national realignment “means ensuring that our abundant national resources are used for the general welfare, instead of war, walls, and the wealthy.”
Indeed, the Poor People Campaign’s list of demands is an essential foundation for our country’s survival:
1. Immediate, comprehensive and permanent paid sick leave for 100% of employees for this pandemic. Paid sick leave must become standard across all sectors of the labor market.
2. Immediate health care for all, including 100% free COVID-19 testing, treatment and quality care to all, regardless of income, age, disability, citizenship or any other factor, and including the uninsured.
3. A guaranteed and adequate annual income / universal income, including rapid, direct payments to all low-wage and temporary workers, from grocery, fast food and delivery workers, care workers, and pharmacists to other workers who remain on the front lines and are severely underpaid.
4. A national moratorium on evictions, tax foreclosures, rent hikes, and a national rent freeze. This includes an immediate halt to encampment sweeps and towing vehicles of unhoused communities. Federal resources must be directed to local and state governments towards opening and preparing vacant and habitable buildings, properties and warehouses to house and provide adequate care for all people who are homeless. This includes ensuring education, food assistance and health care for homeless children and provisions for medical testing, treatment and respite for the homeless.
5. Jubilee and debt forgiveness for medical debt, student debt, water, utilities and other forms of household debt.
6. Protections for our democracy and the right to vote with expanded opportunities to vote during this crisis and an expanded census to ensure every person is accounted for.[...]
In the face of the coronavirus, that stingy “real time delivery” dictum taught in business school to guide how we deploy labor and distribute stuff can be a recipe for needlessly high body counts and wealth destruction on the scale of the Great Depression.
Currently, Senate Majority Leader Mitch McConnell is fashioning a coronavirus pandemic stimulus package that is fashioned after the Trump/ GOP $1.7 trillion tax cut — meaning, weighted to favor corporations and the wealthiest Americans.
To be fair, this was the same impulse we saw in the Bush/Obama response to the Great Recession. Their remedy led to Wall Street’s pillaging of MLK Boulevard and Main Street, the destruction of $20 trillion in household wealth, and accelerated wealth concentration. It also left tens of millions of households in a precarious position to face this pandemic.
And while President Franklin Delano Roosevelt’s response to the Great Depression in the form of the New Deal was widely praised for uplifting working-class Americans, we must remember that it left out Americans of color. Consider the Faustian bargain that FDR made with the Dixiecrats to get basic labor protections and standards for workers that expressly left out domestic and agricultural workers.
Greed dies hard.Now that the wolf (COVID-19) is at the door, we can see the reflex that many political leaders have to put wealth preservation above the common good. Four senators, including Sen. Richard Barr (R.-NC), chair of the Senate’s Intelligence Committee, sold off significant stock holdings after being briefed on the impending coronavirus pandemic.
These guys can’t help themselves. When destiny asks them to choose between money or life, they pause to make a trade.
This is what happens when you organize every aspect of your society to promote wealth accumulation and nothing else. It’s really just physics. You invest everything in accumulating gold or money for security and all of the sudden your life gets cut short as your lungs no longer function because you caught coronavirus from some other person who accidentally became the real sculptor of your destiny.
This will come as a real downer for the wealthy elites who have structured their lives around pre-coronavirus social distancing behind the gated walls of privilege that won’t protect them now.
But it’s our grocers, postal workers, trash collectors, nurses and emergency medical technicians who hold the jobs that are the most essential and need protecting.
Similarly, our vaunted American health care system — which is designed to maximize shareholder profits and discourage patients from using it — turns out to be antithetical to promoting the public health. This for-profit model is based on scarcity, which rations access to care, ventilators and personal protection equipment for medical staff, all to feed the insatiable bottom line.
Works great until that doomsday scenario when everybody needs it.
Our whole socioeconomic framework was predicated on the notion that our society could function and feed off vast inequality, and that the day-in and day-out misery of tens of millions of American families was their problem.
It turns out that the country’s economic deprivation — reflected in hunger and homelessness — significantly complicates our ability to end the pandemic. And as this more vulnerable cohort falls ill as a consequence the inadequacy of this existing system puts the broader society at a greater risk.
Poverty may not be contagious. But COVID-19 is.
--
As Rev. Dr. William Barber and Rev. Dr. Liz Theoharis of the Poor People’s Campaign wrote, “millions of people are in dire need of critical attention immediately. We call on you to fulfill your moral and Constitutional responsibilities: expand the COVID-19 emergency provisions to care for us all and enact our Moral Agenda immediately.”
They continue: “We cannot return to normal. Addressing the depth of the crises that have been revealed in this pandemic means enacting universal health care, expanding social welfare programs, ensuring access to water and sanitation, cash assistance to poor and low-income families, good jobs, living wages and an annual income and protecting our democracy.”
And this real-time national realignment “means ensuring that our abundant national resources are used for the general welfare, instead of war, walls, and the wealthy.”
Indeed, the Poor People Campaign’s list of demands is an essential foundation for our country’s survival:
1. Immediate, comprehensive and permanent paid sick leave for 100% of employees for this pandemic. Paid sick leave must become standard across all sectors of the labor market.
2. Immediate health care for all, including 100% free COVID-19 testing, treatment and quality care to all, regardless of income, age, disability, citizenship or any other factor, and including the uninsured.
3. A guaranteed and adequate annual income / universal income, including rapid, direct payments to all low-wage and temporary workers, from grocery, fast food and delivery workers, care workers, and pharmacists to other workers who remain on the front lines and are severely underpaid.
4. A national moratorium on evictions, tax foreclosures, rent hikes, and a national rent freeze. This includes an immediate halt to encampment sweeps and towing vehicles of unhoused communities. Federal resources must be directed to local and state governments towards opening and preparing vacant and habitable buildings, properties and warehouses to house and provide adequate care for all people who are homeless. This includes ensuring education, food assistance and health care for homeless children and provisions for medical testing, treatment and respite for the homeless.
5. Jubilee and debt forgiveness for medical debt, student debt, water, utilities and other forms of household debt.
6. Protections for our democracy and the right to vote with expanded opportunities to vote during this crisis and an expanded census to ensure every person is accounted for.[...]
the bloodsuckers!!!
BANKS PRESSURE HEALTH CARE FIRMS TO RAISE PRICES ON CRITICAL DRUGS, MEDICAL SUPPLIES FOR CORONAVIRUS
Lee Fang - the intercept
March 19 2020, 12:03 p.m.
IN RECENT WEEKS, investment bankers have pressed health care companies on the front lines of fighting the novel coronavirus, including drug firms developing experimental treatments and medical supply firms, to consider ways that they can profit from the crisis.
The media has mostly focused on individuals who have taken advantage of the market for now-scarce medical and hygiene supplies to hoard masks and hand sanitizer and resell them at higher prices. But the largest voices in the health care industry stand to gain from billions of dollars in emergency spending on the pandemic, as do the bankers and investors who invest in health care companies.
Over the past few weeks, investment bankers have been candid on investor calls and during health care conferences about the opportunity to raise drug prices. In some cases, bankers received sharp rebukes from health care executives; in others, executives joked about using the attention on Covid-19 to dodge public pressure on the opioid crisis.
Gilead Sciences, the company producing remdesivir, the most promising drug to treat Covid-19 symptoms, is one such firm facing investor pressure.
Remdesivir is an antiviral that began development as a treatment for dengue, West Nile virus, and Zika, as well as MERS and SARS. The World Health Organization has said there is “only one drug right now that we think may have real efficacy in treating coronavirus symptoms” — namely, remdesivir.
The drug, though developed in partnership with the University of Alabama through a grant from the federal government’s National Institutes of Health, is patented by Gilead Sciences, a major pharmaceutical company based in California. The firm has faced sharp criticism in the past for its pricing practices. It previously charged $84,000 for a yearlong supply of its hepatitis C treatment, which was also developed with government research support. Remdesivir is estimated to produce a one-time revenue of $2.5 billion.
During an investor conference earlier this month, Phil Nadeau, managing director at investment bank Cowen & Co., quizzed Gilead Science executives over whether the firm had planned for a “commercial strategy for remdesivir” or could “create a business out of remdesivir.”
Johanna Mercier, executive vice president of Gilead, noted that the company is currently donating products and “manufacturing at risk and increasing our capacity” to do its best to find a solution to the pandemic. The company at the moment is focused, she said, primarily on “patient access” and “government access” for remdesivir.
“Commercial opportunity,” Mercier added, “might come if this becomes a seasonal disease or stockpiling comes into play, but that’s much later down the line.”
Steven Valiquette, a managing director at Barclays Investment Bank, last week peppered executives from Cardinal Health, a health care distributor of N95 masks, ventilators and pharmaceuticals, on whether the company would raise prices on a range of supplies.
Valiquette asked repeatedly about potential price increases on a variety of products. Could the company, he asked, “offset some of the risk of volume shortages” on the “pricing side”?
Michael Kaufmann, the chief executive of Cardinal Health, said that “so far, we’ve not seen any material price increases that I would say are related to the coronavirus yet.” Cardinal Health, Kaufman said, would weigh a variety of factors when making these decisions, and added that the company is “always going to fight aggressively to make sure that we’re getting after the lowest cost.”
“Are you able to raise the price on some of this to offset what could be some volume shortages such that it all kind of nets out to be fairly consistent as far as your overall profit matrix?” asked Valiquette.
Kaufman responded that price decisions would depend on contracts with providers, though the firm has greater flexibility over some drug sales. “As you have changes on the cost side, you’re able to make some adjustments,” he noted.
The discussion, over conference call, occurred during the Barclays Global Healthcare Conference on March 10. At one point, Valiquette joked that “one positive” about the coronavirus would be a “silver lining” that Cardinal Health may receive “less questions” about opioid-related lawsuits.
Cardinal Health is one of several firms accused of ignoring warnings and flooding pharmacies known as so-called pill mills with shipments of millions of highly addictive painkillers. Kaufmann noted that negotiations for a settlement are ongoing.
Owens & Minor, a health care logistics company that sources and manufactures surgical gowns, N95 masks, and other medical equipment, presented at the Barclays Global Healthcare Conference the following day.
Valiquette, citing the Covid-19 crisis, asked the company whether it could “increase prices on some of the products where there’s greater demand.” Valiquette then chuckled, adding that doing so “is probably not politically all that great in the sort of dynamic,” but said he was “curious to get some thoughts” on whether the firm would consider hiking prices.
The inquiry was sharply rebuked by Owens & Minor chief executive Edward Pesicka. “I think in a crisis like this, our mission is really around serving the customer. And from an integrity standpoint, we have pricing agreements,” Pesicka said. “So we are not going to go out and leverage this and try to ‘jam up’ customers and raise prices to have short-term benefit.”
AmerisourceBergen, another health care distributor that supplies similar products to Cardinal Health, which is also a defendant in the multistate opioid litigation, faced similar questions from Valiquette at the Barclays event.
Steve Collis, president and chief executive of AmerisourceBergen, noted that his company has been actively involved in efforts to push back against political demands to limit the price of pharmaceutical products.
Collis said that he was recently at a dinner with other pharmaceutical firms involved with developing “vaccines for the coronavirus” and was reminded that the U.S. firms, operating under limited drug price intervention, were among the industry leaders — a claim that has been disputed by experts who note that lack of regulation in the drug industry has led to few investments in viral treatments, which are seen as less lucrative. Leading firms developing a vaccine for Covid-19 are based in Germany, China, and Japan, countries with high levels of government influence in the pharmaceutical industry.
AmerisourceBergen, Collis continued, has been “very active with key stakeholders in D.C., and our priority is to educate policymakers about the impact of policy changes,” with a focus on “rational and responsible discussion about drug pricing.”
Later in the conversation, Valiquette asked AmerisourceBergen about the opioid litigation. The lawsuits could cost as much as $150 billion among the various pharmaceutical and drug distributor defendants. Purdue Pharma, one of the firms targeted with the opioid litigation, has already pursued bankruptcy protection in response to the lawsuit threat.
“We can’t say too much,” Collis responded. But the executive hinted that his company is using its crucial role in responding to the pandemic crisis as leverage in the settlement negotiations. “I would say that this crisis, the coronavirus crisis, actually highlights a lot of what we’ve been saying, how important it is for us to be very strong financial companies and to have strong cash flow ability to invest in our business and to continue to grow our business and our relationship with our customers,” Collis said.
The hope that the coronavirus will benefit firms involved in the opioid crisis has already materialized in some ways. New York Attorney General Letitia James announced last week that her lawsuit against opioid firms and distributors, including Cardinal Health and AmerisourceBergen, set to begin on March 20, would be delayed over coronavirus concerns.
The media has mostly focused on individuals who have taken advantage of the market for now-scarce medical and hygiene supplies to hoard masks and hand sanitizer and resell them at higher prices. But the largest voices in the health care industry stand to gain from billions of dollars in emergency spending on the pandemic, as do the bankers and investors who invest in health care companies.
Over the past few weeks, investment bankers have been candid on investor calls and during health care conferences about the opportunity to raise drug prices. In some cases, bankers received sharp rebukes from health care executives; in others, executives joked about using the attention on Covid-19 to dodge public pressure on the opioid crisis.
Gilead Sciences, the company producing remdesivir, the most promising drug to treat Covid-19 symptoms, is one such firm facing investor pressure.
Remdesivir is an antiviral that began development as a treatment for dengue, West Nile virus, and Zika, as well as MERS and SARS. The World Health Organization has said there is “only one drug right now that we think may have real efficacy in treating coronavirus symptoms” — namely, remdesivir.
The drug, though developed in partnership with the University of Alabama through a grant from the federal government’s National Institutes of Health, is patented by Gilead Sciences, a major pharmaceutical company based in California. The firm has faced sharp criticism in the past for its pricing practices. It previously charged $84,000 for a yearlong supply of its hepatitis C treatment, which was also developed with government research support. Remdesivir is estimated to produce a one-time revenue of $2.5 billion.
During an investor conference earlier this month, Phil Nadeau, managing director at investment bank Cowen & Co., quizzed Gilead Science executives over whether the firm had planned for a “commercial strategy for remdesivir” or could “create a business out of remdesivir.”
Johanna Mercier, executive vice president of Gilead, noted that the company is currently donating products and “manufacturing at risk and increasing our capacity” to do its best to find a solution to the pandemic. The company at the moment is focused, she said, primarily on “patient access” and “government access” for remdesivir.
“Commercial opportunity,” Mercier added, “might come if this becomes a seasonal disease or stockpiling comes into play, but that’s much later down the line.”
Steven Valiquette, a managing director at Barclays Investment Bank, last week peppered executives from Cardinal Health, a health care distributor of N95 masks, ventilators and pharmaceuticals, on whether the company would raise prices on a range of supplies.
Valiquette asked repeatedly about potential price increases on a variety of products. Could the company, he asked, “offset some of the risk of volume shortages” on the “pricing side”?
Michael Kaufmann, the chief executive of Cardinal Health, said that “so far, we’ve not seen any material price increases that I would say are related to the coronavirus yet.” Cardinal Health, Kaufman said, would weigh a variety of factors when making these decisions, and added that the company is “always going to fight aggressively to make sure that we’re getting after the lowest cost.”
“Are you able to raise the price on some of this to offset what could be some volume shortages such that it all kind of nets out to be fairly consistent as far as your overall profit matrix?” asked Valiquette.
Kaufman responded that price decisions would depend on contracts with providers, though the firm has greater flexibility over some drug sales. “As you have changes on the cost side, you’re able to make some adjustments,” he noted.
The discussion, over conference call, occurred during the Barclays Global Healthcare Conference on March 10. At one point, Valiquette joked that “one positive” about the coronavirus would be a “silver lining” that Cardinal Health may receive “less questions” about opioid-related lawsuits.
Cardinal Health is one of several firms accused of ignoring warnings and flooding pharmacies known as so-called pill mills with shipments of millions of highly addictive painkillers. Kaufmann noted that negotiations for a settlement are ongoing.
Owens & Minor, a health care logistics company that sources and manufactures surgical gowns, N95 masks, and other medical equipment, presented at the Barclays Global Healthcare Conference the following day.
Valiquette, citing the Covid-19 crisis, asked the company whether it could “increase prices on some of the products where there’s greater demand.” Valiquette then chuckled, adding that doing so “is probably not politically all that great in the sort of dynamic,” but said he was “curious to get some thoughts” on whether the firm would consider hiking prices.
The inquiry was sharply rebuked by Owens & Minor chief executive Edward Pesicka. “I think in a crisis like this, our mission is really around serving the customer. And from an integrity standpoint, we have pricing agreements,” Pesicka said. “So we are not going to go out and leverage this and try to ‘jam up’ customers and raise prices to have short-term benefit.”
AmerisourceBergen, another health care distributor that supplies similar products to Cardinal Health, which is also a defendant in the multistate opioid litigation, faced similar questions from Valiquette at the Barclays event.
Steve Collis, president and chief executive of AmerisourceBergen, noted that his company has been actively involved in efforts to push back against political demands to limit the price of pharmaceutical products.
Collis said that he was recently at a dinner with other pharmaceutical firms involved with developing “vaccines for the coronavirus” and was reminded that the U.S. firms, operating under limited drug price intervention, were among the industry leaders — a claim that has been disputed by experts who note that lack of regulation in the drug industry has led to few investments in viral treatments, which are seen as less lucrative. Leading firms developing a vaccine for Covid-19 are based in Germany, China, and Japan, countries with high levels of government influence in the pharmaceutical industry.
AmerisourceBergen, Collis continued, has been “very active with key stakeholders in D.C., and our priority is to educate policymakers about the impact of policy changes,” with a focus on “rational and responsible discussion about drug pricing.”
Later in the conversation, Valiquette asked AmerisourceBergen about the opioid litigation. The lawsuits could cost as much as $150 billion among the various pharmaceutical and drug distributor defendants. Purdue Pharma, one of the firms targeted with the opioid litigation, has already pursued bankruptcy protection in response to the lawsuit threat.
“We can’t say too much,” Collis responded. But the executive hinted that his company is using its crucial role in responding to the pandemic crisis as leverage in the settlement negotiations. “I would say that this crisis, the coronavirus crisis, actually highlights a lot of what we’ve been saying, how important it is for us to be very strong financial companies and to have strong cash flow ability to invest in our business and to continue to grow our business and our relationship with our customers,” Collis said.
The hope that the coronavirus will benefit firms involved in the opioid crisis has already materialized in some ways. New York Attorney General Letitia James announced last week that her lawsuit against opioid firms and distributors, including Cardinal Health and AmerisourceBergen, set to begin on March 20, would be delayed over coronavirus concerns.
How the global toilet paper run brought the failings of capitalism front and center
Simon Springer / Common Dreams - alternet
March 16, 2020
The run on toilet paper has brought the failings of capitalism front and center to the bathroom of every house across Australia, a trend that has now spread to other countries. We are witnessing, in real-time and with stunning consequence, the stone-cold fact that markets are an ineffective mediator of resources, prone to the worst vagaries of herd mentality. Perceived impending shortages of toilet paper owing to the spread of COVID-19 set off widespread panic. We might be inclined to laugh at the implausibility of the whole scenario, but whether the situation is real or imagined is beside the point. The truth, which in this case may appear stranger than fiction, is that markets operate in the sweet spot between scarcity and fear.
Those who stockpiled toilet paper are in no danger of running out, and many undoubtedly have way more rolls than they could ever hope to use in the course of several months. These individuals have successfully avoided catastrophe while stuffing up their fellow citizens in the process. The whole situation is quite literally a stinking mess. What is particularly tragic though, is that this story of scarcity and hoarding is a common one. It is the story of capitalism itself.
Let’s pretend that we are talking about housing rather than toilet paper for a moment. The same principles actually apply. Those who got into the property market early, or have the ability to enter into the housing market at this stage, are the big winners. By early, we are talking several generations ago when land was cheaper and people were far fewer. It was a time when savvy buyers could accumulate vast portfolios. The payoff is that their children and grandchildren had to do very little to maintain the wealth that they inherited, other than continuing to extract value in the form of rent from the properties they owned.
This is Donald Trump’s story, and it is one of extreme privilege and exploitation. His critics are often appalled by his lack of empathy, but Trump appears to have no conception of caring for the poor precisely because he doesn’t have to. In a similar fashion, if you have a good stockpile of toilet paper, you’re likely not so worried about what everyone else in your neighborhood might be doing. You’re just looking out for number one, so you can continue to do your number twos in peace. Much like the run on toilet paper produced winners and losers by creating a situation of scarcity, so too does the housing market have the same effect.
Few can afford housing precisely because there has been a decades-long run on this commodity. The extension of the time scale makes it less obvious as to what is going on, but it is the exact same mechanism at play. Those who got into housing first have nothing to fear. They are not prone to the uncertainties that plague the experiences of those who lost out. Insecurity often comes in the form of inflated prices. While there have been examples of people trying to sell toilet paper at exorbitant prices on eBay, so far the demand has not matches sellers’ exploitative expectations. Housing is another matter, where those who did not get in early must pay inflated prices, subject themselves to an ongoing extraction of their means in the form of rent, or find themselves homeless.
The fact that there are fistfights in grocery stores is the tip of the iceberg in terms of the desperation that a populace can express when placed in a context of crisis. Violence becomes inevitable, which is a terrifying thought when we recognize that housing is a systemic crisis. On the one hand people turning on each other is a reflection of an individualist society, a cultural understanding that only emboldens the wealthy. The poor seldom form solidarities that encourage them to turn on their oppressors by organizing events like rent strikes. They are too busy fighting each other over scraps to make ends meet.
Who does hoarding hurt? The answer should be clear. Whether in housing or in toilet paper, it is poor people and working families living paycheck-to-paycheck who are worst affected. They can’t afford to stock up on commodities like toilet paper because they are continually paying rent so that they can have access to the most basic, and yet most hoarded commodity of all: housing.
The toilet paper apocalypse is already prompting people to reconsider their strategies for managing their bodily needs in ways that do not fall prey to further hoarding, paying huge ransoms, or resorting to violence. There is, for example, a lot of discussion on social media about the benefits of bidets. While responding to a shortage of toilet paper might seem trivial in the grand scheme of capitalism, it has provided us with a small glimpse into what it means to explore other ways of being in the world. In the context of housing, such experimentation comes in the form of cooperatives, intergenerational living arrangements, and even housing squats.
There is a key difference between toilet paper and housing though. Toilet paper shortages are unlikely to be a prolonged phenomenon. The boom will soon bust. Major retailers have already begun placing limits on the amount people can buy. They have intervened in the market, recognizing that any supposed invocation of it being “free” is a dystopian fantasy that is detrimental to the community as a whole. The housing situation, on the other hand, is a protracted affair, and one that leaves many people out in the cold. It is not going to fix itself, and successive governments all around the world have proven that they are unwilling to regulate in ways that are equitable. In the face of such ineffectuality and inequality, the question then becomes: how much shit are people willing to take?
Those who stockpiled toilet paper are in no danger of running out, and many undoubtedly have way more rolls than they could ever hope to use in the course of several months. These individuals have successfully avoided catastrophe while stuffing up their fellow citizens in the process. The whole situation is quite literally a stinking mess. What is particularly tragic though, is that this story of scarcity and hoarding is a common one. It is the story of capitalism itself.
Let’s pretend that we are talking about housing rather than toilet paper for a moment. The same principles actually apply. Those who got into the property market early, or have the ability to enter into the housing market at this stage, are the big winners. By early, we are talking several generations ago when land was cheaper and people were far fewer. It was a time when savvy buyers could accumulate vast portfolios. The payoff is that their children and grandchildren had to do very little to maintain the wealth that they inherited, other than continuing to extract value in the form of rent from the properties they owned.
This is Donald Trump’s story, and it is one of extreme privilege and exploitation. His critics are often appalled by his lack of empathy, but Trump appears to have no conception of caring for the poor precisely because he doesn’t have to. In a similar fashion, if you have a good stockpile of toilet paper, you’re likely not so worried about what everyone else in your neighborhood might be doing. You’re just looking out for number one, so you can continue to do your number twos in peace. Much like the run on toilet paper produced winners and losers by creating a situation of scarcity, so too does the housing market have the same effect.
Few can afford housing precisely because there has been a decades-long run on this commodity. The extension of the time scale makes it less obvious as to what is going on, but it is the exact same mechanism at play. Those who got into housing first have nothing to fear. They are not prone to the uncertainties that plague the experiences of those who lost out. Insecurity often comes in the form of inflated prices. While there have been examples of people trying to sell toilet paper at exorbitant prices on eBay, so far the demand has not matches sellers’ exploitative expectations. Housing is another matter, where those who did not get in early must pay inflated prices, subject themselves to an ongoing extraction of their means in the form of rent, or find themselves homeless.
The fact that there are fistfights in grocery stores is the tip of the iceberg in terms of the desperation that a populace can express when placed in a context of crisis. Violence becomes inevitable, which is a terrifying thought when we recognize that housing is a systemic crisis. On the one hand people turning on each other is a reflection of an individualist society, a cultural understanding that only emboldens the wealthy. The poor seldom form solidarities that encourage them to turn on their oppressors by organizing events like rent strikes. They are too busy fighting each other over scraps to make ends meet.
Who does hoarding hurt? The answer should be clear. Whether in housing or in toilet paper, it is poor people and working families living paycheck-to-paycheck who are worst affected. They can’t afford to stock up on commodities like toilet paper because they are continually paying rent so that they can have access to the most basic, and yet most hoarded commodity of all: housing.
The toilet paper apocalypse is already prompting people to reconsider their strategies for managing their bodily needs in ways that do not fall prey to further hoarding, paying huge ransoms, or resorting to violence. There is, for example, a lot of discussion on social media about the benefits of bidets. While responding to a shortage of toilet paper might seem trivial in the grand scheme of capitalism, it has provided us with a small glimpse into what it means to explore other ways of being in the world. In the context of housing, such experimentation comes in the form of cooperatives, intergenerational living arrangements, and even housing squats.
There is a key difference between toilet paper and housing though. Toilet paper shortages are unlikely to be a prolonged phenomenon. The boom will soon bust. Major retailers have already begun placing limits on the amount people can buy. They have intervened in the market, recognizing that any supposed invocation of it being “free” is a dystopian fantasy that is detrimental to the community as a whole. The housing situation, on the other hand, is a protracted affair, and one that leaves many people out in the cold. It is not going to fix itself, and successive governments all around the world have proven that they are unwilling to regulate in ways that are equitable. In the face of such ineffectuality and inequality, the question then becomes: how much shit are people willing to take?
Late-stage capitalism primed us for this pandemic
A decimated welfare state and a government that serves only the rich created the perfect conditions for coronavirus
BOB HENNELLY - salon
MARCH 15, 2020 12:00PM (UTC)
No, this not a bad dream.
You really did just wake up in these "great" United States to find that no matter where you live, your freedom of movement is now constricted. Not by the military, but by the fear of the invisible — a virus you never heard of before it shackled you and your family in a form of self-imposed lockdown.
The power dynamic here is merely a biological progression of what we feel when some malignant cyber-force zeros in on our laptop computer and takes control of it, holding us hostage.
If you are a regular consumer of the corporate news media this unprecedented national public health crisis is being covered through the partisan prism over the incompetence and malevolence of the current occupant of the Oval Office, Donald Trump.
What is being avoided meticulously is any broader and essential discussion about how this precarious planetary moment is a gift to us from late-stage vulture capitalism, which rents our national government as it subordinates the accumulation of wealth over every other human endeavor — including public health.
To start the coronavirus meltdown narrative with Trump's efforts to deliberately play down the risks we faced, which hobbled the U.S. response and will lead to potentially thousands of deaths, is to miss the reality that this systemic failure has been decades in the making.
Subjugation of labor
As the concentration of wealth accelerated and the income gap opened up to a canyon, the balance of political power tilted increasingly to the forces of capital, costing organized labor its leverage. Over that time the world was increasingly made safer for U.S. multinationals who successfully played labor markets off of each other as they captured the regulatory and taxation regimes of sovereign nations.
Everything was measured and governed by what encouraged economic growth and the amassing of wealth. Other vital spheres, from the environment to the public health, became secondary to the private pursuit of profit. Consider how hard it was to overcome the entrenched interests of the tobacco industry to provide the public health warnings on cigarettes.
After the Second World War in the early fifties, over a third of the U.S. workforce was represented by a labor union. Though unions have had their issues with corruption, on the whole they offer countervailing pressure to the potential predations of capitalism.
By the time President Reagan fired all of the Air Traffic Controllers (PATCO) in 1981, organized labor represented just a fifth of American workers. By 2019, it was just barely over 10 percent.
What has followed as a consequence is the massive growth of a contingent workforce hovering by the phone or checking their email to see if they have a "gig" or work for the day. This ability of capital to so greatly limit its social contract with workers creates a race to the bottom and leaves tens of millions without health care, unemployment or disability insurance.
It also puts employers and small businesses at a distinct competitive disadvantage if they choose to provide those basic benefits to their employees.
This is where there is an intersection with labor's marginal circumstance and our current national crisis —in which so many Americans will hesitate to get tested for coronavirus or stay home if they are sick. Millions upon millions of Americans cannot afford the expense or the loss of wages; they have absolutely no safety net in the event the test comes back positive and they are sidelined without work for 14 days, much less left with a hospital bill.
The essential role of labor unions as a countervailing pressure against the predations of unfettered capital is most clearly apparent in the airline industry, which is ground zero for many pandemics including this one.
Unions in the public interest
John Samuelsen is the president of the Transport Workers Union International (TWU) that represents 150,000 members in the airline, railroad, transit, university, utilities and service sector.
Last week, TWU had to back up the decision by a flight crew for a major national air carrier to refuse the orders they were given to go right back to work after they had successfully removed a passenger who had disclosed to crew after his flight landed that he had the coronavirus.
As reported by the Daily News, a Long Island man flew from New York to Florida while he had a test pending for the coronavirus. Upon landing in West Palm Beach, he got the call informing him of his status.
"Our crew facilitated the passenger's removal in a very sophisticated way that limited everyone's potential exposure out the back door of the plane with the help of medical professionals that escorted him off the flight," said Samuelsen. "But the crew was ordered back to work by the air carrier to crew up another flight and they rightfully refused because they knew they were now potentially carriers of the virus."
He continued. "They were still in shock and understandably concerned about their own health and when they were ordered to get back on another flight, they said no. The carrier had said the crew could work because they were asymptomatic and that's when the union stepped in."
Samuelsen recounted how, after the union's intervention, elected officials called the air carrier, as did the Daily News.
"We negotiated a package for the crew that guaranteed their economic security with paid sick leave. Ironically, in the process of doing what was right by our members we helped preserve the public health, which was the original goal of the flight crew. Without the union. we would have had another few planes loads of hundreds of unsuspecting members of the public exposed to the virus."
As Samuelsen sees it, proposals that were considered as radical ideas pre-coronavirus, like Senator Bernie Sander's universal health care plan or former presidential candidate Andrew Yang's proposal for a universal basic income, are no longer radical.
"Can you imagine how much less anxiety all American workers would feel right now if things like this were already in place," he said. "It would be a 365 day-a-year economic stimulus plan."
Public health versus private profit?
Such a realignment of the balance of power, where private capital's interest and the public interest could be potentially reconciled in the face of something like our current existential crisis, is already happening elsewhere on the planet.
Professor Richard Wolff is an economist who teaches at the New School. He says there is no better example of harmonizing these tensions then in China and South Korea, which have gotten their public and private sectors to collaborate in the face of the current pandemic.
"Look at the percentage of the population that has been tested in these two places and you can see the results of the close coordination between the government and the private sector which we don't have, and our testing numbers reflect that," he said.
Wolff says that the current crisis brings into sharp relief the fundamental divergence between American capitalism and the public health. "There was just no profit incentive for the big drug companies to produce a million of these kinds of tests," he added.
He continued: "Looking at the Center for Disease Control's own press releases we see as of Jan. 17 they publicly acknowledged they were following this virus in China . . . . what we have seen since is this ad hoc, last-minute, under-the-gun response with one eye looking out for the interests of the profit making medical industrial complex and the other eye looking out for the re-election of the President."
If there is a silver lining in the coronavirus moment, it is that it can serve as a teachable moment for our entire civilization. It can help us muster the will to make the lifestyle and economic changes required to face up to the challenge of global warming.
You really did just wake up in these "great" United States to find that no matter where you live, your freedom of movement is now constricted. Not by the military, but by the fear of the invisible — a virus you never heard of before it shackled you and your family in a form of self-imposed lockdown.
The power dynamic here is merely a biological progression of what we feel when some malignant cyber-force zeros in on our laptop computer and takes control of it, holding us hostage.
If you are a regular consumer of the corporate news media this unprecedented national public health crisis is being covered through the partisan prism over the incompetence and malevolence of the current occupant of the Oval Office, Donald Trump.
What is being avoided meticulously is any broader and essential discussion about how this precarious planetary moment is a gift to us from late-stage vulture capitalism, which rents our national government as it subordinates the accumulation of wealth over every other human endeavor — including public health.
To start the coronavirus meltdown narrative with Trump's efforts to deliberately play down the risks we faced, which hobbled the U.S. response and will lead to potentially thousands of deaths, is to miss the reality that this systemic failure has been decades in the making.
Subjugation of labor
As the concentration of wealth accelerated and the income gap opened up to a canyon, the balance of political power tilted increasingly to the forces of capital, costing organized labor its leverage. Over that time the world was increasingly made safer for U.S. multinationals who successfully played labor markets off of each other as they captured the regulatory and taxation regimes of sovereign nations.
Everything was measured and governed by what encouraged economic growth and the amassing of wealth. Other vital spheres, from the environment to the public health, became secondary to the private pursuit of profit. Consider how hard it was to overcome the entrenched interests of the tobacco industry to provide the public health warnings on cigarettes.
After the Second World War in the early fifties, over a third of the U.S. workforce was represented by a labor union. Though unions have had their issues with corruption, on the whole they offer countervailing pressure to the potential predations of capitalism.
By the time President Reagan fired all of the Air Traffic Controllers (PATCO) in 1981, organized labor represented just a fifth of American workers. By 2019, it was just barely over 10 percent.
What has followed as a consequence is the massive growth of a contingent workforce hovering by the phone or checking their email to see if they have a "gig" or work for the day. This ability of capital to so greatly limit its social contract with workers creates a race to the bottom and leaves tens of millions without health care, unemployment or disability insurance.
It also puts employers and small businesses at a distinct competitive disadvantage if they choose to provide those basic benefits to their employees.
This is where there is an intersection with labor's marginal circumstance and our current national crisis —in which so many Americans will hesitate to get tested for coronavirus or stay home if they are sick. Millions upon millions of Americans cannot afford the expense or the loss of wages; they have absolutely no safety net in the event the test comes back positive and they are sidelined without work for 14 days, much less left with a hospital bill.
The essential role of labor unions as a countervailing pressure against the predations of unfettered capital is most clearly apparent in the airline industry, which is ground zero for many pandemics including this one.
Unions in the public interest
John Samuelsen is the president of the Transport Workers Union International (TWU) that represents 150,000 members in the airline, railroad, transit, university, utilities and service sector.
Last week, TWU had to back up the decision by a flight crew for a major national air carrier to refuse the orders they were given to go right back to work after they had successfully removed a passenger who had disclosed to crew after his flight landed that he had the coronavirus.
As reported by the Daily News, a Long Island man flew from New York to Florida while he had a test pending for the coronavirus. Upon landing in West Palm Beach, he got the call informing him of his status.
"Our crew facilitated the passenger's removal in a very sophisticated way that limited everyone's potential exposure out the back door of the plane with the help of medical professionals that escorted him off the flight," said Samuelsen. "But the crew was ordered back to work by the air carrier to crew up another flight and they rightfully refused because they knew they were now potentially carriers of the virus."
He continued. "They were still in shock and understandably concerned about their own health and when they were ordered to get back on another flight, they said no. The carrier had said the crew could work because they were asymptomatic and that's when the union stepped in."
Samuelsen recounted how, after the union's intervention, elected officials called the air carrier, as did the Daily News.
"We negotiated a package for the crew that guaranteed their economic security with paid sick leave. Ironically, in the process of doing what was right by our members we helped preserve the public health, which was the original goal of the flight crew. Without the union. we would have had another few planes loads of hundreds of unsuspecting members of the public exposed to the virus."
As Samuelsen sees it, proposals that were considered as radical ideas pre-coronavirus, like Senator Bernie Sander's universal health care plan or former presidential candidate Andrew Yang's proposal for a universal basic income, are no longer radical.
"Can you imagine how much less anxiety all American workers would feel right now if things like this were already in place," he said. "It would be a 365 day-a-year economic stimulus plan."
Public health versus private profit?
Such a realignment of the balance of power, where private capital's interest and the public interest could be potentially reconciled in the face of something like our current existential crisis, is already happening elsewhere on the planet.
Professor Richard Wolff is an economist who teaches at the New School. He says there is no better example of harmonizing these tensions then in China and South Korea, which have gotten their public and private sectors to collaborate in the face of the current pandemic.
"Look at the percentage of the population that has been tested in these two places and you can see the results of the close coordination between the government and the private sector which we don't have, and our testing numbers reflect that," he said.
Wolff says that the current crisis brings into sharp relief the fundamental divergence between American capitalism and the public health. "There was just no profit incentive for the big drug companies to produce a million of these kinds of tests," he added.
He continued: "Looking at the Center for Disease Control's own press releases we see as of Jan. 17 they publicly acknowledged they were following this virus in China . . . . what we have seen since is this ad hoc, last-minute, under-the-gun response with one eye looking out for the interests of the profit making medical industrial complex and the other eye looking out for the re-election of the President."
If there is a silver lining in the coronavirus moment, it is that it can serve as a teachable moment for our entire civilization. It can help us muster the will to make the lifestyle and economic changes required to face up to the challenge of global warming.
no wonder they hate sanders!!!
Filings show top healthcare CEOs raked in combined $300 million in 2019
March 6, 2020
By Jake Johnson, Common Dreams - raw story
Annual financial filings compiled by Axios Friday show that 10 of the nation’s top healthcare CEOs took home more than $300 million in combined pay in 2019, compensation that Sen. Bernie Sanders denounced as “outrageous” and indicative of the industry’s greed.
“While Americans continue to pay, by far, the highest prices in the world for prescription drugs, the top 10 healthcare CEOs made over $300 million in compensation last year,” tweeted Sanders, a 2020 Democratic presidential candidate.
“We will end the greed of the pharmaceutical industry and pass Medicare for All,” added Sanders, who has been targeted by industry-backed ad campaigns against universal healthcare.
Bernie Sanders✔
@BernieSanders
While Americans continue to pay, by far, the highest prices in the world for prescription drugs, the top 10 health cares CEOs made over $300 million in compensation last year.
Outrageous.
We will end the greed of the pharmaceutical industry and pass Medicare for All. https://twitter.com/axios/status/1235899176665239552 …
Axios✔
@axios
The CEOs of 10 major health care companies that filed disclosures outlining executive pay in 2019 made more than $300 million collectively. https://www.axios.com/health-care-executive-pay-iqvia-intuitive-surgical-2019-cdb093fe-ac84-492a-8885-9977af6c6079.html?utm_source=twitter&utm_medium=social&utm_campaign=organic …
9:45 AM - Mar 6, 2020
Axios reported that the executives’ eye-popping compensation in 2019 “mostly came from large stock gains.”
Ari Bousbib, CEO of pharmaceutical data firm IQVIA, raked in more than $104 million in 2019, according to Axios‘ healthcare executive compensation tracker. Gary Guthart, CEO of clinical technology firm Intuitive Surgical CEO, brought home nearly $50.5 million. David Ricks, chief executive at pharmaceutical giant Eli Lilly, made over $30 million.
“The healthcare system is a firehose of spending,” Axios noted, “and a good chunk of that money always makes its way to the top.”
“While Americans continue to pay, by far, the highest prices in the world for prescription drugs, the top 10 healthcare CEOs made over $300 million in compensation last year,” tweeted Sanders, a 2020 Democratic presidential candidate.
“We will end the greed of the pharmaceutical industry and pass Medicare for All,” added Sanders, who has been targeted by industry-backed ad campaigns against universal healthcare.
Bernie Sanders✔
@BernieSanders
While Americans continue to pay, by far, the highest prices in the world for prescription drugs, the top 10 health cares CEOs made over $300 million in compensation last year.
Outrageous.
We will end the greed of the pharmaceutical industry and pass Medicare for All. https://twitter.com/axios/status/1235899176665239552 …
Axios✔
@axios
The CEOs of 10 major health care companies that filed disclosures outlining executive pay in 2019 made more than $300 million collectively. https://www.axios.com/health-care-executive-pay-iqvia-intuitive-surgical-2019-cdb093fe-ac84-492a-8885-9977af6c6079.html?utm_source=twitter&utm_medium=social&utm_campaign=organic …
9:45 AM - Mar 6, 2020
Axios reported that the executives’ eye-popping compensation in 2019 “mostly came from large stock gains.”
Ari Bousbib, CEO of pharmaceutical data firm IQVIA, raked in more than $104 million in 2019, according to Axios‘ healthcare executive compensation tracker. Gary Guthart, CEO of clinical technology firm Intuitive Surgical CEO, brought home nearly $50.5 million. David Ricks, chief executive at pharmaceutical giant Eli Lilly, made over $30 million.
“The healthcare system is a firehose of spending,” Axios noted, “and a good chunk of that money always makes its way to the top.”
AT&T To Lay Off More Workers And Cut Costs By Tens Of Billions—Those Tax Breaks Are Working!
AT&T has reportedly been able to save $42 billion because of the GOP tax break, but has also been making big cuts and layoffs since 2018. It has also been slowing down spending on infrastructure during that time.
By Walter Einenkel - crooks & liars
3/05/20 5:00pm
Remember those luxurious tax cuts the Republican Party gifted the tippy-top Americans and corporations? The one that has helped to blow out our deficit while allowing top companies to basically pay nothing in taxes? Of course you do! I mean, you are probably swimming in job opportunities and wage increases as we speak! That was the promise from the GOP and their wealthy overlords, overlords such as telecommunications giant AT&T. AT&T has reportedly been able to save $42 billion because of the GOP tax break, but has also been making big cuts and layoffs since 2018. It has also been slowing down spending on infrastructure during that time.
This, of course, is the opposite of what the American public was promised by big businesses and their Republican cronies. A big part of the issue for AT&T is the debt created by its acquisitions of DirectTV and Time Warner Inc. Those acquisitions haven’t worked out the way AT&T had hoped, and the company has begun moving into the online-only streaming sector and away from the satellite services that DirectTV offers. The debt acquired by AT&T, according to Ars Technica, is almost $200 billion, and the telecom has been cutting costs and jobs ever since to get out from under it.
On Tuesday, during an investors event at Morgan Stanley, AT&T president and COO John Stankey told the audience that part of the exciting new moves for the company will be cutting costs. “In the near term, things that fall in that short-term bucket, I already talked to you about some of them, some of the headcount rationalization work we're doing on overhead, some of the benefit restructuring that we've done that we've already communicated out that get us a good way to some of our objectives this year.” “Headcount rationalization” is a brand new way of saying “firing people.”
This, of course, is the opposite of what the American public was promised by big businesses and their Republican cronies. A big part of the issue for AT&T is the debt created by its acquisitions of DirectTV and Time Warner Inc. Those acquisitions haven’t worked out the way AT&T had hoped, and the company has begun moving into the online-only streaming sector and away from the satellite services that DirectTV offers. The debt acquired by AT&T, according to Ars Technica, is almost $200 billion, and the telecom has been cutting costs and jobs ever since to get out from under it.
On Tuesday, during an investors event at Morgan Stanley, AT&T president and COO John Stankey told the audience that part of the exciting new moves for the company will be cutting costs. “In the near term, things that fall in that short-term bucket, I already talked to you about some of them, some of the headcount rationalization work we're doing on overhead, some of the benefit restructuring that we've done that we've already communicated out that get us a good way to some of our objectives this year.” “Headcount rationalization” is a brand new way of saying “firing people.”
The real global threat to 21st century freedom is authoritarian capitalism — not democratic socialism
Peter Bloom / Common Dreams - alternet
March 1, 2020
Only days after firmly establishing himself as the clear Democratic nominee frontrunner with a decisive victory in the Nevada caucus last week, Bernie Sanders found himself mired in a fresh controversy. In a widely watched and shared primetime interview he appeared to partially support recently deceased former Cuban leader Fidel Castro, condemning his authoritarianism while praising his mass literacy campaign and health program. Whatever the historical veracity of these arguments, it raised fears again of Sanders supposed “communist” sympathies as a self-described “democratic socialist.”
The onslaught by Republicans and establishment Democrats was as swift as it was predictable. Florida Democrats were particularly strong in their criticisms. Rep. Debbie Mucarsel-Powel (D-Fla.) tweeted “as the first South American immigrant member of Congress who proudly represents thousands of Cuban Americans, I find Senator Bernie Sanders’ comments on Castro’s Cuba absolutely unacceptable.”
The larger worry is that this will be a preview of the general election if Sanders is the nominee. According to conventional thinking, the chance to stop Trump will be halted in its tracks by a Republican-led “red scare.” However, it also offers Sanders an opportunity to fundamentally change the debate to show that the biggest threat to freedom is capitalist oligarchy and militarism not progressives or socialism.
Beyond Damage Control
The obvious and understandable first instinct of the Sanders campaign is to go into damage control mode. In a town hall following the interview, Sanders reiterated once again his rejection of authoritarianism of all types while still highlighting the benefits of mass literacy campaigns—proclaiming “truth is truth.” This commitment to freedom is backed up by his 100% legislative score from the ACLU and the fact that he is the only candidate to completely reject the Patriot Act.
Further, Sanders has sought to shift the discussion into a larger one about the dangers of right-wing authoritarianism, often backed by U.S. imperialism past and present. At the last debate before the South Caroline primary, he declared: “Occasionally it might be good idea to be honest about American foreign policy, and that includes the fact that America has overthrown governments all over the world in Chile and Guatemala in Iran.” While the effects of this tactic remains ambiguous, it represents a substantive and strategically important attempt to put into question the actual cause of authoritarianism both at home and abroad.
It is almost gospel in mainstream U.S. political discourse that socialism and Communism are the greatest threats to liberty. Yet the actual historical record suggests otherwise. While recognizing the death and misery caused by past totalitarian Communist regimes, too often ignored is the role of the free market for spreading oligarchy, dictatorship, and illiberalism across the world. If Sanders wants to win the nomination and generation election, he must go beyond damage control and show progressive values and his brand of democratic socialism is the best defense against such tyranny.
The Global Threat of Authoritarian Capitalism
A huge problem, in this respect, is the narrowness of traditional U.S. popular understandings of authoritarianism and fascism—and the distinctions between such terms as socialism, democratic socialism, and communism. Mounting fears of a Trump dictatorship, for instance, have brought renewed historical attention to the rise of Hitler and the Nazis. Tellingly, the emphasis has been on the increase in mass intolerance (especially anti-Semitism) and even the “authoritarian personality” both of which are thought to have resonances with the present day situation. While all these factors had a role to play, conveniently forgotten is how economic and social elites supported Nazism to protect their own wealth and status.
This holds strong lessons for our own times. The encroachment of fascism is being enabled through the funding and at times direct political support of the 1% defending their privileges by seemingly any means necessary. The are willing to do whatever they can to protect the upward redistribution of wealth to the rich following decades of neoliberalism. Indeed, we are now confronted with the troubling prospect of a U.S. election between two billionaires—one who has mused that it might be nice to be “President for Life” and another whose campaign merchandise trumpets the need to “bring in the boss.”
Fundamentally, it points to the wider danger corporations and the very wealthy pose to the very survival of democracy and civil liberties. Internally, they have eroded democratic institutions such as union based collective bargaining and idolised the top down dictator like leadership of the “CEO politician”. The scourge of private prisons, moreover, reveals the desire by these conglomerates to profit off the lessening of our freedom and human rights. Internationally, the U.S. continues to undermine democracies that do not serve its corporate interests ranging from Honduras to the Ukraine to Haiti.
This speaks to the broader rise of the 21st century authoritarian capitalism. It reveals the willingness and enhanced ability for governments and corporations to work together to defend the “free market” against social unrest and demands for greater equality and justice.
The Real Danger to Freedom
Again and again Sanders is being attacked as a socialist and by association a friend of totalitarianism. The question instead should be how corporate-funded Democrats and Republicans will be able to stave off the threat of “authoritarian capitalism” despite being primarily funded by the very autocrats who most benefit from and promote it. Indeed, how can they answer for their support for a market system that seems to incetivize and without serious socialist safeguards leads naturally too increased economic repression, political oppression, and military intervention?
To his credit, Sanders has in the past laid out his own foreign policy division that explicitly stresses the global danger of oligarchy to democracy. In a 2017 speech he proclaimed:
Inequality, corruption, oligarchy and authoritarianism are inseparable. They must be understood as part of the same system, and fought in the same way. Around the world we have witnessed the rise of demagogues who once in power use their positions to loot the state of its resources. These kleptocrats, like Putin in Russia, use divisiveness and abuse as a tool for enriching themselves and those loyal to them.
This is the precise argument he must continue to make not just for his own political survival but democracy and freedom worldwide. The real danger to freedom in the 21st century is authoritarian capitalism not democratic socialism and this election is a choice once more for a new generation between “socialism and barbarianism.”
The onslaught by Republicans and establishment Democrats was as swift as it was predictable. Florida Democrats were particularly strong in their criticisms. Rep. Debbie Mucarsel-Powel (D-Fla.) tweeted “as the first South American immigrant member of Congress who proudly represents thousands of Cuban Americans, I find Senator Bernie Sanders’ comments on Castro’s Cuba absolutely unacceptable.”
The larger worry is that this will be a preview of the general election if Sanders is the nominee. According to conventional thinking, the chance to stop Trump will be halted in its tracks by a Republican-led “red scare.” However, it also offers Sanders an opportunity to fundamentally change the debate to show that the biggest threat to freedom is capitalist oligarchy and militarism not progressives or socialism.
Beyond Damage Control
The obvious and understandable first instinct of the Sanders campaign is to go into damage control mode. In a town hall following the interview, Sanders reiterated once again his rejection of authoritarianism of all types while still highlighting the benefits of mass literacy campaigns—proclaiming “truth is truth.” This commitment to freedom is backed up by his 100% legislative score from the ACLU and the fact that he is the only candidate to completely reject the Patriot Act.
Further, Sanders has sought to shift the discussion into a larger one about the dangers of right-wing authoritarianism, often backed by U.S. imperialism past and present. At the last debate before the South Caroline primary, he declared: “Occasionally it might be good idea to be honest about American foreign policy, and that includes the fact that America has overthrown governments all over the world in Chile and Guatemala in Iran.” While the effects of this tactic remains ambiguous, it represents a substantive and strategically important attempt to put into question the actual cause of authoritarianism both at home and abroad.
It is almost gospel in mainstream U.S. political discourse that socialism and Communism are the greatest threats to liberty. Yet the actual historical record suggests otherwise. While recognizing the death and misery caused by past totalitarian Communist regimes, too often ignored is the role of the free market for spreading oligarchy, dictatorship, and illiberalism across the world. If Sanders wants to win the nomination and generation election, he must go beyond damage control and show progressive values and his brand of democratic socialism is the best defense against such tyranny.
The Global Threat of Authoritarian Capitalism
A huge problem, in this respect, is the narrowness of traditional U.S. popular understandings of authoritarianism and fascism—and the distinctions between such terms as socialism, democratic socialism, and communism. Mounting fears of a Trump dictatorship, for instance, have brought renewed historical attention to the rise of Hitler and the Nazis. Tellingly, the emphasis has been on the increase in mass intolerance (especially anti-Semitism) and even the “authoritarian personality” both of which are thought to have resonances with the present day situation. While all these factors had a role to play, conveniently forgotten is how economic and social elites supported Nazism to protect their own wealth and status.
This holds strong lessons for our own times. The encroachment of fascism is being enabled through the funding and at times direct political support of the 1% defending their privileges by seemingly any means necessary. The are willing to do whatever they can to protect the upward redistribution of wealth to the rich following decades of neoliberalism. Indeed, we are now confronted with the troubling prospect of a U.S. election between two billionaires—one who has mused that it might be nice to be “President for Life” and another whose campaign merchandise trumpets the need to “bring in the boss.”
Fundamentally, it points to the wider danger corporations and the very wealthy pose to the very survival of democracy and civil liberties. Internally, they have eroded democratic institutions such as union based collective bargaining and idolised the top down dictator like leadership of the “CEO politician”. The scourge of private prisons, moreover, reveals the desire by these conglomerates to profit off the lessening of our freedom and human rights. Internationally, the U.S. continues to undermine democracies that do not serve its corporate interests ranging from Honduras to the Ukraine to Haiti.
This speaks to the broader rise of the 21st century authoritarian capitalism. It reveals the willingness and enhanced ability for governments and corporations to work together to defend the “free market” against social unrest and demands for greater equality and justice.
The Real Danger to Freedom
Again and again Sanders is being attacked as a socialist and by association a friend of totalitarianism. The question instead should be how corporate-funded Democrats and Republicans will be able to stave off the threat of “authoritarian capitalism” despite being primarily funded by the very autocrats who most benefit from and promote it. Indeed, how can they answer for their support for a market system that seems to incetivize and without serious socialist safeguards leads naturally too increased economic repression, political oppression, and military intervention?
To his credit, Sanders has in the past laid out his own foreign policy division that explicitly stresses the global danger of oligarchy to democracy. In a 2017 speech he proclaimed:
Inequality, corruption, oligarchy and authoritarianism are inseparable. They must be understood as part of the same system, and fought in the same way. Around the world we have witnessed the rise of demagogues who once in power use their positions to loot the state of its resources. These kleptocrats, like Putin in Russia, use divisiveness and abuse as a tool for enriching themselves and those loyal to them.
This is the precise argument he must continue to make not just for his own political survival but democracy and freedom worldwide. The real danger to freedom in the 21st century is authoritarian capitalism not democratic socialism and this election is a choice once more for a new generation between “socialism and barbarianism.”
opinion: The Disaster of Utopian Engineering
Chris Hedges - truthdig
...The ideology of neoliberalism, which makes no economic sense and requires a willful ignorance of social and economic history, is the latest iteration of utopian projects. It posits that human society achieves its apex when individual entrepreneurial actions are free from government constraints. Society and culture should be dictated by the primacy of property rights, open trade — which sends manufacturing jobs to sweatshops in China and the global south and permits the flow of money across borders — and unfettered global markets. Labor and product markets should be deregulated and freed from government oversight. Global financiers should be given control of the economies of nation-states. The role of the state should be reduced to ensuring the quality and integrity of money, along with internal and external security, and to privatizing control of land, water, public utilities, education and government services such as intelligence and often the military, prisons, health care and the management of natural resources. Neoliberalism turns capitalism into a religious idol.
This utopian vision of the market, of course, bears no relationship to its reality. Capitalists hate free markets. They seek to control markets through mergers and acquisitions, buying out the competition. They saturate the culture with advertising to manipulate public tastes and consumption. They engage in price fixing. They build unassailable monopolies. They carry out schemes, without checks or oversight, of wild speculation, predation, fraud and theft. They enrich themselves through stock buybacks, Ponzi schemes, structured asset destruction through inflation, asset stripping and the imposition of crippling debt peonage on the public. In the United States, they saturate the electoral process with money, buying the allegiance of elected officials from the two ruling parties to legislate tax boycotts, demolish regulations and further consolidate their wealth and power.
These corporate capitalists spend hundreds of millions of dollars to fund organizations such as Business Roundtable and the Chamber of Commerce and think tanks such as The Heritage Foundation to sell the ideology to the public. They lavish universities with donations, as long as the universities pay fealty to the ruling ideology. They use their influence and wealth, as well as their ownership of media platforms, to transform the press into their mouthpiece. And they silence heretics or make it hard for them to find employment. Soaring stock values, rather than production, become the new measure of the economy. Everything is financialized and commodified.
These utopians mutilate the social fabric through deindustrialization, turning once-great manufacturing centers into decayed wastelands, and the middle and working class, the bulwark of any democracy, into a frustrated and enraged precariat. They “offshore” work, carry out massive layoffs and depress wages. They destroy unions. Neoliberalism — because it was always a class project and this was its goal — redistributes wealth upward. “Robbed of the protective covering of cultural institutions,” Karl Polanyi writes in his book “The Great Transformation,” human beings “perish from the effects of social exposure” and die as “victims of acute social dislocation.”
Neoliberalism, as a class project, is a brilliant success. Eight families now hold as much wealth as 50% of the world’s population. The world’s 500 richest people in 2019 added $12 trillion to their assets, while nearly half of all Americans had no savings and nearly 70% could not have come up with $1,000 in an emergency without going into debt. David Harvey calls this “accumulation by dispossession.” This neoliberal assault, antagonistic to all forms of social solidarity that put restraints on amassing capital, has obliterated the self-corrective democratic mechanisms that once made incremental and piecemeal reform possible. It has turned human beings and the natural world into commodities to be exploited until exhaustion or collapse. The ruling elites’ slavish devotion to corporate profit and the accumulation of wealth by the global oligarchy means they are unwilling or incapable of addressing perhaps the greatest existential crisis facing the human species — the climate emergency.
---
Unfettered capitalism, as Karl Marx pointed out, destroys the so-called free market. It is hostile to the values and traditions of a capitalist democracy. Capitalism’s final stage, Marx wrote, is marked by the pillage of the systems and structures that make capitalism possible. It is not capitalism at all. The arms industry, for example, with its official $612 billion defense authorization bill — a figure that ignores numerous other military expenditures tucked away in other budgets, masking the fact that our real expenditure on national security expenses is over $1 trillion a year — has gotten the government to commit to spending $348 billion over the next decade to modernize our nuclear weapons and build 12 new Ohio-class nuclear submarines, estimated at $8 billion each. We spend some $100 billion a year on intelligence —read surveillance — and 70% of that money goes to private contractors such as Booz Allen Hamilton, which gets 99% of its revenues from the U.S. government. We are the largest exporters of arms in the world.
The fossil fuel industry swallows up $5.3 trillion a year worldwide in hidden costs to keep burning fossil fuels, according to the International Monetary Fund. This money, the IMF notes, is in addition to the $492 billion in direct subsidies offered by governments around the world through write-offs, write-downs and land-use loopholes.
---
The pharmaceutical and insurance corporations that manage our for-profit health care industry extracted $812 billion from Americans in 2017. This represents more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. If we had a public health system, such as in Canada, it would save us $600 billion in costs in a single year, according to a report by Physicians for a National Health Plan. Health administration costs in 2017 were more than fourfold higher per capita in the U.S. than in Canada ($2,479 versus $551 per person), the group notes. Canada implemented a single-payer “Medicare for All” system in 1962. In 2017, Americans spent $844 per person on insurers’ overhead. Canadians spent $146.
Neoliberalism cannot be defended as more innovative or more efficient. It has not spread democracy, and by orchestrating unprecedented levels of income inequality and political stagnation has vomited up demagogues and authoritarian regimes that falsely promise vengeance against ruling elites who betrayed the people. Our democracy under this assault has been replaced with meaningless political theater.
As the academics Benjamin Page and Martin Gilens detailed in their exhaustive 2017 study “Democracy in America?”:
the best evidence indicates that the wishes of ordinary Americans [have] little or no impact on the making of federal government policy. Wealthy individuals and organized interest groups—especially business corporations—have … much more political clout. … [T]he general public [is] … virtually powerless. … The will of majorities is … thwarted by the affluent and the well-organized, who block popular policy proposals and enact special favors for themselves. … Majorities of Americans favor specific policies designed to deal with such problems as climate change, gun violence, an untenable immigration system, inadequate public schools, and crumbling bridges and highways. … Large majorities of America favor various programs to help provide jobs, increase wages, help the unemployed, provide universal medical insurance, ensure decent retirement pensions, and pay for such programs with progressive taxes. Most Americans also want to cut “corporate welfare.” Yet the wealthy, business groups, and structural gridlock have mostly blocked such new policies. …
This utopian vision of the market, of course, bears no relationship to its reality. Capitalists hate free markets. They seek to control markets through mergers and acquisitions, buying out the competition. They saturate the culture with advertising to manipulate public tastes and consumption. They engage in price fixing. They build unassailable monopolies. They carry out schemes, without checks or oversight, of wild speculation, predation, fraud and theft. They enrich themselves through stock buybacks, Ponzi schemes, structured asset destruction through inflation, asset stripping and the imposition of crippling debt peonage on the public. In the United States, they saturate the electoral process with money, buying the allegiance of elected officials from the two ruling parties to legislate tax boycotts, demolish regulations and further consolidate their wealth and power.
These corporate capitalists spend hundreds of millions of dollars to fund organizations such as Business Roundtable and the Chamber of Commerce and think tanks such as The Heritage Foundation to sell the ideology to the public. They lavish universities with donations, as long as the universities pay fealty to the ruling ideology. They use their influence and wealth, as well as their ownership of media platforms, to transform the press into their mouthpiece. And they silence heretics or make it hard for them to find employment. Soaring stock values, rather than production, become the new measure of the economy. Everything is financialized and commodified.
These utopians mutilate the social fabric through deindustrialization, turning once-great manufacturing centers into decayed wastelands, and the middle and working class, the bulwark of any democracy, into a frustrated and enraged precariat. They “offshore” work, carry out massive layoffs and depress wages. They destroy unions. Neoliberalism — because it was always a class project and this was its goal — redistributes wealth upward. “Robbed of the protective covering of cultural institutions,” Karl Polanyi writes in his book “The Great Transformation,” human beings “perish from the effects of social exposure” and die as “victims of acute social dislocation.”
Neoliberalism, as a class project, is a brilliant success. Eight families now hold as much wealth as 50% of the world’s population. The world’s 500 richest people in 2019 added $12 trillion to their assets, while nearly half of all Americans had no savings and nearly 70% could not have come up with $1,000 in an emergency without going into debt. David Harvey calls this “accumulation by dispossession.” This neoliberal assault, antagonistic to all forms of social solidarity that put restraints on amassing capital, has obliterated the self-corrective democratic mechanisms that once made incremental and piecemeal reform possible. It has turned human beings and the natural world into commodities to be exploited until exhaustion or collapse. The ruling elites’ slavish devotion to corporate profit and the accumulation of wealth by the global oligarchy means they are unwilling or incapable of addressing perhaps the greatest existential crisis facing the human species — the climate emergency.
---
Unfettered capitalism, as Karl Marx pointed out, destroys the so-called free market. It is hostile to the values and traditions of a capitalist democracy. Capitalism’s final stage, Marx wrote, is marked by the pillage of the systems and structures that make capitalism possible. It is not capitalism at all. The arms industry, for example, with its official $612 billion defense authorization bill — a figure that ignores numerous other military expenditures tucked away in other budgets, masking the fact that our real expenditure on national security expenses is over $1 trillion a year — has gotten the government to commit to spending $348 billion over the next decade to modernize our nuclear weapons and build 12 new Ohio-class nuclear submarines, estimated at $8 billion each. We spend some $100 billion a year on intelligence —read surveillance — and 70% of that money goes to private contractors such as Booz Allen Hamilton, which gets 99% of its revenues from the U.S. government. We are the largest exporters of arms in the world.
The fossil fuel industry swallows up $5.3 trillion a year worldwide in hidden costs to keep burning fossil fuels, according to the International Monetary Fund. This money, the IMF notes, is in addition to the $492 billion in direct subsidies offered by governments around the world through write-offs, write-downs and land-use loopholes.
---
The pharmaceutical and insurance corporations that manage our for-profit health care industry extracted $812 billion from Americans in 2017. This represents more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. If we had a public health system, such as in Canada, it would save us $600 billion in costs in a single year, according to a report by Physicians for a National Health Plan. Health administration costs in 2017 were more than fourfold higher per capita in the U.S. than in Canada ($2,479 versus $551 per person), the group notes. Canada implemented a single-payer “Medicare for All” system in 1962. In 2017, Americans spent $844 per person on insurers’ overhead. Canadians spent $146.
Neoliberalism cannot be defended as more innovative or more efficient. It has not spread democracy, and by orchestrating unprecedented levels of income inequality and political stagnation has vomited up demagogues and authoritarian regimes that falsely promise vengeance against ruling elites who betrayed the people. Our democracy under this assault has been replaced with meaningless political theater.
As the academics Benjamin Page and Martin Gilens detailed in their exhaustive 2017 study “Democracy in America?”:
the best evidence indicates that the wishes of ordinary Americans [have] little or no impact on the making of federal government policy. Wealthy individuals and organized interest groups—especially business corporations—have … much more political clout. … [T]he general public [is] … virtually powerless. … The will of majorities is … thwarted by the affluent and the well-organized, who block popular policy proposals and enact special favors for themselves. … Majorities of Americans favor specific policies designed to deal with such problems as climate change, gun violence, an untenable immigration system, inadequate public schools, and crumbling bridges and highways. … Large majorities of America favor various programs to help provide jobs, increase wages, help the unemployed, provide universal medical insurance, ensure decent retirement pensions, and pay for such programs with progressive taxes. Most Americans also want to cut “corporate welfare.” Yet the wealthy, business groups, and structural gridlock have mostly blocked such new policies. …
Influence of Wall Street Donors Has Exploded in Decade Since “Citizens United”
BY Tatyana Monnay, Center for Responsive Politics - truthout
PUBLISHED January 27, 2020
The 2010 landmark ruling in Citizens United amplified the influence of deep-pocketed Wall Street stockbrokers and private investors in federal politics and rewarded them with greater political purchasing power.
The securities and investment industry gave more to outside spending groups than any other industry in each of the last four full election cycles. As big money continues to take advantage of current campaign finance regulations, the financial industry remains at the top as the 2020 election gets underway.
Since 2012, the industry has contributed at least $80 million to outside groups in every cycle, more than half of that coming from a small group of individuals. Before the Supreme Court decision, the industry never spent more than $17.8 million in any election cycle.
The ruling in Citizens United allowed corporations and labor unions to spend unlimited sums on independent expenditures. Most major corporations have not taken advantage of their increased abilities since the ruling, but ultra-wealthy political insiders give multi-million gifts to outside groups born out of the ruling such as super PACs.
Campaign finance reformers have criticized the ruling for giving wealthy elites more influence over elections that cater to their personal issues, rather than focusing on issues that are relevant to working-class voters who represent the majority of the electorate.
In 2016, investors and hedge fund managers gave nearly $350 million to outside groups. Big money contributions from wealthy individuals are more important than ever, especially at the presidential level, and it’s not surprising that Wall Street investors who have million-dollar incomes are at the top of the pack, according to Michael Kang, professor of law at Northwestern University.
“Wall Street thinks it’s important to influence politics, to have the right policy makers for them to make the money that they are accustomed to making,” Kang said.
Over the last decade, a consistent group of wealthy investors contributed to outside groups, including George Soros of Soros Fund Management, Ken Griffin of Citadel and Stephen Schwarzman of Blackstone Group. The list of wealthy donors also includes Democratic presidential candidates Mike Bloomberg and Tom Steyer, who made their billions in the investment industry.
Donald Sussman of Paloma Partners contributed more than $39 million to outside groups during the 2016 election cycle alone. At the hedge fund Renaissance Technologies, billionaire James Simons gave around $25 million to liberal groups while his former coworker Robert Mercer gave more than $22 million to conservative groups.
Typically, big-dollar donors stick with either liberal or conservative groups, and don’t donate to both camps.
Citizens United laid the foundation to open up avenues for big money contributions. SpeechNow.org v. Federal Election Commission, which led to the creation of super PACs, broke psychological barriers for wealthy people to contribute more money to influence federal elections, according to Richard Hasen, a professor of law at the University of California-Irvine.
In the 2008 election cycle, the industries that contributed the most to outside groups were public sector unions, miscellaneous unions, and pharmaceuticals. During that year, labor groups contributed $54 million, which accounted for more than half of outside spending for that election cycle.
Without officially coordinating with candidates, outside spending groups such as super PACs and nonprofits influence elections through ads and other forms of media. Since Citizens United, outside groups outspent the candidates in 126 races, effectively becoming substitutes for candidate campaigns.
Even though major donors and candidates are not allowed to collaborate, there is often a level of coordination between the two, allowing candidates to ensure big money support or prevent ultra-rich donors from actively opposing them, Kang said.
“It’s less than quid pro quo, but it’s more how candidates position themselves, knowing that donors have certain preferences and how you position yourself is going to change the way that donors perceive you,” Kang said.
Kang said wealthy donors and other political insiders often have candidates they support or oppose go through invisible, private primaries that happen behind closed doors to cater to their personal, narrow ideologies.
Hasen said wealthy donors have a unique set of issues that people in other socioeconomic classes typically don’t share. Through loopholes in funding of public policy, a donor can influence change that is significant to their industry, but not important or noticeable to working-class voters, he said.
After a candidate is elected, mega-donors look to influence public policy, which occurs fairly regularly in politics, according to Hasen.
Hasen anticipates campaign finance concerns about mega-donors will only be exacerbated in the 2020 presidential election. He does not see big money contributions slowing down within the next 10 years.
So far in 2020, the securities and investment industry contributed $32 million to outside groups, more than any other industry. That number is expected to increase dramatically as the election year continues.
The securities and investment industry gave more to outside spending groups than any other industry in each of the last four full election cycles. As big money continues to take advantage of current campaign finance regulations, the financial industry remains at the top as the 2020 election gets underway.
Since 2012, the industry has contributed at least $80 million to outside groups in every cycle, more than half of that coming from a small group of individuals. Before the Supreme Court decision, the industry never spent more than $17.8 million in any election cycle.
The ruling in Citizens United allowed corporations and labor unions to spend unlimited sums on independent expenditures. Most major corporations have not taken advantage of their increased abilities since the ruling, but ultra-wealthy political insiders give multi-million gifts to outside groups born out of the ruling such as super PACs.
Campaign finance reformers have criticized the ruling for giving wealthy elites more influence over elections that cater to their personal issues, rather than focusing on issues that are relevant to working-class voters who represent the majority of the electorate.
In 2016, investors and hedge fund managers gave nearly $350 million to outside groups. Big money contributions from wealthy individuals are more important than ever, especially at the presidential level, and it’s not surprising that Wall Street investors who have million-dollar incomes are at the top of the pack, according to Michael Kang, professor of law at Northwestern University.
“Wall Street thinks it’s important to influence politics, to have the right policy makers for them to make the money that they are accustomed to making,” Kang said.
Over the last decade, a consistent group of wealthy investors contributed to outside groups, including George Soros of Soros Fund Management, Ken Griffin of Citadel and Stephen Schwarzman of Blackstone Group. The list of wealthy donors also includes Democratic presidential candidates Mike Bloomberg and Tom Steyer, who made their billions in the investment industry.
Donald Sussman of Paloma Partners contributed more than $39 million to outside groups during the 2016 election cycle alone. At the hedge fund Renaissance Technologies, billionaire James Simons gave around $25 million to liberal groups while his former coworker Robert Mercer gave more than $22 million to conservative groups.
Typically, big-dollar donors stick with either liberal or conservative groups, and don’t donate to both camps.
Citizens United laid the foundation to open up avenues for big money contributions. SpeechNow.org v. Federal Election Commission, which led to the creation of super PACs, broke psychological barriers for wealthy people to contribute more money to influence federal elections, according to Richard Hasen, a professor of law at the University of California-Irvine.
In the 2008 election cycle, the industries that contributed the most to outside groups were public sector unions, miscellaneous unions, and pharmaceuticals. During that year, labor groups contributed $54 million, which accounted for more than half of outside spending for that election cycle.
Without officially coordinating with candidates, outside spending groups such as super PACs and nonprofits influence elections through ads and other forms of media. Since Citizens United, outside groups outspent the candidates in 126 races, effectively becoming substitutes for candidate campaigns.
Even though major donors and candidates are not allowed to collaborate, there is often a level of coordination between the two, allowing candidates to ensure big money support or prevent ultra-rich donors from actively opposing them, Kang said.
“It’s less than quid pro quo, but it’s more how candidates position themselves, knowing that donors have certain preferences and how you position yourself is going to change the way that donors perceive you,” Kang said.
Kang said wealthy donors and other political insiders often have candidates they support or oppose go through invisible, private primaries that happen behind closed doors to cater to their personal, narrow ideologies.
Hasen said wealthy donors have a unique set of issues that people in other socioeconomic classes typically don’t share. Through loopholes in funding of public policy, a donor can influence change that is significant to their industry, but not important or noticeable to working-class voters, he said.
After a candidate is elected, mega-donors look to influence public policy, which occurs fairly regularly in politics, according to Hasen.
Hasen anticipates campaign finance concerns about mega-donors will only be exacerbated in the 2020 presidential election. He does not see big money contributions slowing down within the next 10 years.
So far in 2020, the securities and investment industry contributed $32 million to outside groups, more than any other industry. That number is expected to increase dramatically as the election year continues.
Wall Street Superpower Eyes The Electricity Business
Goldman Sachs Sets Up a Cayman Island Company to Take a Position in the Power Market
By Sarah Okeson - dc report
1/14/20
Goldman Sachs, the behemoth Wall Street investment bank whose former president was Trump’s top economic adviser, claims it isn’t connected to a company that bears its name. The two businesses also share the same offices, the same phone number and some of the same employees.
Goldman Sachs Renewable Power Marketing LLC is seeking federal approval to sell electricity at market rates, meaning it could charge more than the actual cost to produce power.
“Our findings raise a host of questions about what Goldman Sachs is doing and what else it isn’t reporting,” said Tyson Slocum of Public Citizen which is protesting to the Federal Energy Regulatory Commission.
The Goldman Sachs LLC said that Public Citizen’s protest “is unsupported and not grounded in fact, the law or the Commission’s regulations” and that the LLC is not affiliated with the Goldman Sachs Group as defined by FERC rules.
Slocum said that if Goldman Sachs can successfully claim not to be affiliated with the LLC it can get higher profits.
Congressional investigators held hearings in 2014 into banks, including Goldman Sachs, that were competing directly with commercial businesses in areas such as supplying electricity. The suppliers the Goldman Sachs LLC is working with include solar farms running on the transmission system of PG&E, the California company that filed for bankruptcy because of $30 billion in liabilities from wildfires.
Carl Levin, the former chairman of the Senate Permanent Subcommittee on Investigations, warned in 2014 that mega-bank investments in electricity and other energy markets mean that the banks could be liable for catastrophes and environmental problems. Levin said this could roil the economy much as the housing market did in 2008.
“Should a catastrophe occur, it could undermine a bank or spur fears that it might fail, sparking a bank run, a shutdown of lending, and turmoil in the U.S. economy,” Levin said.
The Goldman Sachs LLC turned to the Cayman Islands, one of the world’s most notorious tax havens, for three directors who it claimed are independent of the Goldman Sachs Group. The directors – Andrew Galloway of ICG Management Ltd., Andrew Johnson of Circumference FS and John Lewis of HighWater Ltd. – are directors at 60 other companies affiliated with the Goldman Sachs Group.
Goldman Sachs alums who have worked for Trump include Gary Cohn, the former National Economic Council director, and Treasury Secretary Steven Mnuchin. Goldman has a long history of supplying top-level government officials, whichever party is in the White House.
Public Citizen said Goldman Sachs’ links to shell companies raises questions about whether Goldman Sachs is complying with Federal Reserve reporting obligations and Securities and Exchange Commission reporting requirements.
Another mega-bank, JPMorgan Chase, unsuccessfully argued in a similar scheme that it wasn’t affiliated with a company set up to buy an energy utility. In 2013, JPMorgan was fined $410 million to settle charges of manipulating electric power markets.
“I think some lawyers working for Wall Street developed what they think is a grand loophole to conceal their bank’s involvement in ownership and control over various energy infrastructure assets,” Slocum said.
Goldman Sachs Renewable Power Marketing LLC is seeking federal approval to sell electricity at market rates, meaning it could charge more than the actual cost to produce power.
“Our findings raise a host of questions about what Goldman Sachs is doing and what else it isn’t reporting,” said Tyson Slocum of Public Citizen which is protesting to the Federal Energy Regulatory Commission.
The Goldman Sachs LLC said that Public Citizen’s protest “is unsupported and not grounded in fact, the law or the Commission’s regulations” and that the LLC is not affiliated with the Goldman Sachs Group as defined by FERC rules.
Slocum said that if Goldman Sachs can successfully claim not to be affiliated with the LLC it can get higher profits.
Congressional investigators held hearings in 2014 into banks, including Goldman Sachs, that were competing directly with commercial businesses in areas such as supplying electricity. The suppliers the Goldman Sachs LLC is working with include solar farms running on the transmission system of PG&E, the California company that filed for bankruptcy because of $30 billion in liabilities from wildfires.
Carl Levin, the former chairman of the Senate Permanent Subcommittee on Investigations, warned in 2014 that mega-bank investments in electricity and other energy markets mean that the banks could be liable for catastrophes and environmental problems. Levin said this could roil the economy much as the housing market did in 2008.
“Should a catastrophe occur, it could undermine a bank or spur fears that it might fail, sparking a bank run, a shutdown of lending, and turmoil in the U.S. economy,” Levin said.
The Goldman Sachs LLC turned to the Cayman Islands, one of the world’s most notorious tax havens, for three directors who it claimed are independent of the Goldman Sachs Group. The directors – Andrew Galloway of ICG Management Ltd., Andrew Johnson of Circumference FS and John Lewis of HighWater Ltd. – are directors at 60 other companies affiliated with the Goldman Sachs Group.
Goldman Sachs alums who have worked for Trump include Gary Cohn, the former National Economic Council director, and Treasury Secretary Steven Mnuchin. Goldman has a long history of supplying top-level government officials, whichever party is in the White House.
Public Citizen said Goldman Sachs’ links to shell companies raises questions about whether Goldman Sachs is complying with Federal Reserve reporting obligations and Securities and Exchange Commission reporting requirements.
Another mega-bank, JPMorgan Chase, unsuccessfully argued in a similar scheme that it wasn’t affiliated with a company set up to buy an energy utility. In 2013, JPMorgan was fined $410 million to settle charges of manipulating electric power markets.
“I think some lawyers working for Wall Street developed what they think is a grand loophole to conceal their bank’s involvement in ownership and control over various energy infrastructure assets,” Slocum said.
Meet the CEOs Raking It in from Trump’s Aggression Toward Iran
by Sarah Anderson | smirking chimp
January 7, 2020
*Resigned 12/22/19.
**Resigned 1/1/19 while staying on as chairman until 7/19. New CEO Kathy Warden accumulated 92,894 shares in her previous position as Northrop Grumman COO.
CEOs of major U.S. military contractors stand to reap huge windfalls from the escalation of conflict with Iran. This was evident in the immediate aftermath of the U.S. assassination of a top Iranian military official last week. As soon as the news reached financial markets, these companies’ share prices spiked, inflating the value of their executives’ stock-based pay.
I took a look at how the CEOs at the top five Pentagon contractors were affected by this surge, using the most recent SEC information on their stock holdings.
Northrop Grumman executives saw the biggest increase in the value of their stocks after the U.S. airstrike that killed Qasem Suleimani on January 2. Shares in the B-2 bomber maker rose 5.43 percent by the end of trading the following day.
Wesley Bush, who turned Northrop Grumman’s reins over to Kathy Warden last year, held 251,947 shares of company stock in various trusts as of his final SEC Form 4 filing in May 2019. (Companies must submit these reports when top executives and directors buy and sell company stock.) Assuming Bush is still sitting on that stockpile, he saw the value grow by $4.9 million to a total of $94.5 million last Friday.
New Northrop Grumman CEO Warden saw the 92,894 shares she’d accumulated as the firm’s COO expand in value by more than $2.7 million in just one day of post-assassination trading.
Lockheed Martin, whose Hellfire missiles were reportedly used in the attack at the Baghdad airport, saw a 3.6 percent increase in price per share on January 3. Marillyn Hewson, CEO of the world’s largest weapon maker, may be kicking herself for selling off a considerable chunk of stock last year when it was trading at around $307. Nevertheless, by the time Lockheed shares reached $413 at the closing bell, her remaining stash had increased in value by about $646,000.
What about the manufacturer of the MQ-9 Reaper that carried the Hellfire missiles? That would be General Atomics. Despite raking in $2.8 billion in taxpayer-funded contracts in 2018, the drone maker is not required to disclose executive compensation information because it is a privately held corporation.
We do know General Atomics CEO Neal Blue is worth an estimated $4.1 billion — and he’s a major investor in oil production, a sector that also stands to profit from conflict with a major oil-producing country like Iran.
Suleimani’s killing also inflated the value of General Dynamics CEO Phebe Novakovic’s fortune. As the weapon maker’s share price rose about 1 percentage point on January 3, the former CIA official saw her stock holdings increase by more than $1.2 million.
Raytheon CEO Thomas Kennedy saw a single-day increase in his stock of more than half a million dollars, as the missile and bomb manufacturer’s share price increased nearly 1.5 percent. Boeing stock remained flat on Friday. But Dennis Muilenberg, recently ousted as CEO over the 737 aircraft scandal, appears to be well-positioned to benefit from any continued upward drift of the defense sector.
As of his final Form 4 report, Muilenburg was sitting on stock worth about $47.7 million. In his yet to be finalized exit package, the disgraced former executive could also pocket huge sums of currently unvested stock grants.
Hopefully sanity will soon prevail and the terrifyingly high tensions between the Trump administration and Iran will de-escalate. But even if the military stock surge of this past Friday turns out to be a market blip, it’s a sobering reminder of who stands to gain the most from a war that could put millions of lives at risk.
We can put an end to dangerous war profiteering by denying federal contracts to corporations that pay their top executives excessively. In 2008, John McCain, then a Republican presidential candidate, proposed capping CEO pay at companies receiving taxpayer bailouts at no more than $400,000 (the salary of the U.S. president). That notion should be extended to companies that receive massive taxpayer-funded contracts.
Sen. Bernie Sanders, for instance, has a plan to deny federal contracts to companies that pay CEOs more than 150 times what their typical worker makes.
As long as we allow the top executives of our privatized war economy to reap unlimited rewards, the profit motive for war in Iran — or anywhere — will persist.
I took a look at how the CEOs at the top five Pentagon contractors were affected by this surge, using the most recent SEC information on their stock holdings.
Northrop Grumman executives saw the biggest increase in the value of their stocks after the U.S. airstrike that killed Qasem Suleimani on January 2. Shares in the B-2 bomber maker rose 5.43 percent by the end of trading the following day.
Wesley Bush, who turned Northrop Grumman’s reins over to Kathy Warden last year, held 251,947 shares of company stock in various trusts as of his final SEC Form 4 filing in May 2019. (Companies must submit these reports when top executives and directors buy and sell company stock.) Assuming Bush is still sitting on that stockpile, he saw the value grow by $4.9 million to a total of $94.5 million last Friday.
New Northrop Grumman CEO Warden saw the 92,894 shares she’d accumulated as the firm’s COO expand in value by more than $2.7 million in just one day of post-assassination trading.
Lockheed Martin, whose Hellfire missiles were reportedly used in the attack at the Baghdad airport, saw a 3.6 percent increase in price per share on January 3. Marillyn Hewson, CEO of the world’s largest weapon maker, may be kicking herself for selling off a considerable chunk of stock last year when it was trading at around $307. Nevertheless, by the time Lockheed shares reached $413 at the closing bell, her remaining stash had increased in value by about $646,000.
What about the manufacturer of the MQ-9 Reaper that carried the Hellfire missiles? That would be General Atomics. Despite raking in $2.8 billion in taxpayer-funded contracts in 2018, the drone maker is not required to disclose executive compensation information because it is a privately held corporation.
We do know General Atomics CEO Neal Blue is worth an estimated $4.1 billion — and he’s a major investor in oil production, a sector that also stands to profit from conflict with a major oil-producing country like Iran.
Suleimani’s killing also inflated the value of General Dynamics CEO Phebe Novakovic’s fortune. As the weapon maker’s share price rose about 1 percentage point on January 3, the former CIA official saw her stock holdings increase by more than $1.2 million.
Raytheon CEO Thomas Kennedy saw a single-day increase in his stock of more than half a million dollars, as the missile and bomb manufacturer’s share price increased nearly 1.5 percent. Boeing stock remained flat on Friday. But Dennis Muilenberg, recently ousted as CEO over the 737 aircraft scandal, appears to be well-positioned to benefit from any continued upward drift of the defense sector.
As of his final Form 4 report, Muilenburg was sitting on stock worth about $47.7 million. In his yet to be finalized exit package, the disgraced former executive could also pocket huge sums of currently unvested stock grants.
Hopefully sanity will soon prevail and the terrifyingly high tensions between the Trump administration and Iran will de-escalate. But even if the military stock surge of this past Friday turns out to be a market blip, it’s a sobering reminder of who stands to gain the most from a war that could put millions of lives at risk.
We can put an end to dangerous war profiteering by denying federal contracts to corporations that pay their top executives excessively. In 2008, John McCain, then a Republican presidential candidate, proposed capping CEO pay at companies receiving taxpayer bailouts at no more than $400,000 (the salary of the U.S. president). That notion should be extended to companies that receive massive taxpayer-funded contracts.
Sen. Bernie Sanders, for instance, has a plan to deny federal contracts to companies that pay CEOs more than 150 times what their typical worker makes.
As long as we allow the top executives of our privatized war economy to reap unlimited rewards, the profit motive for war in Iran — or anywhere — will persist.
op - ed:How Economists Tricked Us Into Thinking Capitalism Works
BY Robert R. Raymond, Truthout
PUBLISHED January 5, 2020
These days, it seems like someone is always trying to privatize something. One day it’s the Trump administration contemplating the privatization of the Department of Veterans Affairs. The next it’s the Tories looking to sell off the U.K.’s National Health Service, or economists promoting “market-based” solutions to the climate crisis. In this age of neoliberalism, the rallying cry for politicians and economists alike is always for “More privatization! More markets! Sell it all off to the private sector!”
Of course, much of the time this faith in the market is used as a cover by those looking to simply make a profit — or by the politicians representing their interests. But this is not always the case. There are many who actually believe, wholeheartedly, that markets are the most efficient and even the most ethical way to run a society. And because this is the worldview that is taught in the vast majority of economics departments throughout the world, it’s not surprising that this is the dominant worldview among those in power.
It’s an ideology that was carefully crafted during the time of the early Western economists like Adam Smith and David Ricardo. Homo sapiens are actually Homo economicus, the theory goes: selfish, competitive, rational agents who are all constantly seeking to efficiently maximize their own personal well-being.
No need to despair, however, because economists have figured out that these inherent traits can actually be utilized for good, through a social relation known as the market. By its nature, the market encourages competition and efficiency, and thus, by relying on the self-maximizing behavior of individuals, market capitalism is the only economic system that truly accepts human nature for what it is. And in fact, it’s the only system uniquely situated to actually channel this nature into a net positive outcome for society.
How does this all work? Well, when they are free to make choices that maximize their own interests, people in a market system negotiate on a price and quantity of a product or service until a sort of equilibrium is established. It’s a natural process of compromise that leaves everyone satisfied and also leads to an efficient way of producing and distributing goods and services. Everyone wins. And, the theory goes, it just so happens that the process aligns perfectly with human nature. It’s a fascinating theory. The only thing is, it’s completely wrong.
The foundation of this theory relies on an assumption about human nature that has been discredited over and over by research across multiple scientific disciplines. It turns out that Homo economicus is a fairytale, an outdated misconception, a gross distortion of reality. Yet, it still serves as the theoretical foundation of our entire economic system.
Studies have determined that the Homo economicus personality is an extremely rare one. Instead, most humans are marked by a deep capacity for reciprocity, cooperation and selflessness. For example, research shows that by 14 months of age, children are already beginning to help each other by handing over objects that others are unsuccessfully reaching for. This empathic behavior only increases as children grow older and begin to share things that they value with others and even object to other people’s violation of social norms.
These are all early signs of prosociality — behavior that is marked by an intent to help or benefit others. And importantly, this behavior is motivated by a genuine concern for others and not by selfishness.
Evolutionary biologists have also largely debunked the theory of Homo economicus. Researchers like David Sloan Wilson and others have determined that more prosocial groups will robustly outcompete less prosocial groups, meaning that prosociality was an advantageous trait when it came to the natural selection of early humans. And these theories are not new. Over a century ago, the anarchist theorist Peter Kropotkin wrote convincingly on how the survival of our species has depended more on cooperation than on the heroic efforts of isolated individuals. It certainly is difficult imagining an early human taking down a woolly mammoth without engaging in highly coordinated prosocial behavior. How else could the human species evolve to dominate the globe if not by cooperating with one another to overcome the many challenges our species faced?
Another place where we see the myth of Homo economicus debunked is in the research that comes out of post-disaster communities. In her landmark book, A Paradise Built in Hell, Rebecca Solnit presents a thesis arguing that humans have an innate capacity toward collectivism — and that these traits tend to reveal themselves most strongly in community response to disasters. Far from resorting to antisocial behavior after a disaster (a myth which the media tend to elevate), Solnit’s book outlines enumerable instances where communities demonstrate prosocial behaviors like cooperation, solidarity, sacrifice and generosity instead.
“In the wake of an earthquake, a bombing, or a major storm, most people are altruistic, urgently engaged in caring for themselves and those around them, strangers and neighbors as well as friends and loved ones,” Solnit writes. “Decades of meticulous sociological research on behavior in disasters, from the bombings of World War II to floods, tornadoes, earthquakes, and storms across the continent and around the world, have demonstrated this.”
Yet, despite the overwhelming evidence contradicting it, we’ve come to accept Homo economicus as the truth.
Perhaps not always consciously, but it haunts our dreams, our imagination. It confines our sense of possibility and imposes boundaries as arbitrary as those that carve up ecosystems and communities into nation-states.
Market capitalism has been imposed onto us, often at the point of a gun, and as a result, we’ve been forced to internalize the idea that we are a selfish, competitive and greedy species. Well, that’s just human nature, we’ll acquiesce when we hear about the profiteering of pharmaceutical companies or the greed of investment bankers. But the thing this, that’s not human nature — it’s just what we’ve been coerced into thinking by an unfeeling economic system that dominates every facet of our life. And in many ways, Homo economicus is a self-fulfilling prophecy.
It’s been demonstrated that studying economics actually makes you more selfish. Studies have shown that economics students are much less likely than other students to donate money that was given to them into a common pool; that they are more likely to “freeride” and are also more likely to defect than to cooperate; that they are more likely to participate in deception for personal gain; and even that they are more likely than their peers to rate greed as “generally good,” “correct” and “moral.”
And it’s not just students: economics professors give less money to charity than professors in other fields — including history, philosophy, education, psychology, sociology, anthropology, literature, physics, chemistry and biology.
When faced with the overwhelming evidence that Homo economicus — and thus the whole neoclassical economic project — is nonsense, the defenders of the status quo tend to rely on another myth: that there is no alternative. Margaret Thatcher famously uttered those words over 30 years ago, paving the way for an age of neoliberalism that has seen the dismantling of the social safety net, the stagnation of wages and the rise of extreme inequality.
But the thing is, there are alternative ways of organizing society that reflect the human capacity for reciprocity, selflessness and cooperation. The worker cooperative model promotes equity and democracy by giving workers ownership and control over their workplaces. It does so in a way that not only aligns with our inherently human traits, but in a way which has been shown to be more efficient and productive than the traditional workplace models.
There is also the commons model that reflects how communities organized themselves for thousands of years before they were torn off their land in the enclosure acts of 17th-century England. The commons are a way of organizing production and distribution where resources are held in common and are accessible to every member of society to be managed collectively for the benefit of all.
In fact, the political economist Eleanor Ostrom actually won the Nobel Prize in Economics in 2009 for disproving the long-held belief known as the “tragedy of the commons,” a theory which held that resources held in common by communities would naturally be overused and depleted. Ostrom’s work demonstrated that this assumption is false, and that it is in fact very possible for resources to be managed collectively without privatization.
There are many ways that community resources can be collectivized instead of privatized, from land trusts that take land off of the market to policy proposals like Medicare for All, which represents a major shift in how we view our collective responsibility when it comes to health care, or the Green New Deal, which recognizes our collective responsibility to prioritize climate justice in the fight against climate change.
The alternatives to market capitalism are out there — and the thing is, they actually align much more closely to the natural human tendencies toward reciprocity and sharing. The theories behind modern economics have left us with a burning planet and with skyrocketing inequality — it’s time to put them to rest.
And whether economists and politicians choose to accept it or not, the days of Homo economicus are limited, because a society based off of a lie cannot go on indefinitely.
Of course, much of the time this faith in the market is used as a cover by those looking to simply make a profit — or by the politicians representing their interests. But this is not always the case. There are many who actually believe, wholeheartedly, that markets are the most efficient and even the most ethical way to run a society. And because this is the worldview that is taught in the vast majority of economics departments throughout the world, it’s not surprising that this is the dominant worldview among those in power.
It’s an ideology that was carefully crafted during the time of the early Western economists like Adam Smith and David Ricardo. Homo sapiens are actually Homo economicus, the theory goes: selfish, competitive, rational agents who are all constantly seeking to efficiently maximize their own personal well-being.
No need to despair, however, because economists have figured out that these inherent traits can actually be utilized for good, through a social relation known as the market. By its nature, the market encourages competition and efficiency, and thus, by relying on the self-maximizing behavior of individuals, market capitalism is the only economic system that truly accepts human nature for what it is. And in fact, it’s the only system uniquely situated to actually channel this nature into a net positive outcome for society.
How does this all work? Well, when they are free to make choices that maximize their own interests, people in a market system negotiate on a price and quantity of a product or service until a sort of equilibrium is established. It’s a natural process of compromise that leaves everyone satisfied and also leads to an efficient way of producing and distributing goods and services. Everyone wins. And, the theory goes, it just so happens that the process aligns perfectly with human nature. It’s a fascinating theory. The only thing is, it’s completely wrong.
The foundation of this theory relies on an assumption about human nature that has been discredited over and over by research across multiple scientific disciplines. It turns out that Homo economicus is a fairytale, an outdated misconception, a gross distortion of reality. Yet, it still serves as the theoretical foundation of our entire economic system.
Studies have determined that the Homo economicus personality is an extremely rare one. Instead, most humans are marked by a deep capacity for reciprocity, cooperation and selflessness. For example, research shows that by 14 months of age, children are already beginning to help each other by handing over objects that others are unsuccessfully reaching for. This empathic behavior only increases as children grow older and begin to share things that they value with others and even object to other people’s violation of social norms.
These are all early signs of prosociality — behavior that is marked by an intent to help or benefit others. And importantly, this behavior is motivated by a genuine concern for others and not by selfishness.
Evolutionary biologists have also largely debunked the theory of Homo economicus. Researchers like David Sloan Wilson and others have determined that more prosocial groups will robustly outcompete less prosocial groups, meaning that prosociality was an advantageous trait when it came to the natural selection of early humans. And these theories are not new. Over a century ago, the anarchist theorist Peter Kropotkin wrote convincingly on how the survival of our species has depended more on cooperation than on the heroic efforts of isolated individuals. It certainly is difficult imagining an early human taking down a woolly mammoth without engaging in highly coordinated prosocial behavior. How else could the human species evolve to dominate the globe if not by cooperating with one another to overcome the many challenges our species faced?
Another place where we see the myth of Homo economicus debunked is in the research that comes out of post-disaster communities. In her landmark book, A Paradise Built in Hell, Rebecca Solnit presents a thesis arguing that humans have an innate capacity toward collectivism — and that these traits tend to reveal themselves most strongly in community response to disasters. Far from resorting to antisocial behavior after a disaster (a myth which the media tend to elevate), Solnit’s book outlines enumerable instances where communities demonstrate prosocial behaviors like cooperation, solidarity, sacrifice and generosity instead.
“In the wake of an earthquake, a bombing, or a major storm, most people are altruistic, urgently engaged in caring for themselves and those around them, strangers and neighbors as well as friends and loved ones,” Solnit writes. “Decades of meticulous sociological research on behavior in disasters, from the bombings of World War II to floods, tornadoes, earthquakes, and storms across the continent and around the world, have demonstrated this.”
Yet, despite the overwhelming evidence contradicting it, we’ve come to accept Homo economicus as the truth.
Perhaps not always consciously, but it haunts our dreams, our imagination. It confines our sense of possibility and imposes boundaries as arbitrary as those that carve up ecosystems and communities into nation-states.
Market capitalism has been imposed onto us, often at the point of a gun, and as a result, we’ve been forced to internalize the idea that we are a selfish, competitive and greedy species. Well, that’s just human nature, we’ll acquiesce when we hear about the profiteering of pharmaceutical companies or the greed of investment bankers. But the thing this, that’s not human nature — it’s just what we’ve been coerced into thinking by an unfeeling economic system that dominates every facet of our life. And in many ways, Homo economicus is a self-fulfilling prophecy.
It’s been demonstrated that studying economics actually makes you more selfish. Studies have shown that economics students are much less likely than other students to donate money that was given to them into a common pool; that they are more likely to “freeride” and are also more likely to defect than to cooperate; that they are more likely to participate in deception for personal gain; and even that they are more likely than their peers to rate greed as “generally good,” “correct” and “moral.”
And it’s not just students: economics professors give less money to charity than professors in other fields — including history, philosophy, education, psychology, sociology, anthropology, literature, physics, chemistry and biology.
When faced with the overwhelming evidence that Homo economicus — and thus the whole neoclassical economic project — is nonsense, the defenders of the status quo tend to rely on another myth: that there is no alternative. Margaret Thatcher famously uttered those words over 30 years ago, paving the way for an age of neoliberalism that has seen the dismantling of the social safety net, the stagnation of wages and the rise of extreme inequality.
But the thing is, there are alternative ways of organizing society that reflect the human capacity for reciprocity, selflessness and cooperation. The worker cooperative model promotes equity and democracy by giving workers ownership and control over their workplaces. It does so in a way that not only aligns with our inherently human traits, but in a way which has been shown to be more efficient and productive than the traditional workplace models.
There is also the commons model that reflects how communities organized themselves for thousands of years before they were torn off their land in the enclosure acts of 17th-century England. The commons are a way of organizing production and distribution where resources are held in common and are accessible to every member of society to be managed collectively for the benefit of all.
In fact, the political economist Eleanor Ostrom actually won the Nobel Prize in Economics in 2009 for disproving the long-held belief known as the “tragedy of the commons,” a theory which held that resources held in common by communities would naturally be overused and depleted. Ostrom’s work demonstrated that this assumption is false, and that it is in fact very possible for resources to be managed collectively without privatization.
There are many ways that community resources can be collectivized instead of privatized, from land trusts that take land off of the market to policy proposals like Medicare for All, which represents a major shift in how we view our collective responsibility when it comes to health care, or the Green New Deal, which recognizes our collective responsibility to prioritize climate justice in the fight against climate change.
The alternatives to market capitalism are out there — and the thing is, they actually align much more closely to the natural human tendencies toward reciprocity and sharing. The theories behind modern economics have left us with a burning planet and with skyrocketing inequality — it’s time to put them to rest.
And whether economists and politicians choose to accept it or not, the days of Homo economicus are limited, because a society based off of a lie cannot go on indefinitely.
happy new year, you are still being screwed by the gop!!!
Trump administration is quietly “gutting” tax law to give big new breaks to corporations
Treasury will use loopholes in the tax bill to offer giant corporations more breaks worth tens of billions
IGOR DERYSH - salon
JANUARY 1, 2020 11:00AM (UTC)
The Trump administration quietly used loopholes built into the 2017 tax cuts to give big corporations an even bigger tax savings.
The tax cut bill passed by Republicans in 2017 overwhelmingly benefited the wealthy and big corporations, according to a House Budget Committee report issued earlier this year. The law gave individuals a modest short-term tax cut while permanently slashing corporate taxes from 35 percent to 21 percent. The new law has greatly contributed to the 50 percent growth in the budget deficit since President Trump took office.
But that was not enough for big corporations, which launched intense lobbying efforts to carve out even bigger breaks in the bill’s loopholes. The effort led the Treasury Department to quietly change rules to hand big companies an even bigger tax break, according to The New York Times, costing taxpayers billions in lost revenue.
“Treasury is gutting the new law,” University of Houston tax law professor Bret Wells told the Times. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”
Republicans used budget reconciliation, a congressional process that allowed the Senate to pass the tax cuts with 51 votes instead of 60. But that process requires a bill that will contribute less than $1.5 trillion to the deficit over 10 years, so Republicans decided to offset the cost of the corporate tax cut by eliminating a wide range of corporate deductions and introducing new taxes.
One of the biggest new taxes was the "base erosion and anti-abuse tax," or BEAT, which aimed to cut down on foreign companies with large American operations avoiding US taxes by sending their profits to countries with lower tax rates. The other was a provision on "global intangible low-taxed income," or GILTI, which imposed a tax up to 10.5 percent on some offshore income.
The Joint Committee on Taxation estimated that these two new taxes would add $262 billion in revenue over the next decade, which the Times noted would be enough to fund the entire Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.
But the new taxes also featured many loopholes, and “almost immediately” after Trump signed the tax bill, companies launched an aggressive lobbying effort to carve out breaks for themselves in the law, the Times reported.
Chip Harter, a longtime tax attorney who advised companies on how to avoid taxes — before being appointed as the Treasury official in charge of writing rules regarding the new taxes — and his team “found themselves in nonstop meetings — roughly 10 a week at time — with lobbyists” from those companies, according to the Times report. Many of the lobbyists were from the same firms that Harter had previously worked for.
Earlier this month, the department released the final version of some of the BEAT rules that allowed companies to use a “complex currency-accounting maneuver” to avoid paying the tax, according to the Times, giving the lobbyists what they had pushed for.
Foreign banks like Barclays and Credit Suisse also staged an aggressive lobbying effort to carve out an exemption in the BEAT law. The lobbyists included Erika Nijenhuis, who represented the Institute of International Bankers. Harter got Treasury Secretary Steven Mnuchin to approve new exemptions for the banks earlier this year, before the tax office announced even more exemptions. In September, Nijenhuis was appointed to a job at Treasury's Office of Tax Policy.
Officials at the Joint Committee on Taxation projected that the exemptions for international banks alone would cut revenue by up to $50 billion.
All told, BEAT is only likely to collect “a small fraction” of the $150 billion projection, tax adviser Thomas Horst told the Times.
The department made the moves even as Treasury officials warned Harter that it may lack legal authority to exempt bank payments from the law. Harter dismissed the objections, according to the Times.
“We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations,” a Treasury Department spokesperson told the Times.
Companies like Procter & Gamble, News Corp., Comcast, Liberty Mutual and Anheuser-Busch also launched an intense lobbying effort to exempt themselves from GILTI. After months of meetings with lobbyists, the department announced the rules that the companies had pushed for in June.
As a result, companies “continue to shift hundreds of billions of dollars to overseas tax havens” and the IRS is collecting tens of billions less in revenue than Congress projected, the Times reported. In 2018, the United States lost more tax revenue than any other developed nation, according to the Organization for Economic Cooperation and Development.
But big companies may have even more tax breaks coming.
“In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts," the Times reported. “Big companies have spent this fall trying to win more.”
The tax cut bill passed by Republicans in 2017 overwhelmingly benefited the wealthy and big corporations, according to a House Budget Committee report issued earlier this year. The law gave individuals a modest short-term tax cut while permanently slashing corporate taxes from 35 percent to 21 percent. The new law has greatly contributed to the 50 percent growth in the budget deficit since President Trump took office.
But that was not enough for big corporations, which launched intense lobbying efforts to carve out even bigger breaks in the bill’s loopholes. The effort led the Treasury Department to quietly change rules to hand big companies an even bigger tax break, according to The New York Times, costing taxpayers billions in lost revenue.
“Treasury is gutting the new law,” University of Houston tax law professor Bret Wells told the Times. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”
Republicans used budget reconciliation, a congressional process that allowed the Senate to pass the tax cuts with 51 votes instead of 60. But that process requires a bill that will contribute less than $1.5 trillion to the deficit over 10 years, so Republicans decided to offset the cost of the corporate tax cut by eliminating a wide range of corporate deductions and introducing new taxes.
One of the biggest new taxes was the "base erosion and anti-abuse tax," or BEAT, which aimed to cut down on foreign companies with large American operations avoiding US taxes by sending their profits to countries with lower tax rates. The other was a provision on "global intangible low-taxed income," or GILTI, which imposed a tax up to 10.5 percent on some offshore income.
The Joint Committee on Taxation estimated that these two new taxes would add $262 billion in revenue over the next decade, which the Times noted would be enough to fund the entire Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.
But the new taxes also featured many loopholes, and “almost immediately” after Trump signed the tax bill, companies launched an aggressive lobbying effort to carve out breaks for themselves in the law, the Times reported.
Chip Harter, a longtime tax attorney who advised companies on how to avoid taxes — before being appointed as the Treasury official in charge of writing rules regarding the new taxes — and his team “found themselves in nonstop meetings — roughly 10 a week at time — with lobbyists” from those companies, according to the Times report. Many of the lobbyists were from the same firms that Harter had previously worked for.
Earlier this month, the department released the final version of some of the BEAT rules that allowed companies to use a “complex currency-accounting maneuver” to avoid paying the tax, according to the Times, giving the lobbyists what they had pushed for.
Foreign banks like Barclays and Credit Suisse also staged an aggressive lobbying effort to carve out an exemption in the BEAT law. The lobbyists included Erika Nijenhuis, who represented the Institute of International Bankers. Harter got Treasury Secretary Steven Mnuchin to approve new exemptions for the banks earlier this year, before the tax office announced even more exemptions. In September, Nijenhuis was appointed to a job at Treasury's Office of Tax Policy.
Officials at the Joint Committee on Taxation projected that the exemptions for international banks alone would cut revenue by up to $50 billion.
All told, BEAT is only likely to collect “a small fraction” of the $150 billion projection, tax adviser Thomas Horst told the Times.
The department made the moves even as Treasury officials warned Harter that it may lack legal authority to exempt bank payments from the law. Harter dismissed the objections, according to the Times.
“We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations,” a Treasury Department spokesperson told the Times.
Companies like Procter & Gamble, News Corp., Comcast, Liberty Mutual and Anheuser-Busch also launched an intense lobbying effort to exempt themselves from GILTI. After months of meetings with lobbyists, the department announced the rules that the companies had pushed for in June.
As a result, companies “continue to shift hundreds of billions of dollars to overseas tax havens” and the IRS is collecting tens of billions less in revenue than Congress projected, the Times reported. In 2018, the United States lost more tax revenue than any other developed nation, according to the Organization for Economic Cooperation and Development.
But big companies may have even more tax breaks coming.
“In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts," the Times reported. “Big companies have spent this fall trying to win more.”
World’s 500 richest people gained $1.2 trillion in wealth in 2019: Analysis
December 27, 2019
By Jake Johnson, Common Dreams - raw story
“In the U.S., the richest 0.1% control a bigger share of the pie than at any time since 1929.”
The 500 richest people in the world, all of whom are billionaires, gained a combined $1.2 trillion in wealth in 2019, further exacerbating inequities that have not been seen since the late 1920s.
That’s according to a new Bloomberg analysis published Friday, which found that the planet’s 500 richest people saw their collective net worth soar by 25 percent to $5.9 trillion over the last year.
“In the U.S., the richest 0.1 percent control a bigger share of the pie than at any time since 1929,” Bloomberg noted. “The 172 American billionaires on the Bloomberg ranking added $500 billion, with Facebook Inc.’s Mark Zuckerberg up $27.3 billion and Microsoft Corp. co-founder Bill Gates [rising] $22.7 billion.”
According to the Bloomberg Billionaires Index, eight of the 10 richest people in the world are from the U.S.
Amazon CEO Jeff Bezos lost nearly $9 billion in wealth in 2019, according to Bloomberg, but he will still likely end the year as the richest man in the world with a total net worth of $116 billion.
The analysis comes as 2020 Democratic presidential candidates, particularly Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), have made tackling inequality a key component of their policy platforms.
Warren has proposed an annual two percent tax on assets over $50 million and a three percent tax on assets above $1 billion.
Sanders, who has said he does not believe billionaires should exist, is calling for a wealth tax that would slash the fortunes of U.S. billionaires in half over 15 years, according to his campaign.
“A small handful of billionaires should not be able to accumulate more money than they could spend in 10 lifetimes,” Sanders said in September, “while millions of Americans are living in poverty and dying because they can’t afford healthcare.”
The 500 richest people in the world, all of whom are billionaires, gained a combined $1.2 trillion in wealth in 2019, further exacerbating inequities that have not been seen since the late 1920s.
That’s according to a new Bloomberg analysis published Friday, which found that the planet’s 500 richest people saw their collective net worth soar by 25 percent to $5.9 trillion over the last year.
“In the U.S., the richest 0.1 percent control a bigger share of the pie than at any time since 1929,” Bloomberg noted. “The 172 American billionaires on the Bloomberg ranking added $500 billion, with Facebook Inc.’s Mark Zuckerberg up $27.3 billion and Microsoft Corp. co-founder Bill Gates [rising] $22.7 billion.”
According to the Bloomberg Billionaires Index, eight of the 10 richest people in the world are from the U.S.
Amazon CEO Jeff Bezos lost nearly $9 billion in wealth in 2019, according to Bloomberg, but he will still likely end the year as the richest man in the world with a total net worth of $116 billion.
The analysis comes as 2020 Democratic presidential candidates, particularly Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), have made tackling inequality a key component of their policy platforms.
Warren has proposed an annual two percent tax on assets over $50 million and a three percent tax on assets above $1 billion.
Sanders, who has said he does not believe billionaires should exist, is calling for a wealth tax that would slash the fortunes of U.S. billionaires in half over 15 years, according to his campaign.
“A small handful of billionaires should not be able to accumulate more money than they could spend in 10 lifetimes,” Sanders said in September, “while millions of Americans are living in poverty and dying because they can’t afford healthcare.”
The Ongoing Effort to Write Wall Street Out of the 2008 Financial Crisis
Malaika Jabali, Ryan Grim - the intercept
December 17 2019, 4:00 a.m.
SINCE THE 2008 meltdown, there’s been an ongoing effort to revise history and write Wall Street out of the financial crisis. The latest in this narrative is a new working paper, published by the Federal Reserve Bank of Philadelphia, which argues that the real criminals were, after all, those house-flipping exotic dancers made famous by Michael Lewis’s book and subsequent movie “The Big Short.”
The new study zeroes in on what its authors call “fraudulent investors”: people who got mortgages for investment homes in which they never intended to live, despite claiming that they would. Pinning the blame for the mortgage crisis on the dancers who agreed to take the money being given to them by the banks would be similar to faulting hoodwinked students for taking out massive loans from fraudulent for-profit colleges.
During the recession, conservatives latched onto the narrative that the crisis was caused by prospective homeowners’ greed, implying — and often outright stating — that the crisis resulted from the bad decisions of lower-income, largely minority families. In a 2009 congressional oversight report, then-Rep. Jeb Hensarling, R-Texas, blamed, among other reasons for the crisis, people who “simply made bad choices … and overestimated their readiness for homeownership.” He added these borrowers to his list of others, including those who commit mortgage fraud. While in Congress, Hensarling collected thousands of dollars from the payday lending industry around the time he was expected to act on policies affecting the industry, vocally criticized the Consumer Finance Protection Bureau, and crusaded for years to deregulate Wall Street after the crash. He is now an executive at banking giant UBS, while many of his former staff have moved to the CFPB, where they have set about dismantling it.
The working paper, which comes with a disclosure saying it doesn’t represent the opinion of the Philadelphia Fed, complements other research indicating that the “subprime mortgage crisis” is a myth. But it doesn’t go all the way to citing the role of Wall Street, which is convenient for politicians and regulators uninterested in policing those banks. Indeed, if the cause of the crisis was greed and fraud, there are several happy conclusions Hensarling can draw from that analysis. As he argued at the time, such borrowers were “much less sympathetic in the eyes of many,” meaning that the government has no responsibility to help those hit by the crisis. “Attempting to develop a government-subsidized foreclosure mitigation plan to assist [these borrowers] will inevitably raise significant moral hazard questions,” Hensarling argued in the 2009 report.
It also means that the law enforcement and regulatory response should focus on the borrowers, not the lenders on Wall Street or their brokers. Indeed, perhaps the most high-profile prosecution of the mortgage crisis was not of a bank CEO, but of Joe and Teresa Giudice, stars of the reality TV series “Real Housewives of New Jersey.” Both were sentenced to prison for mortgage fraud, caught with paperwork discrepancies on investment properties, and Joe Giudice, who was born in Italy, was deported, though not before spending time in solitary confinement in Immigration and Customs Enforcement custody. (“It was a terrible experience; I don’t wish that on anybody,” he said.)
While the conservative response to the crisis was to blame black and brown homeowners, the more sophisticated academic response extends the blame more broadly to other borrowers. The new paper, authored by Ronel Elul, Aaron Payne, and Sebastian Tilson, studied the pervasiveness of what it called owner-occupancy fraud — that is, borrowers who applied for home purchase loans as owner-occupants despite no evidence of them subsequently occupying the home. Fraudulent investors defaulted on their mortgage at a nearly 40 percent higher rate than owner-occupants, second-homeowners, and declared investors (those who identified that they were applying for a home purchase loan as an investment property). The paper does not examine whether brokers advised the loan applicant how to fill out the form, but reporting from the time indicates that it was nearly always brokers who guided borrowers through the process. If there was fraud, in other words, it was directed by the brokers working on behalf of lenders.
“Despite making up only 5 percent of the borrower populations,” the study says, fraudulent investors “constitute one-sixth of the dollar share of defaulted loans for originations” from 2005 to 2007.
Lenders consider investment properties to carry greater risk. If a home is one’s primary residence, there is more incentive to pay the mortgage payment and avoid delinquency. In an economic downturn, there is less incentive to wait out the market and keep a home if the borrower does not occupy it. Consequently, lenders apply higher interest rates and require more cash up front than they do for owner-occupied homes. Applying as an owner-occupier allowed fraudulent investors to save these costs, providing them with interest rates that were “35 basis points lower, on average, than otherwise similar declared investors,” the study argues. (Depending on the size of the mortgage, the difference could mean a few hundred dollars per month or less.)
The paper argues that delinquencies that came from these loans were strategic and not from fraudulent investors struggling to make payments. They defaulted on these loans despite using significantly less of their available credit than other types of home borrowers, indicating that they were, in fact, able to manage their credit. But as the economy collapsed, renting those properties to cover the mortgage became significantly more difficult, and many of the owners, undoubtedly, also lost their own jobs, rendering the fact that they had successfully managed credit before then far less relevant. As the value of the homes plummeted, the possibility of refinancing the mortgage would also disappear. Default may have been a choice, but it was often the only choice.
The new paper found that adding these “fraudulent investors” to the investor pool increased the share of investors comprising the mortgage borrowers in this period to 50 percent — feeding the kind of surging demand Wall Street had created. This fraud, the paper states, was “widespread,” including in the large government-sponsored enterprise market led by the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).
Lower-income borrowers and black and Latino borrowers — including those who are upper-income — were targeted for subprime loans and people of color have struggled most to recover from the Great Recession. They have also endured most of the blame. In 2006, at the height of the boom, black and Hispanic families making more than $200,000 a year were more likely on average to be given a subprime loan than a white family making less than $30,000 a year. Black and Latino households were also more likely to end this period underwater.
While recognizing that these subprime borrowers were not the crisis’s primary drivers, recent studies like those published by Philadelphia’s Fed nevertheless blame borrowers and not the actors who created the conditions and set the terms for such transactions. Wall Street banks — whose insatiable demand for loan products it could slice up, securitize, slap a AAA rating on, and sell to pension funds — had created an industry of brokers ready to produce that supply by any means of fraud necessary.
The new study zeroes in on what its authors call “fraudulent investors”: people who got mortgages for investment homes in which they never intended to live, despite claiming that they would. Pinning the blame for the mortgage crisis on the dancers who agreed to take the money being given to them by the banks would be similar to faulting hoodwinked students for taking out massive loans from fraudulent for-profit colleges.
During the recession, conservatives latched onto the narrative that the crisis was caused by prospective homeowners’ greed, implying — and often outright stating — that the crisis resulted from the bad decisions of lower-income, largely minority families. In a 2009 congressional oversight report, then-Rep. Jeb Hensarling, R-Texas, blamed, among other reasons for the crisis, people who “simply made bad choices … and overestimated their readiness for homeownership.” He added these borrowers to his list of others, including those who commit mortgage fraud. While in Congress, Hensarling collected thousands of dollars from the payday lending industry around the time he was expected to act on policies affecting the industry, vocally criticized the Consumer Finance Protection Bureau, and crusaded for years to deregulate Wall Street after the crash. He is now an executive at banking giant UBS, while many of his former staff have moved to the CFPB, where they have set about dismantling it.
The working paper, which comes with a disclosure saying it doesn’t represent the opinion of the Philadelphia Fed, complements other research indicating that the “subprime mortgage crisis” is a myth. But it doesn’t go all the way to citing the role of Wall Street, which is convenient for politicians and regulators uninterested in policing those banks. Indeed, if the cause of the crisis was greed and fraud, there are several happy conclusions Hensarling can draw from that analysis. As he argued at the time, such borrowers were “much less sympathetic in the eyes of many,” meaning that the government has no responsibility to help those hit by the crisis. “Attempting to develop a government-subsidized foreclosure mitigation plan to assist [these borrowers] will inevitably raise significant moral hazard questions,” Hensarling argued in the 2009 report.
It also means that the law enforcement and regulatory response should focus on the borrowers, not the lenders on Wall Street or their brokers. Indeed, perhaps the most high-profile prosecution of the mortgage crisis was not of a bank CEO, but of Joe and Teresa Giudice, stars of the reality TV series “Real Housewives of New Jersey.” Both were sentenced to prison for mortgage fraud, caught with paperwork discrepancies on investment properties, and Joe Giudice, who was born in Italy, was deported, though not before spending time in solitary confinement in Immigration and Customs Enforcement custody. (“It was a terrible experience; I don’t wish that on anybody,” he said.)
While the conservative response to the crisis was to blame black and brown homeowners, the more sophisticated academic response extends the blame more broadly to other borrowers. The new paper, authored by Ronel Elul, Aaron Payne, and Sebastian Tilson, studied the pervasiveness of what it called owner-occupancy fraud — that is, borrowers who applied for home purchase loans as owner-occupants despite no evidence of them subsequently occupying the home. Fraudulent investors defaulted on their mortgage at a nearly 40 percent higher rate than owner-occupants, second-homeowners, and declared investors (those who identified that they were applying for a home purchase loan as an investment property). The paper does not examine whether brokers advised the loan applicant how to fill out the form, but reporting from the time indicates that it was nearly always brokers who guided borrowers through the process. If there was fraud, in other words, it was directed by the brokers working on behalf of lenders.
“Despite making up only 5 percent of the borrower populations,” the study says, fraudulent investors “constitute one-sixth of the dollar share of defaulted loans for originations” from 2005 to 2007.
Lenders consider investment properties to carry greater risk. If a home is one’s primary residence, there is more incentive to pay the mortgage payment and avoid delinquency. In an economic downturn, there is less incentive to wait out the market and keep a home if the borrower does not occupy it. Consequently, lenders apply higher interest rates and require more cash up front than they do for owner-occupied homes. Applying as an owner-occupier allowed fraudulent investors to save these costs, providing them with interest rates that were “35 basis points lower, on average, than otherwise similar declared investors,” the study argues. (Depending on the size of the mortgage, the difference could mean a few hundred dollars per month or less.)
The paper argues that delinquencies that came from these loans were strategic and not from fraudulent investors struggling to make payments. They defaulted on these loans despite using significantly less of their available credit than other types of home borrowers, indicating that they were, in fact, able to manage their credit. But as the economy collapsed, renting those properties to cover the mortgage became significantly more difficult, and many of the owners, undoubtedly, also lost their own jobs, rendering the fact that they had successfully managed credit before then far less relevant. As the value of the homes plummeted, the possibility of refinancing the mortgage would also disappear. Default may have been a choice, but it was often the only choice.
The new paper found that adding these “fraudulent investors” to the investor pool increased the share of investors comprising the mortgage borrowers in this period to 50 percent — feeding the kind of surging demand Wall Street had created. This fraud, the paper states, was “widespread,” including in the large government-sponsored enterprise market led by the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).
Lower-income borrowers and black and Latino borrowers — including those who are upper-income — were targeted for subprime loans and people of color have struggled most to recover from the Great Recession. They have also endured most of the blame. In 2006, at the height of the boom, black and Hispanic families making more than $200,000 a year were more likely on average to be given a subprime loan than a white family making less than $30,000 a year. Black and Latino households were also more likely to end this period underwater.
While recognizing that these subprime borrowers were not the crisis’s primary drivers, recent studies like those published by Philadelphia’s Fed nevertheless blame borrowers and not the actors who created the conditions and set the terms for such transactions. Wall Street banks — whose insatiable demand for loan products it could slice up, securitize, slap a AAA rating on, and sell to pension funds — had created an industry of brokers ready to produce that supply by any means of fraud necessary.
More tax break winning! AT&T looks into '4% cut in the operator's labor expenses'
Walter Einenkel
Daily Kos Staff
Monday December 16, 2019 · 6:30 PM PST
The storied Republican tax cuts continue to do exactly what their detractors said they would do: make money for rich people while doing absolutely nothing to stimulate wealth in the rest of society. There is a long list of corporations that continue to downsize their employee payrolls after pretending that big tax breaks would mean big infrastructure investments and bigger jobs for Americans. Now, AT&T is looking into a new massive “cost-cutting initiative,” that will undoubtedly include downsizing their workforce even further.
As LightReading reports, at an investor forum in the beginning of December, AT&T CFO John Stephens explained that their cost-cutting would “include a 4% cut in the operator's labor expenses.” Those labor expenses make up around $1.5 billion and usually means “jobs.” Considering that some estimates put AT&T’s financial “savings” from the Republican tax cuts at around $42 billion, it is just remarkable that the obvious greed involved here isn’t bigger news.
As part of the self-serving propaganda push for the wildly unpopular tax breaks, CEOs like AT&T’s Randall Stephenson told the world that they would be investing more billions into infrastructure and great paying jobs.
Those investments and those jobs have never materialized, meaning that they were just words, not actions, which in turn means that they were outright lies.
At the end of 2018, as the big Republican tax-welfare-breaks to corporations and the rich kicked in, telecoms like AT&T began to to cut back on their promised infrastructure investments. Not only did those companies not invest more in their infrastructure, they have begun to pull back the pace with which they continue to expand. Of course, none of this is surprising when you consider that the history of telecoms like AT&T include decades of examples where after demanding—and receiving—corporate tax welfare, they have not lived up to their promised end of the bargain.
AT&T has run into financial problems after its multi-media mergers into television have ended up being big albatrosses around their necks. But those executives, making those bad business decisions, aren’t the ones on the chopping block.
As LightReading reports, at an investor forum in the beginning of December, AT&T CFO John Stephens explained that their cost-cutting would “include a 4% cut in the operator's labor expenses.” Those labor expenses make up around $1.5 billion and usually means “jobs.” Considering that some estimates put AT&T’s financial “savings” from the Republican tax cuts at around $42 billion, it is just remarkable that the obvious greed involved here isn’t bigger news.
As part of the self-serving propaganda push for the wildly unpopular tax breaks, CEOs like AT&T’s Randall Stephenson told the world that they would be investing more billions into infrastructure and great paying jobs.
Those investments and those jobs have never materialized, meaning that they were just words, not actions, which in turn means that they were outright lies.
At the end of 2018, as the big Republican tax-welfare-breaks to corporations and the rich kicked in, telecoms like AT&T began to to cut back on their promised infrastructure investments. Not only did those companies not invest more in their infrastructure, they have begun to pull back the pace with which they continue to expand. Of course, none of this is surprising when you consider that the history of telecoms like AT&T include decades of examples where after demanding—and receiving—corporate tax welfare, they have not lived up to their promised end of the bargain.
AT&T has run into financial problems after its multi-media mergers into television have ended up being big albatrosses around their necks. But those executives, making those bad business decisions, aren’t the ones on the chopping block.
‘Staggering’ new data shows income of top 1% has grown 100 times faster than bottom 50% since 1970
December 9, 2019
By Common Dreams - raw story
“The bulk of a generation of economic growth has been captured and concentrated in a few hands, and many people have barely seen any of it.”
New data released Monday explains the numbers behind Sen. Bernie Sanders’ often-cited statistic that the three richest Americans hold more wealth than the 160 million people who make up the bottom 50% of the population.
Washington Post columnist Greg Sargent published what he called “stunning” findings from Stanford University economist Gabriel Zucman, showing how both an explosion in annual earnings by the rich and an increasingly regressive tax structure have combined to allow the top 1% of Americans’ wealth to triple over the past five decades.
Meanwhile, working people are taking home just $8,000 more per year than they did in 1970.
In what Sargent called “the triumph of the rich, which is one of the defining stories of our time,” the richer a household is, the more its take-home wealth has grown in the past 50 years.
Greg Sargent✔
@ThePlumLineGS
New data:
For top 1%, average income has risen by $800,000 since 1970.
For top 0.1%, it has risen by $4 million.
For top .01%, it has risen $20 million.
Bottom 50%? $8,000.
All this is *after taxes and transfers.*
The top 1% of earners make an average of more than $1 million per year after accounting for taxes they pay, a 50-year increase of more than $800,000—100 times the growth rate of the bottom 50%.
The wealth of the top .1% is five times larger than it was in 1970, while that of the top .01% is seven times larger, at over $24 million in 2018.
Zucman and fellow economist Emmanuel Saez, his co-author of the new book “The Triumph of Injustice,” provided a chart showing how each group of earners’ take-home pay has changed since 1970. The wealthiest Americans’ assets skyrocketed by millions of dollars even in the first decade of the 21st century—when people in the bottom 50% saw their average take-home income decrease.
For middle-income earners since 1970, income-plus-effective tax rates have gone from $44,000 to about $75,000—a greater increase than those in the bottom 50% of earners, “but still their income growth rate has been very low,” Zucman told the Post.
Zucman, who with Saez advised Sen. Elizabeth Warren (D-Mass.) on her Ultra-Millionaires Tax, emphasized that both the explosion of yearly income at the top and the effective tax rates of people in all income brackets must be taken into account to understand the massive wealth gap.
“You have two trends reinforcing each other,” Zucman told the Post. “There has been the rise in market income inequality—the rise in pretax income inequality. At the same time, the tax system has become much less progressive at the top of the income distribution.”
“People have this idea that government redistribution has upset some of the rise in inequality, but essentially that’s not the case,” the economist added.
Zucman’s findings were revealed two months after New York Times columnist David Leonhardt published a graphic showing how in 2018, for the first time in U.S. history, the 400 richest Americans paid less in taxes than any other income group.
The richest Americans have benefited from numerous changes to tax laws and enforcement in recent decades, Sargent wrote, “including domestic and international tax avoidance, the whittling away of the estate and corporate taxes, and the repeated downsizing of top marginal rates.”
Tony Annett of the Center for Sustainable Development at Columbia University wrote that Zucman’s research shows how “it is no longer meaningful to rely on GDP” as a measure of economic well-being, since the benefits of growth are no longer being shared among all earners as they were in previous eras.
Seth D. Michaels of the Union of Concerned Scientists described Zucman’s findings as showing how many people of his generation have seen the bulk of economic growth “captured and concentrated in a few hands.”
“The tiny number of people raking in the overwhelming majority of the last 40 years of economic growth are distorting the economy and the political system like a black hole, everything falling toward their interests at high speed,” Michaels wrote.
New data released Monday explains the numbers behind Sen. Bernie Sanders’ often-cited statistic that the three richest Americans hold more wealth than the 160 million people who make up the bottom 50% of the population.
Washington Post columnist Greg Sargent published what he called “stunning” findings from Stanford University economist Gabriel Zucman, showing how both an explosion in annual earnings by the rich and an increasingly regressive tax structure have combined to allow the top 1% of Americans’ wealth to triple over the past five decades.
Meanwhile, working people are taking home just $8,000 more per year than they did in 1970.
In what Sargent called “the triumph of the rich, which is one of the defining stories of our time,” the richer a household is, the more its take-home wealth has grown in the past 50 years.
Greg Sargent✔
@ThePlumLineGS
New data:
For top 1%, average income has risen by $800,000 since 1970.
For top 0.1%, it has risen by $4 million.
For top .01%, it has risen $20 million.
Bottom 50%? $8,000.
All this is *after taxes and transfers.*
The top 1% of earners make an average of more than $1 million per year after accounting for taxes they pay, a 50-year increase of more than $800,000—100 times the growth rate of the bottom 50%.
The wealth of the top .1% is five times larger than it was in 1970, while that of the top .01% is seven times larger, at over $24 million in 2018.
Zucman and fellow economist Emmanuel Saez, his co-author of the new book “The Triumph of Injustice,” provided a chart showing how each group of earners’ take-home pay has changed since 1970. The wealthiest Americans’ assets skyrocketed by millions of dollars even in the first decade of the 21st century—when people in the bottom 50% saw their average take-home income decrease.
For middle-income earners since 1970, income-plus-effective tax rates have gone from $44,000 to about $75,000—a greater increase than those in the bottom 50% of earners, “but still their income growth rate has been very low,” Zucman told the Post.
Zucman, who with Saez advised Sen. Elizabeth Warren (D-Mass.) on her Ultra-Millionaires Tax, emphasized that both the explosion of yearly income at the top and the effective tax rates of people in all income brackets must be taken into account to understand the massive wealth gap.
“You have two trends reinforcing each other,” Zucman told the Post. “There has been the rise in market income inequality—the rise in pretax income inequality. At the same time, the tax system has become much less progressive at the top of the income distribution.”
“People have this idea that government redistribution has upset some of the rise in inequality, but essentially that’s not the case,” the economist added.
Zucman’s findings were revealed two months after New York Times columnist David Leonhardt published a graphic showing how in 2018, for the first time in U.S. history, the 400 richest Americans paid less in taxes than any other income group.
The richest Americans have benefited from numerous changes to tax laws and enforcement in recent decades, Sargent wrote, “including domestic and international tax avoidance, the whittling away of the estate and corporate taxes, and the repeated downsizing of top marginal rates.”
Tony Annett of the Center for Sustainable Development at Columbia University wrote that Zucman’s research shows how “it is no longer meaningful to rely on GDP” as a measure of economic well-being, since the benefits of growth are no longer being shared among all earners as they were in previous eras.
Seth D. Michaels of the Union of Concerned Scientists described Zucman’s findings as showing how many people of his generation have seen the bulk of economic growth “captured and concentrated in a few hands.”
“The tiny number of people raking in the overwhelming majority of the last 40 years of economic growth are distorting the economy and the political system like a black hole, everything falling toward their interests at high speed,” Michaels wrote.
profiting from slavery!!!
Choppy markets leave U.S. bank bonus decisions in limbo
Elizabeth Dilts Marshall, Imani Moise - reuters
DECEMBER 9, 2019 / 9:06 PM
NEW YORK (Reuters) - December is always a month of suspense on Wall Street, as dealmakers, traders and money managers at big U.S. banks wait to find out how much they will receive in bonuses.
But this year is more fraught than usual, industry sources said, because executives are waiting until the last minute to allocate bonuses, worried that market volatility could hit earnings.
Those awards typically account for one-third of compensation for employees who receive them, so they are important.
By now, division heads usually have a sense of what a bonus pool will look like and what portion their divisions will get. Although formal bonus communications can happen as late as March, executives and consultants start working on decisions after Labor Day and tend to give unofficial guidance to staff before year-end, sources said.
But because there is so much uncertainty about what might happen in overnight lending in late December, and the ripple effects it could have on other markets, many executives are taking the unusual step of waiting to divvy up bonus pools until the year is completely finished.
“There may be people working New Year’s because they’ve got to finalize this January 10 or 15,” said compensation consultant Alan Johnson. “People are going to be particularly vigilant to make sure that they’re going to be paying the right amount, figuring it out right up to the end of the year.”
At one bank last year, trading heads were told in late-December that millions of dollars needed to be shifted from their bonus pool to other divisions, a source familiar with the matter told Reuters on the condition that the bank and person not be named. The industry is trying to avoid situations like that again this year, Johnson said.
Johnson’s firm publishes a closely watched annual report forecasting where Wall Street bonuses are headed. It found that most employees will likely see a decline from last year, especially in equities trading where bonuses could fall 10-15%. Investment bankers can generally expect to see declines of 5-10%, Johnson Associates predicted.
The expected declines reflect less-than-stellar results across the banking industry this year. Although the industry has recovered dramatically from the 2007-2009 financial crisis, a fresh round of interest-rate cuts from central banks combined with subdued loan demand, weak trading results and declines in some areas of investment banking have left revenue and profits treading water.
During the first nine months of the year, Goldman Sachs Group Inc (GS.N) and the capital markets divisions of JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) and Morgan Stanley (MS.N) reported declines of 1-8% in revenue and 8-18% in profit. Citigroup Inc (C.N) was an outlier, reporting flat revenue and a 1% gain in year-to-date earnings.
Even those who worked on big deals or in business areas or that did well — say, bankers who worked on Bristol-Myers Squibb’s (BMY.N) $74 billion acquisition of Celgene, or traders who generated a lot of revenue helping companies manage falling rates — are not assured of a rich bonus.
GRIM, ANXIOUS
Their bonuses are tied to the performance of divisions and companies overall. That means if a trading division suffers from market chaos, it will get less of the bonus pool, and the overall pool could be smaller because of related losses.
Sources at some of the banks described the atmosphere around bonuses as grim and anxious.
Bonus declines would be coming on top of a weak 2018 bonus season for Wall Street, when the average bonus paid to a securities industry employee in New York fell 17% to $153,700, according to a report by the New York State Comptroller Thomas DiNapoli.
Despite the anticipated declines, many bankers aren’t too concerned because even without bonuses, their salaries average $398,600 compared to a broader state average for workers of $79,800, the comptroller found.
“I don’t live my life based on my bonus because its purely discretionary,” a JPMorgan investment banker said, shrugging off the uncertainty.
But this year is more fraught than usual, industry sources said, because executives are waiting until the last minute to allocate bonuses, worried that market volatility could hit earnings.
Those awards typically account for one-third of compensation for employees who receive them, so they are important.
By now, division heads usually have a sense of what a bonus pool will look like and what portion their divisions will get. Although formal bonus communications can happen as late as March, executives and consultants start working on decisions after Labor Day and tend to give unofficial guidance to staff before year-end, sources said.
But because there is so much uncertainty about what might happen in overnight lending in late December, and the ripple effects it could have on other markets, many executives are taking the unusual step of waiting to divvy up bonus pools until the year is completely finished.
“There may be people working New Year’s because they’ve got to finalize this January 10 or 15,” said compensation consultant Alan Johnson. “People are going to be particularly vigilant to make sure that they’re going to be paying the right amount, figuring it out right up to the end of the year.”
At one bank last year, trading heads were told in late-December that millions of dollars needed to be shifted from their bonus pool to other divisions, a source familiar with the matter told Reuters on the condition that the bank and person not be named. The industry is trying to avoid situations like that again this year, Johnson said.
Johnson’s firm publishes a closely watched annual report forecasting where Wall Street bonuses are headed. It found that most employees will likely see a decline from last year, especially in equities trading where bonuses could fall 10-15%. Investment bankers can generally expect to see declines of 5-10%, Johnson Associates predicted.
The expected declines reflect less-than-stellar results across the banking industry this year. Although the industry has recovered dramatically from the 2007-2009 financial crisis, a fresh round of interest-rate cuts from central banks combined with subdued loan demand, weak trading results and declines in some areas of investment banking have left revenue and profits treading water.
During the first nine months of the year, Goldman Sachs Group Inc (GS.N) and the capital markets divisions of JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) and Morgan Stanley (MS.N) reported declines of 1-8% in revenue and 8-18% in profit. Citigroup Inc (C.N) was an outlier, reporting flat revenue and a 1% gain in year-to-date earnings.
Even those who worked on big deals or in business areas or that did well — say, bankers who worked on Bristol-Myers Squibb’s (BMY.N) $74 billion acquisition of Celgene, or traders who generated a lot of revenue helping companies manage falling rates — are not assured of a rich bonus.
GRIM, ANXIOUS
Their bonuses are tied to the performance of divisions and companies overall. That means if a trading division suffers from market chaos, it will get less of the bonus pool, and the overall pool could be smaller because of related losses.
Sources at some of the banks described the atmosphere around bonuses as grim and anxious.
Bonus declines would be coming on top of a weak 2018 bonus season for Wall Street, when the average bonus paid to a securities industry employee in New York fell 17% to $153,700, according to a report by the New York State Comptroller Thomas DiNapoli.
Despite the anticipated declines, many bankers aren’t too concerned because even without bonuses, their salaries average $398,600 compared to a broader state average for workers of $79,800, the comptroller found.
“I don’t live my life based on my bonus because its purely discretionary,” a JPMorgan investment banker said, shrugging off the uncertainty.
opinion
Nobel laureate economist Joseph Stiglitz: It's time for Congress to do something about the economic mess that private-equity giants have created
Joseph Stiglitz - business insider
12/7/19
- The private-equity industry has been extracting wealth from the US economy for investors at the expense of the American economy for too long.
- The private-equity industry is too secretive, loads takeover targets with too much debt, and pushes companies to lay off too many workers.
- Given the problems with private equity, Congress is right to try to crack down on the industry with the new Stop Wall Street Looting Act.
- Joseph E. Stiglitz was awarded the Nobel Prize in Economics in 2001. He is a professor at Columbia University, and his most recent book is "People, Power and Profits: Progressive Capitalism for an Age of Discontent."
Over the past decade, a large body of research has confirmed what many of us have long suspected, namely that American capitalism is a far cry from the textbook model of a competitive, efficient economy. Instead, the United States is now home to far too many of what economists call "rent seekers."
These are economic actors who take advantage of others through market power, through individual vulnerabilities, and through inside or unequal information. They grab an unfairly large slice of the pie at the expense of other people, rather than adding to the nation's wealth.
Markets where rent-seeking is prevalent are neither efficient nor fair, and they help explain America's increasing inequality and weakening growth.
One of those rent-seeking sectors is finally getting the attention it deserves: private equity.
The private-equity industry has exploded in size over the past two decades, from $700 billion in global assets in 2000 to $5.8 trillion in 2018. In the US, it now controls 8,000 companies, more than twice as many as are traded on public markets. This all came about without any debate over whether this immensely influential industry is playing by the right rules.
As they stand, the rules ensure that private-equity barons win, no matter who else loses. Of course, not all private-equity players are exploitative. But even the good actors play on a field advantageous to them, as they exploit rules that create opacity, prevent accountability for their harmful effects, and preserve unjustifiable tax advantages.
Reining in the private-equity industry
Legislation introduced this summer by US lawmakers, including Sens. Elizabeth Warren, Bernie Sanders, Sherrod Brown, and Tammy Baldwin, and Reps. Mark Pocan and Pramila Jayapal, proposes at long last to change that.
Now, from the presidential campaign trail in Iowa to the financial press in New York to Washington policy wonks, we are discussing this set of new answers to how we address abuses in private equity that have turned parts of this massive industry into straightforward wealth extractors, not creators.
Start at the beginning of the life cycle of a private-equity fund with the investors who entrust their money to firms that promise them a healthy return. Markets deliver efficient outcomes if there is transparency. Behind a cloak of secrecy, exploitation can run rampant.
The allocation of capital can be efficient only if both investor and asset manager have credible information about the track record of the private-equity firms and their portfolio companies. Alas, even some of the most sophisticated investors on the planet — pension funds, university endowments — can't obtain that data from private-equity firms.
For example, the industry's preferred metric, the internal rate of return, is notoriously prone to manipulation. Private-equity firms often exclude money they have not yet invested when calculating a rate of return. But they will not hesitate to include that money when calculating the management fees that make the business particularly lucrative, regardless of how successfully executives invest. In the market for dollars that private equity raises, the information investors have to go on is simply not clear.
The bill introduced this summer, the Stop Wall Street Looting Act, would bring a measure of standardization and transparency for the benefit of investors by creating standard, annual, disclosures that would allow comparison shopping.
The bill would also ban efforts by private-equity firms to contractually squirm out of the fiduciary duty they owe investors, an all-too-frequent phenomenon. And it would curb fees charged to portfolio companies that are added on to the fees charged for fund management and performance often for nonexistent services, to dodge taxes.
The private-equity debt problem
Then there is the debt. Private equity's business model is built on acquisitions via debt — 70 or 80% is not unheard of. And Wall Street banks provide this debt in a way that creates perverse incentives. Banks lend the money for private-equity firms to acquire target companies, and then turn the loan into securities they sell to other investors, leaving the bankers with no stake in the outcome.
And when the company acquired by the private-equity firm is loaded with debt, private-equity firms can fire workers and sell assets to pay it down debt and generate capital for distribution to the owners — themselves. This problem is not theoretical; it's exactly what happened at retailers such as Toys R Us, Sears, and Shopko.
The new proposal would introduce a suite of changes to combat this practice including a limit to the tax deductibility of debt and a requirement for banks that finance these deals to retain a portion of the loans they underwrite.
Crucially, the Stop Wall Street Looting Act would extend the liability for the obligations of a target company to the private-equity firm itself, ensuring that the private-equity executives are on the hook for some of the risk created by loading a takeover target with debt, and do not simply reap the rewards.
Private-equity benefits from an even more outrageous provision called "carried interest," whereby managers in these enterprises are taxed on their returns from managerial activities at the very favorable capital-gains tax rate, about half the rate that those engaged in other managerial activities or workers are taxed. This is not only unfair, but it encourages the growth of these nontransparent exploitative enterprises. That would end under this bill.
Stopping the destruction of jobs
Finally, a recent study by groups including Americans for Financial Reform found that private-equity bankruptcies in the retail industry alone cost 600,000 jobs. One of those laid off, Giovanna De La Rosa, told of her experiences in this publication. The best outcome would be fewer bankruptcies, but when they happen, the welfare of workers needs to be at the top of the list, not at the bottom.
Private-equity cannot simply reap the rewards of cost-cutting and let others bear the dislocations in the lives of the workers and the communities in which they operate. So the legislation would tweak bankruptcy laws to improve the treatment of worker severance, limit executive payouts, and favor purchase offers that preserve employment.
What enables a market economy to serve American society is informed competition with a fair set of rules where decision makers bear the full consequences of their actions. A system in which private equity can hoodwink investors, rely on debt to fund acquisitions — raised by banks that pass the risk on to others — and then extract wealth from viable going concerns, is a far cry from a just market economy. It is a creation of already rich Wall Street financiers who win even if everyone else loses.
If private equity is to work to the benefit of all stakeholders, then Congress needs to demonstrate the same talent for making markets work that bad actors on Wall Street have shown for sabotaging them.
Off the radar: U.S. CEOs' jet perks add millions to corporate tax bills
Tim McLaughlin - reuters
DECEMBER 2, 2019
BOSTON (Reuters) - As U.S. corporate jet use approaches pre-financial crisis levels and chief executives take an increasing number of personal trips on the company tab, many investors are being kept in the dark about the true cost of the perk.
For the S&P 500 companies that pay for their CEOs to use corporate jets for private trips, the estimated median value of that flying climbed 11 percent last year to $107,286 from $96,532 in 2017, according to the latest available figures from compensation research firm Equilar Inc. That is up 27 percent from $84,636 in 2007, the year before the financial crisis.
This is taxable income for executives. The estimates are often based on what a first-class seat would have cost on a commercial flight rather than on the true, much higher cost of using a corporate jet.
But not only are companies left to pay the full cost of those flights, which can be for anything from family vacations to trips to major sports events or a commute from a distant family home, but they can also find that their tax bills can be significantly higher because of lost deductions.
That is because the U.S. Internal Revenue Service has limited a company’s deductions on personal aircraft use to the estimated valuation of the executives’ flights.
As a result, companies forfeit a long list of tax deductions for the time the jets are used for personal trips, including pilots’ salaries, maintenance costs, insurance, aircraft depreciation and finance charges. Companies usually can deduct the full cost of these expenses when planes are used for business flights.
Exacerbating the issue, U.S. President Donald Trump’s 2017 Tax Cuts and Jobs Act eliminated deductions on two kinds of flights, said Ruth Wimer, a tax expert and partner at law firm Winston & Strawn LLP in Washington. They are for trips taken purely for business entertainment - such as a CEO taking clients to a golf tournament - and an executive’s use of a corporate jet to commute to work from his home, she said.
However, given that the U.S. Securities and Exchange Commission does not require disclosure of such lost deductions, investors are none the wiser.
U.S. business jet operations are on track to top 4.5 million arrivals and departures in 2019, the highest since 2007, according to U.S. Federal Aviation Administration data, though only a small percentage are by major company executives.
Popular perceptions of U.S. corporate jet use hit a nadir in 2008 as the financial crisis was worsening. That was when members of Congress blasted the CEOs of the three big U.S. automakers for flying to Washington on corporate jets to ask for financial help.
The fallout was so bad that in the terms of its bailout General Motors Co was initially barred from corporate jet use.
“But since then, the whole economy has turned around. The stock market is setting records and jet use has rebounded along with it,” said Nick Copley, president of SherpaReport.com, which analyzes private aviation trends.
GM is back to operating its own corporate aircraft, according to its disclosures.
‘HIDDEN ELEMENT OF EXECUTIVE PAY’
The true cost of corporate jets are a mystery for investors in many companies, though.
A Reuters analysis of proxy filings by companies in the S&P 500 found that only a handful detailed the value of lost deductions in their public filings.
Among the few to disclose was payments system and credit card company Visa Inc. Its lost deductions from the personal use of company jets by executives and their guests have more than quadrupled between 2016 and 2018, and totaled $4.8 million in its fiscal year to September 2018, according to the company’s last proxy statement.
Visa did not reply to messages seeking comment.
Another exception is cable and broadcast TV group Comcast Corp, which reported $8.8 million in disallowed deductions in 2018 on flights taken by its executives and guests.
Comcast declined to comment.
This is a hidden element of executive pay, said Dieter Waizenegger, executive director of CtW Investment Group, which represents union-sponsored pension funds with nearly 5 million members.
“Having a better sense of how expensive the C-suite is for the company is a very relevant number,” Waizenegger said. “If they aren’t disclosed, investors won’t know about these lost deductions.”
While the costs for Visa and Comcast, both with annual net earnings of more than $10 billion, may be a drop in the bucket, lost deductions for smaller companies can have a much bigger impact.
Earlier this year, San Francisco-based hedge fund Voce Capital Management LLC targeted disallowed tax deductions in its campaign to gain board seats at insurer Argo Group International Holdings Ltd.
The hedge fund argued the Bermuda-based insurance company, which had net income of $63.6 million in 2018, was hurting investors by racking up disallowed tax deductions from corporate jets “crisscrossing the globe at a dizzying pace.”
Argo declined to comment for this story. It has said previously that when its executives use corporate aircraft for personal trips they do so at their own expense. However, it does not disclose how that is calculated or detail any lost tax deductions as a result of personal travel.
Voce has not provided any estimates for lost tax deductions. It did not reply to messages seeking comment.
However, it did outline in a statement earlier this year what it said “most ordinary people would consider the trip of a lifetime,” by then Argo CEO Mark Watson and his family on an Argo Gulfstream jet during the 2017 Christmas holidays.
The trip began in San Antonio, Texas, with stops in Bermuda, New York, Copenhagen and the Malabar Coast of India, Jaipur in northern India, Amsterdam, and then back to Texas over a three-week period.
The company said in October the SEC was investigating Argo’s disclosures about executive compensation. Within a few weeks, the company announced Watson’s departure.
For the S&P 500 companies that pay for their CEOs to use corporate jets for private trips, the estimated median value of that flying climbed 11 percent last year to $107,286 from $96,532 in 2017, according to the latest available figures from compensation research firm Equilar Inc. That is up 27 percent from $84,636 in 2007, the year before the financial crisis.
This is taxable income for executives. The estimates are often based on what a first-class seat would have cost on a commercial flight rather than on the true, much higher cost of using a corporate jet.
But not only are companies left to pay the full cost of those flights, which can be for anything from family vacations to trips to major sports events or a commute from a distant family home, but they can also find that their tax bills can be significantly higher because of lost deductions.
That is because the U.S. Internal Revenue Service has limited a company’s deductions on personal aircraft use to the estimated valuation of the executives’ flights.
As a result, companies forfeit a long list of tax deductions for the time the jets are used for personal trips, including pilots’ salaries, maintenance costs, insurance, aircraft depreciation and finance charges. Companies usually can deduct the full cost of these expenses when planes are used for business flights.
Exacerbating the issue, U.S. President Donald Trump’s 2017 Tax Cuts and Jobs Act eliminated deductions on two kinds of flights, said Ruth Wimer, a tax expert and partner at law firm Winston & Strawn LLP in Washington. They are for trips taken purely for business entertainment - such as a CEO taking clients to a golf tournament - and an executive’s use of a corporate jet to commute to work from his home, she said.
However, given that the U.S. Securities and Exchange Commission does not require disclosure of such lost deductions, investors are none the wiser.
U.S. business jet operations are on track to top 4.5 million arrivals and departures in 2019, the highest since 2007, according to U.S. Federal Aviation Administration data, though only a small percentage are by major company executives.
Popular perceptions of U.S. corporate jet use hit a nadir in 2008 as the financial crisis was worsening. That was when members of Congress blasted the CEOs of the three big U.S. automakers for flying to Washington on corporate jets to ask for financial help.
The fallout was so bad that in the terms of its bailout General Motors Co was initially barred from corporate jet use.
“But since then, the whole economy has turned around. The stock market is setting records and jet use has rebounded along with it,” said Nick Copley, president of SherpaReport.com, which analyzes private aviation trends.
GM is back to operating its own corporate aircraft, according to its disclosures.
‘HIDDEN ELEMENT OF EXECUTIVE PAY’
The true cost of corporate jets are a mystery for investors in many companies, though.
A Reuters analysis of proxy filings by companies in the S&P 500 found that only a handful detailed the value of lost deductions in their public filings.
Among the few to disclose was payments system and credit card company Visa Inc. Its lost deductions from the personal use of company jets by executives and their guests have more than quadrupled between 2016 and 2018, and totaled $4.8 million in its fiscal year to September 2018, according to the company’s last proxy statement.
Visa did not reply to messages seeking comment.
Another exception is cable and broadcast TV group Comcast Corp, which reported $8.8 million in disallowed deductions in 2018 on flights taken by its executives and guests.
Comcast declined to comment.
This is a hidden element of executive pay, said Dieter Waizenegger, executive director of CtW Investment Group, which represents union-sponsored pension funds with nearly 5 million members.
“Having a better sense of how expensive the C-suite is for the company is a very relevant number,” Waizenegger said. “If they aren’t disclosed, investors won’t know about these lost deductions.”
While the costs for Visa and Comcast, both with annual net earnings of more than $10 billion, may be a drop in the bucket, lost deductions for smaller companies can have a much bigger impact.
Earlier this year, San Francisco-based hedge fund Voce Capital Management LLC targeted disallowed tax deductions in its campaign to gain board seats at insurer Argo Group International Holdings Ltd.
The hedge fund argued the Bermuda-based insurance company, which had net income of $63.6 million in 2018, was hurting investors by racking up disallowed tax deductions from corporate jets “crisscrossing the globe at a dizzying pace.”
Argo declined to comment for this story. It has said previously that when its executives use corporate aircraft for personal trips they do so at their own expense. However, it does not disclose how that is calculated or detail any lost tax deductions as a result of personal travel.
Voce has not provided any estimates for lost tax deductions. It did not reply to messages seeking comment.
However, it did outline in a statement earlier this year what it said “most ordinary people would consider the trip of a lifetime,” by then Argo CEO Mark Watson and his family on an Argo Gulfstream jet during the 2017 Christmas holidays.
The trip began in San Antonio, Texas, with stops in Bermuda, New York, Copenhagen and the Malabar Coast of India, Jaipur in northern India, Amsterdam, and then back to Texas over a three-week period.
The company said in October the SEC was investigating Argo’s disclosures about executive compensation. Within a few weeks, the company announced Watson’s departure.
The monopolization of milk
Claire Kelloway / Washington Monthly - alternet
November 21, 2019
Earlier this year, both The New York Times and National Public Radio reported that Chinese retaliatory tariffs in Trump’s trade war were accelerating the loss of U.S. dairy farms. In the first half of 2019, dairy exports to China were down 54 percent from the previous year, at a time when dairy farmers rely on exports to market a surplus of milk that’s driven milk prices below most farmers’ break-even point for nearly four years.
Meanwhile, Trump’s Secretary of Agriculture has told dairy farmers that the only way to stay afloat in these tough times is to get big, or get out, while promising new markets for U.S. dairy products in the yet-to-be-ratified U.S.-Mexico-Canada agreement.
These declarations reflect a powerful conventional wisdom about the plight of America’s farmers, namely, that agricultural consolidation is inevitable, and that American farmers must export their way to profitability. But that conventional wisdom, which is shared even by some leading voices in the Democratic Party, is seriously out of focus. Although trariffs and technology play a role, they are hardly the main factors in the dairy crisis.
One critical reason dairy farms feel pressure to consolidate is because milk retailers, buyers, and, processors have spent years consolidating around them—and neither the Trump nor previous administrations have done much to stop it. Now, a merger between major milk monopolists threatens to deal another blow to ailing dairy farmers, and its not clear if federal enforcers will do anything to stop it.
Last week, America’s largest dairy processor, Dean Foods, filed for Chapter 11 bankruptcy and announced that it was in advanced talks to sell to America’s largest cooperative, Dairy Farmers of America (DFA). These two goliaths are a case study in how unchecked mergers beget abusive monopolies that harm both farmers and consumers. But because Dean has filed for bankruptcy, this otherwise questionable union could avoid antitrust scrutiny under the failing firm defense, which allows for mergers when one firm would otherwise go out of business. In other words, two monopolists may soon join forces to create an even bigger monopoly.
DFA is the amalgamate of a three-way cooperative merger in late 1997 and Dean Foods rose to prominence by buying up regional milk brands since the 1980s. Today, DFA has a near monopoly in many regional markets, and controls roughly 30 percent of all raw milk in the U.S., handling more than two and a half times as much milk as the next largest co-op. At the same time, Dean sells 12 percent of all fluid milk and claimed to be five times larger than its next competitor in 2013.
As detailed by Leah Douglas in the Washington Monthly last year, these giants have been accused of colluding against the interest of dairy farmers and consumers for years. Two groups of farmers have settled multi-million-dollar antitrust claims with DFA, and another has spun-off a case to seek more damages in court. On the consumer end, Dean Foods reached an antitrust settlement with grocery chain Food Lion in 2017 over allegations thatthe firm avoided competing with DFA-owned National Dairy Holdings to raise retail milk prices.
A Dean Foods-DFA merger would make this otherwise illegal collusion perfectly legal, since our antitrust laws permit collusion once it occurs within a single corporation. “The more DFA expands downstream into fluid milk processing the greater the leverage it’s going to have in a variety of ways,” Peter Carstensen, a Professor Emeritus at the University of Wisconsin Law School and former Department of Justice antitrust attorney, told me. So-called “‘tacit’coordination becomes much more possible because … that will be an internal corporate [decision].”
The merger means that dairy farmers have even fewer processors competing to buy their milk. “As a producer, I’m concerned about DFA making this large a purchase,” said Charles Untz, a farmer and former DFA board member. “It puts a lot of the control of the fluid market in the hands of one co-op. That sends a little fear as far as the milk price goes, because they can literally dictate what they pay for milk.”
What’s more, the deal would exacerbate DFA’s conflict of interest between its processing operations and its members, since processing operations reap higher profits the less they pay farmers for milk. Proponents argue that investing in processing ultimately helps DFA farmers by guaranteeing markets and eliminating the middleman, but Carstensen argues that a fair share of processing profits “never seems to make it to the farmers.”
To make matters worse, DFA takes further cuts from farmers’ milk checks to pay for its processing business under the justification that these investments help farmers in the long-run. A recent report by the Government Accountability Office found that these investment withholdings lower farmers short-term earnings.
As a former DFA board member, Untz stands behind some of the group’s processing investments, but worries that this deal with Dean could put farmers at financial risk given its substantial size. “It’s easy to buy something when it’s going broke, it’s [harder] when you got to pay for it,” he said. “It would have to be paid for by the farmers and that’s a pretty scary situation after making a lot of other purchases.”
If DFA operated the way co-ops are supposed to, its farmer owners would be able to decide if a major deal like acquiring Dean Foods was worth the risk. But because of its vast size and entrenched management, farmers have little control—an issue highlighted in the GAO’s recent report. Ironically, a third of Dean’s bondhodlers who have hired an attorney to advocate for alternative bankruptcy solutions may have a better chance at blocking the sale.
Should a Dean and DFA deal go forward, the fate of farmers will ultimately be left to the Justice Department, which may or may not embrace the faulty logic of the failing firm defense.
Carstensen, for his part, argues that there are other ways to restructure Dean’s business without selling wholesale to DFA. “My preference would be to break Dean up, seperate out more facilities, and sell to separate operators,” he told me. In fact, Carstensen sees Dean’s relentless efforts to expand as part of the reason for its bankruptcy, calling into question the very notion that bigger is better.
Because, it turns out, the consolidation of American agriculture is not a universally efficient or inevitable result of market forces. It is the product of policies that permit and reward monopoly power, regardless of the risks to producers, consumers, and even, ironically, to monopolists themselves.
Meanwhile, Trump’s Secretary of Agriculture has told dairy farmers that the only way to stay afloat in these tough times is to get big, or get out, while promising new markets for U.S. dairy products in the yet-to-be-ratified U.S.-Mexico-Canada agreement.
These declarations reflect a powerful conventional wisdom about the plight of America’s farmers, namely, that agricultural consolidation is inevitable, and that American farmers must export their way to profitability. But that conventional wisdom, which is shared even by some leading voices in the Democratic Party, is seriously out of focus. Although trariffs and technology play a role, they are hardly the main factors in the dairy crisis.
One critical reason dairy farms feel pressure to consolidate is because milk retailers, buyers, and, processors have spent years consolidating around them—and neither the Trump nor previous administrations have done much to stop it. Now, a merger between major milk monopolists threatens to deal another blow to ailing dairy farmers, and its not clear if federal enforcers will do anything to stop it.
Last week, America’s largest dairy processor, Dean Foods, filed for Chapter 11 bankruptcy and announced that it was in advanced talks to sell to America’s largest cooperative, Dairy Farmers of America (DFA). These two goliaths are a case study in how unchecked mergers beget abusive monopolies that harm both farmers and consumers. But because Dean has filed for bankruptcy, this otherwise questionable union could avoid antitrust scrutiny under the failing firm defense, which allows for mergers when one firm would otherwise go out of business. In other words, two monopolists may soon join forces to create an even bigger monopoly.
DFA is the amalgamate of a three-way cooperative merger in late 1997 and Dean Foods rose to prominence by buying up regional milk brands since the 1980s. Today, DFA has a near monopoly in many regional markets, and controls roughly 30 percent of all raw milk in the U.S., handling more than two and a half times as much milk as the next largest co-op. At the same time, Dean sells 12 percent of all fluid milk and claimed to be five times larger than its next competitor in 2013.
As detailed by Leah Douglas in the Washington Monthly last year, these giants have been accused of colluding against the interest of dairy farmers and consumers for years. Two groups of farmers have settled multi-million-dollar antitrust claims with DFA, and another has spun-off a case to seek more damages in court. On the consumer end, Dean Foods reached an antitrust settlement with grocery chain Food Lion in 2017 over allegations thatthe firm avoided competing with DFA-owned National Dairy Holdings to raise retail milk prices.
A Dean Foods-DFA merger would make this otherwise illegal collusion perfectly legal, since our antitrust laws permit collusion once it occurs within a single corporation. “The more DFA expands downstream into fluid milk processing the greater the leverage it’s going to have in a variety of ways,” Peter Carstensen, a Professor Emeritus at the University of Wisconsin Law School and former Department of Justice antitrust attorney, told me. So-called “‘tacit’coordination becomes much more possible because … that will be an internal corporate [decision].”
The merger means that dairy farmers have even fewer processors competing to buy their milk. “As a producer, I’m concerned about DFA making this large a purchase,” said Charles Untz, a farmer and former DFA board member. “It puts a lot of the control of the fluid market in the hands of one co-op. That sends a little fear as far as the milk price goes, because they can literally dictate what they pay for milk.”
What’s more, the deal would exacerbate DFA’s conflict of interest between its processing operations and its members, since processing operations reap higher profits the less they pay farmers for milk. Proponents argue that investing in processing ultimately helps DFA farmers by guaranteeing markets and eliminating the middleman, but Carstensen argues that a fair share of processing profits “never seems to make it to the farmers.”
To make matters worse, DFA takes further cuts from farmers’ milk checks to pay for its processing business under the justification that these investments help farmers in the long-run. A recent report by the Government Accountability Office found that these investment withholdings lower farmers short-term earnings.
As a former DFA board member, Untz stands behind some of the group’s processing investments, but worries that this deal with Dean could put farmers at financial risk given its substantial size. “It’s easy to buy something when it’s going broke, it’s [harder] when you got to pay for it,” he said. “It would have to be paid for by the farmers and that’s a pretty scary situation after making a lot of other purchases.”
If DFA operated the way co-ops are supposed to, its farmer owners would be able to decide if a major deal like acquiring Dean Foods was worth the risk. But because of its vast size and entrenched management, farmers have little control—an issue highlighted in the GAO’s recent report. Ironically, a third of Dean’s bondhodlers who have hired an attorney to advocate for alternative bankruptcy solutions may have a better chance at blocking the sale.
Should a Dean and DFA deal go forward, the fate of farmers will ultimately be left to the Justice Department, which may or may not embrace the faulty logic of the failing firm defense.
Carstensen, for his part, argues that there are other ways to restructure Dean’s business without selling wholesale to DFA. “My preference would be to break Dean up, seperate out more facilities, and sell to separate operators,” he told me. In fact, Carstensen sees Dean’s relentless efforts to expand as part of the reason for its bankruptcy, calling into question the very notion that bigger is better.
Because, it turns out, the consolidation of American agriculture is not a universally efficient or inevitable result of market forces. It is the product of policies that permit and reward monopoly power, regardless of the risks to producers, consumers, and even, ironically, to monopolists themselves.
The plutocrats’ most effective secret weapon is the U.S. tax code
Jim Hightower / Creators Syndicate - alternet
November 12, 2019
I should start this homily on inequality by distinguishing income from wealth. Income is your annual wages or salary, as well as your earnings from a business, pension or government benefits such as Social Security, etc.
As the average U.S. worker’s real wages have stagnated for more than a decade, income disparity has become enormous. The bottom 90% of us average $30,000 a year, while the top 0.01% and 0.001% (about 1,400 taxpayers) rake in average annual incomes of $35.1 million and $152 million, respectively.
Meanwhile, even mediocre CEOs pocket many millions a year, and the greediest Wall Street hucksters annually amass more than $1 billion in booty. Until relatively recently, the ethical standard was for workers to gain a proportionate share of the income growth we generate. But in the last dozen years, the rich have been gobbling more and more of the total income pie, so the bottom half of Americans now get only 14%.
As gross as income inequality is, though, it’s dwarfed by the lesser-known wealth disparity that has engulfed our land, mocking our egalitarian pretensions.
Wealth is your net worth, the total financial value of every asset you own: your home(s), business, stocks, cash, real estate, cars, yachts, jewels, gold, art, toys and … well, everything, minus debts.
The rapidly widening divide between the rich and the rest of us is neither natural nor accidental. During the past half-century, myriad corporate and governmental decisions — from labor law to campaign finance regulations — have methodically slanted America’s economic and political systems so that money and power flow from the many to the few. The plutocrats’ most effective and least reported-on tool is America’s tax structure.
For most of us — workers, professionals, farmers, small-business folks, etc. — income taxes are generally straightforward. The rich are different. Multimillionaires and billionaires don’t usually draw the bulk of their fabulous incomes from paychecks but from their enormous financial assets, i.e., their wealth. This inherited or accumulated wealth generates “capital income” — and further wealth — with little or no work by the asset holder.
As the Center for American Progress’ excellent report “Ending Special Tax Treatment for the Very Wealthy” details, the moral basis of U.S. tax policy has been perverted since the 1980s by legislative and regulatory twists that tax work but let these massive accretions of wealth skate by virtually untouched. Thus, the ultrarich, who benefit the most from our country’s economy and public infrastructure, pay the smallest proportion of their incomes to sustain it.
Today’s tax laws offer a carnival of loop-the-loops, whirligigs and other tax-free joyrides for those who’ve stockpiled capital income. For example, while you might pay the top tax rate of 37% on ordinary income, someone selling a capital asset like stock pays only 20% tax on income from that sale.
Nearly 70% of such capital gains are made by America’s richest 1%, who reap trillions of dollars a year in savings through such special tax treatments. This windfall allows them to amass and concentrate even more of America’s wealth in their sheltered accounts and buy the political clout to push through laws that the great majority oppose — such as 2017’s Trump-McConnell trillion-dollar tax giveaway to the rich. (Facing overwhelming public opposition, the GOP wrote the bill behind closed doors, allowed no public hearings and rammed it into law on a partisan vote.)
And round and round it goes … unless and until we stop it.
Read the Center for American Progress’ report.
As the average U.S. worker’s real wages have stagnated for more than a decade, income disparity has become enormous. The bottom 90% of us average $30,000 a year, while the top 0.01% and 0.001% (about 1,400 taxpayers) rake in average annual incomes of $35.1 million and $152 million, respectively.
Meanwhile, even mediocre CEOs pocket many millions a year, and the greediest Wall Street hucksters annually amass more than $1 billion in booty. Until relatively recently, the ethical standard was for workers to gain a proportionate share of the income growth we generate. But in the last dozen years, the rich have been gobbling more and more of the total income pie, so the bottom half of Americans now get only 14%.
As gross as income inequality is, though, it’s dwarfed by the lesser-known wealth disparity that has engulfed our land, mocking our egalitarian pretensions.
Wealth is your net worth, the total financial value of every asset you own: your home(s), business, stocks, cash, real estate, cars, yachts, jewels, gold, art, toys and … well, everything, minus debts.
- Startling statistic: 1 in 5 Americans have zero net worth — or less. Many of us owe more than we own and, living paycheck to paycheck, can’t get ahead to build a nest egg.
- More startling statistic: U.S. wealth disparity is the greatest of any advanced economy in the world, with the richest 1% holding more of our nation’s wealth than the bottom 90% of us.
- Even more startling: Just three Americans — Jeff Bezos (Amazon), Bill Gates (Microsoft) and Warren Buffett (Berkshire Hathaway) — possess more personal wealth ($248 billion) than the entire bottom half. Yes, more than 165 million of us combined.
The rapidly widening divide between the rich and the rest of us is neither natural nor accidental. During the past half-century, myriad corporate and governmental decisions — from labor law to campaign finance regulations — have methodically slanted America’s economic and political systems so that money and power flow from the many to the few. The plutocrats’ most effective and least reported-on tool is America’s tax structure.
For most of us — workers, professionals, farmers, small-business folks, etc. — income taxes are generally straightforward. The rich are different. Multimillionaires and billionaires don’t usually draw the bulk of their fabulous incomes from paychecks but from their enormous financial assets, i.e., their wealth. This inherited or accumulated wealth generates “capital income” — and further wealth — with little or no work by the asset holder.
As the Center for American Progress’ excellent report “Ending Special Tax Treatment for the Very Wealthy” details, the moral basis of U.S. tax policy has been perverted since the 1980s by legislative and regulatory twists that tax work but let these massive accretions of wealth skate by virtually untouched. Thus, the ultrarich, who benefit the most from our country’s economy and public infrastructure, pay the smallest proportion of their incomes to sustain it.
Today’s tax laws offer a carnival of loop-the-loops, whirligigs and other tax-free joyrides for those who’ve stockpiled capital income. For example, while you might pay the top tax rate of 37% on ordinary income, someone selling a capital asset like stock pays only 20% tax on income from that sale.
Nearly 70% of such capital gains are made by America’s richest 1%, who reap trillions of dollars a year in savings through such special tax treatments. This windfall allows them to amass and concentrate even more of America’s wealth in their sheltered accounts and buy the political clout to push through laws that the great majority oppose — such as 2017’s Trump-McConnell trillion-dollar tax giveaway to the rich. (Facing overwhelming public opposition, the GOP wrote the bill behind closed doors, allowed no public hearings and rammed it into law on a partisan vote.)
And round and round it goes … unless and until we stop it.
Read the Center for American Progress’ report.
OP-ED ECONOMY & LABOR
Neither Democrats Nor Republicans Will Admit the Problem Is Capitalism Itself
BY Richard D. Wolff, Truthout
PUBLISHED September 30, 2019
Leaders around the world increasingly worry about the next capitalist recession (or economic downturn) now looming globally. In Europe’s strongest economy, Germany, a recession has already arrived in all but formal naming. U.S. manufacturing has declined for the last two quarters. Negative interest rates (where lenders pay borrowers to safely make a loan) are an increasingly widespread sign. Another sign is that lenders charge higher interest rates for short-term vs. long-term loans because they fear an impending recession will make borrowers’ ability to repay riskier in the short term. Anxieties about safety reflect the sense of an impending economic crash.
Trump is perhaps the most worried among world leaders fearing recession. Having made the economy a central issue for his re-election effort, he needs the U.S. economy to be in “great” shape. He repeats the few statistics available to support such claims. Yet Trump’s fears of a looming recession and its possible consequences for his 2020 re-election are also evident. He recently branded the man he made chair of the U.S. central bank, Jerome Powell, an “enemy” like the leader of China. Powell’s refusal to cut interest rates drastically – a classic tool to slow or postpone a recession – was Trump’s target. Trump recognizes, as other leaders do, that their political futures hinge on the next recession: on when it hits, how bad it gets, and how long it lasts. Recessions have always haunted the leaders of countries where capitalism is the prevailing system.
The basic cause of current and past downturns in capitalist economies is the system itself. It has been plagued by and subjected its people to the plague of cyclically recurring economic downturns for the last 250 years. They happen on average every four to seven years, although particular conditions of time and place can occasionally make the period longer or shorter. They happen wherever in the world the capitalist system came to prevail. As that prevalence became global, so too have the cyclical downturns.
Profit-driven market capitalism has mechanisms and incentives that generate growth but also repeatedly produce imbalances in the supplies and demands for inputs and outputs. Those imbalances cause price movements that eventually and adversely affect profits. Capitalists then cut back their investments resulting in the unemployment and reduced production that comprise and define recessions and downturns. The downturns offset the initial imbalances enabling capitalism’s cycle to repeat.
The recessions are thus not instances of market failures nor instances when markets function imperfectly because of government interventions. Rather, recessions and downturns are how market capitalism “corrects” the imbalances it also causes. In other words, market capitalism has mechanisms of self-healing alongside the mechanisms that make it sick. Those who live in capitalist systems repeatedly suffer through both mechanisms so long as that system prevails.
Capitalism’s downturns hurt political leaders’ careers because of their effects on the well-being of the masses of people. Widespread losses of jobs and businesses mean many mortgages go unpaid and homes get foreclosed. Parents cannot pay for children to finish higher education. People forego needed medical care leading to later, more costly treatment. Stresses from lost jobs and incomes strain family relations often to breaking points. As all levels of government suffer reduced tax revenues, budget deficits and public debts rise and public services decline just when they are needed more than ever because of the economic downturn. Popular dissatisfaction at downturns and all their effects usually spills over to dissatisfaction with politicians and parties in power when they occur.
Capitalist downturns also provoke thoughtful victims and observers to ask two questions: Why does it happen and what might be done to stop it from happening? Will those questions extend to asking why this system reproduces such downturns so recurringly throughout its history everywhere? Will the process of answering include a discussion of the systemic nature and causes of downturns? Will capitalism itself then become a target for criticism? Might that lead to the really big question lurking in such criticism: Can we do better than capitalism with a system that does not have or need recurring downturns?
Most political leaders of countries where capitalism is the prevailing system know, consciously or not, that their job descriptions include a commandment: Thou shalt not challenge or even question capitalism as a system. Instinctively, self-preservation drives them to find and focus public attention elsewhere. Plausible other, nonsystemic causes need to be defined and denounced. If needed, suitable scapegoats – notably those that have proved useful in the past – need to be blamed. Thus, Trump focuses attacks on the Federal Reserve as the short-run scapegoat (its failure to drop interest rates as far and fast as Trump wants will “cause” recession). Likewise, he attacks Democrats and mass media for exaggerating recession risks purposely to bring the recession that will undermine Trump’s re-election.
Similarly, Boris Johnson in the U.K. blames the recession looming there on the European Union (EU), on a delayed Brexit from the EU, on immigrants, and the other usual targets and scapegoats for his Conservative Party. Likewise, many other European leaders follow suit, blaming existing or looming recessions on immigration, on U.S.-China economic warfare, on Brexit, and so on. Much the same leadership patterns appear elsewhere.
It is important to notice how leaders carefully, consistently avoid any critique of the capitalist system and its internal structure for generating yet another economic downturn in its long, long history of doing that repeatedly. That absence speaks very loudly once you note it. The lack of a systemic critique soon becomes routinized. The public is, in effect, trained to see only the external, conjunctural conditions of, and influences, on economic downturns. The taboo applied generally to systemic critique in capitalism then covers the public discussion of capitalism’s regular, socially disruptive and immensely costly systemic instability.
Instead of systemic critique, we often get overheated debates over alternative policies to limit, contain and moderate recessions. Conservatives generally have wanted to limit government countercyclical intervention in the economy. They favor minimalism and monetary actions (changing interest rates, quantity of money in circulation). Liberals and social democrats favor larger government interventions with a focus more on fiscal policy (changing taxes and government spending). Thus today, Trump hammers the Fed to get lower interest rates but waffles on a large infrastructure spending program that Democrats prefer, for example.
Far less important than the details of these debates is their shared function. Both sides keep the public from discussing the systemic causes of recurring downturns. Both sides avoid any discussion of systemic change as a logical part of a rational response to the latest or impending downturn. However nuanced or mathematicized the professional economics literature on countercyclical policies, like the popular discourses, it too, keeps system change off the agenda for discussion, let alone policy analyses or prescriptions.
Rarely, a few debaters defensively acknowledge that systemic causes and changes might belong logically in the discussion of capitalist downturns. But doing so, they assure their audiences, would be simply “unrealistic.” That is because monetary and fiscal policies fall within what politicians can do, while system change does not. In short, “realism” is their defense for the limitations they place on their studies of and responses to capitalist downturns. But that defense fails. Why and how is it “realistic” to limit public and professional debate and discussion to policies that never end or stop the problem they purport to address?
In the U.S., every president since at least Franklin D. Roosevelt promised the American people that he would not only end the capitalist downturn his administration faced, but also that his policies would make sure such downturns would not afflict succeeding generations. No president could or did keep that promise.
Current Democratic candidates for president, including Elizabeth Warren and Bernie Sanders on the left, have not yet gone beyond the combination of fiscal and monetary anti-recessionary policies captured under the phrase “New Deal.” While proposals for a Green New Deal address environmental as well as anti-recessionary needs, they once again hesitate to go beyond them to propose basic system change.
Genuine “realism” would admit those policies’ failures and open the public and professional discussion of capitalism’s recurring recessions to systemic critiques and solutions involving systemic change.
Trump is perhaps the most worried among world leaders fearing recession. Having made the economy a central issue for his re-election effort, he needs the U.S. economy to be in “great” shape. He repeats the few statistics available to support such claims. Yet Trump’s fears of a looming recession and its possible consequences for his 2020 re-election are also evident. He recently branded the man he made chair of the U.S. central bank, Jerome Powell, an “enemy” like the leader of China. Powell’s refusal to cut interest rates drastically – a classic tool to slow or postpone a recession – was Trump’s target. Trump recognizes, as other leaders do, that their political futures hinge on the next recession: on when it hits, how bad it gets, and how long it lasts. Recessions have always haunted the leaders of countries where capitalism is the prevailing system.
The basic cause of current and past downturns in capitalist economies is the system itself. It has been plagued by and subjected its people to the plague of cyclically recurring economic downturns for the last 250 years. They happen on average every four to seven years, although particular conditions of time and place can occasionally make the period longer or shorter. They happen wherever in the world the capitalist system came to prevail. As that prevalence became global, so too have the cyclical downturns.
Profit-driven market capitalism has mechanisms and incentives that generate growth but also repeatedly produce imbalances in the supplies and demands for inputs and outputs. Those imbalances cause price movements that eventually and adversely affect profits. Capitalists then cut back their investments resulting in the unemployment and reduced production that comprise and define recessions and downturns. The downturns offset the initial imbalances enabling capitalism’s cycle to repeat.
The recessions are thus not instances of market failures nor instances when markets function imperfectly because of government interventions. Rather, recessions and downturns are how market capitalism “corrects” the imbalances it also causes. In other words, market capitalism has mechanisms of self-healing alongside the mechanisms that make it sick. Those who live in capitalist systems repeatedly suffer through both mechanisms so long as that system prevails.
Capitalism’s downturns hurt political leaders’ careers because of their effects on the well-being of the masses of people. Widespread losses of jobs and businesses mean many mortgages go unpaid and homes get foreclosed. Parents cannot pay for children to finish higher education. People forego needed medical care leading to later, more costly treatment. Stresses from lost jobs and incomes strain family relations often to breaking points. As all levels of government suffer reduced tax revenues, budget deficits and public debts rise and public services decline just when they are needed more than ever because of the economic downturn. Popular dissatisfaction at downturns and all their effects usually spills over to dissatisfaction with politicians and parties in power when they occur.
Capitalist downturns also provoke thoughtful victims and observers to ask two questions: Why does it happen and what might be done to stop it from happening? Will those questions extend to asking why this system reproduces such downturns so recurringly throughout its history everywhere? Will the process of answering include a discussion of the systemic nature and causes of downturns? Will capitalism itself then become a target for criticism? Might that lead to the really big question lurking in such criticism: Can we do better than capitalism with a system that does not have or need recurring downturns?
Most political leaders of countries where capitalism is the prevailing system know, consciously or not, that their job descriptions include a commandment: Thou shalt not challenge or even question capitalism as a system. Instinctively, self-preservation drives them to find and focus public attention elsewhere. Plausible other, nonsystemic causes need to be defined and denounced. If needed, suitable scapegoats – notably those that have proved useful in the past – need to be blamed. Thus, Trump focuses attacks on the Federal Reserve as the short-run scapegoat (its failure to drop interest rates as far and fast as Trump wants will “cause” recession). Likewise, he attacks Democrats and mass media for exaggerating recession risks purposely to bring the recession that will undermine Trump’s re-election.
Similarly, Boris Johnson in the U.K. blames the recession looming there on the European Union (EU), on a delayed Brexit from the EU, on immigrants, and the other usual targets and scapegoats for his Conservative Party. Likewise, many other European leaders follow suit, blaming existing or looming recessions on immigration, on U.S.-China economic warfare, on Brexit, and so on. Much the same leadership patterns appear elsewhere.
It is important to notice how leaders carefully, consistently avoid any critique of the capitalist system and its internal structure for generating yet another economic downturn in its long, long history of doing that repeatedly. That absence speaks very loudly once you note it. The lack of a systemic critique soon becomes routinized. The public is, in effect, trained to see only the external, conjunctural conditions of, and influences, on economic downturns. The taboo applied generally to systemic critique in capitalism then covers the public discussion of capitalism’s regular, socially disruptive and immensely costly systemic instability.
Instead of systemic critique, we often get overheated debates over alternative policies to limit, contain and moderate recessions. Conservatives generally have wanted to limit government countercyclical intervention in the economy. They favor minimalism and monetary actions (changing interest rates, quantity of money in circulation). Liberals and social democrats favor larger government interventions with a focus more on fiscal policy (changing taxes and government spending). Thus today, Trump hammers the Fed to get lower interest rates but waffles on a large infrastructure spending program that Democrats prefer, for example.
Far less important than the details of these debates is their shared function. Both sides keep the public from discussing the systemic causes of recurring downturns. Both sides avoid any discussion of systemic change as a logical part of a rational response to the latest or impending downturn. However nuanced or mathematicized the professional economics literature on countercyclical policies, like the popular discourses, it too, keeps system change off the agenda for discussion, let alone policy analyses or prescriptions.
Rarely, a few debaters defensively acknowledge that systemic causes and changes might belong logically in the discussion of capitalist downturns. But doing so, they assure their audiences, would be simply “unrealistic.” That is because monetary and fiscal policies fall within what politicians can do, while system change does not. In short, “realism” is their defense for the limitations they place on their studies of and responses to capitalist downturns. But that defense fails. Why and how is it “realistic” to limit public and professional debate and discussion to policies that never end or stop the problem they purport to address?
In the U.S., every president since at least Franklin D. Roosevelt promised the American people that he would not only end the capitalist downturn his administration faced, but also that his policies would make sure such downturns would not afflict succeeding generations. No president could or did keep that promise.
Current Democratic candidates for president, including Elizabeth Warren and Bernie Sanders on the left, have not yet gone beyond the combination of fiscal and monetary anti-recessionary policies captured under the phrase “New Deal.” While proposals for a Green New Deal address environmental as well as anti-recessionary needs, they once again hesitate to go beyond them to propose basic system change.
Genuine “realism” would admit those policies’ failures and open the public and professional discussion of capitalism’s recurring recessions to systemic critiques and solutions involving systemic change.
Here’s why Capitalism vs Socialism is a false choice
DAVID KORTEN, YES! MAGAZINE - COMMENTARY - raw story
05 MAY 2019 AT 01:25 ET
Economic power is—and always has been—the foundation of political power. Those who control the peoples’ means of living rule.
In a democracy, however, each person must have a voice in the control and management of the means of their living. That requires more than a vote expressing a preference for which establishment-vetted candidatewill be in power for the next few years.
My previous column, “Confronting the Great American Myth,” distinguished true democracy from government by the wealthy, a plutocracy. Contrary to popular belief, the U.S. Constitution was written by representatives of the new nation’s wealthy class to keep people like themselves in power.
On Jan. 4, the newly elected Democratic majority in the U.S. House of Representatives introduced HR1, the For the People Act of 2019. Its aim is to make voting easier, reduce the influence of big money, and curtail gerrymandering. Even before it was introduced, the champions of having rich people rule were falsely characterizing it as an attack on the freedom of speech of ordinary Americans.
The provisions of HR1 represent an important step in a transition from the plutocracy we have to the democracy most Americans want. Unfortunately, political gridlock assures that HR1 has no chance of becoming law until at least after the 2020 election. Yet the popular yearning for democracy reflected in that bill makes this a propitious moment for a serious conversation about what a true democracy might look like and why it would be a good idea.
We stand at an epic choice point for our nation and for humanity. The plutocracy now in place has put us on a path to self-extinction—a future with no winners, rich or poor. We must now seek a path that restores the health of Earth’s regenerative systems while securing equity, material sufficiency, peace, and spiritual abundance for all—exactly the opposite of the plutocrats’ drive to secure the power, privilege, and material excess for themselves. This makes democracy far more than just a good idea; it is now an imperative.
The power of plutocracy depends on keeping the people divided against each other along gender, racial, religious, or other fault lines. The goal is to divert our attention from themselves so that they can maintain their power and continue to amass wealth.
Champions of plutocracy would also have us believe that we must choose between two options: capitalism (private ownership and management) or socialism (government ownership and management). They prefer we not notice that in their most familiar forms, both capitalism and socialism feature an undemocratic concentration of control over the means of living in the hands of the few. Democracy is essential for either to work effectively for the benefit of all.
Plutocrats generally favor capitalism, because in the extreme form we now experience, it supports virtually unlimited concentrations of wealth and power. Its practitioners are also drawn by capitalism’s ideological claim that unregulated markets will assure that the presumed benefits of a growing economy will be shared by everyone, and so the rich need not bear any personal responsibility beyond maximizing their personal financial gain.
The critical economic and political question for humanity is not whether our means of living will be controlled by corporations or government, but whether control will be concentrated for the benefit of the few or dispersed, with benefits shared by everyone.
Support for the needed economic transition can come from many places. Just as people are not necessarily racist because they are White or misogynistic because they are male, people do not necessarily become plutocrats just because they are rich. Many wealthy people work actively for economic and political democracy and support radical wealth redistribution, including through support of progressive taxation and significant taxing of inherited wealth.
The political and economic democracy we seek cannot be easily characterized as either capitalist or socialist. It is a system of substantially self-reliant local economies composed of locally owned enterprises and community-secured safety nets with responsibilities shared by families, charities, and governments. Such a system facilitates self-organizing to create healthy, happy, and productive communities.
In our complex and interconnected world, this system will require national and global institutions responsive to the people’s will and well-being to support cooperation and sharing among communities, but the real power will be dispersed locally. There would be ample room for competition among local communities to be the most beautiful, healthy, democratic, creative, and generous. There is no place for colonizing the resources of others or for predatory corporations.
These communities will most likely feature cooperative and family ownership of businesses. They will also recognize the rights of nature and their shared responsibility to care for the commons and to share its gifts.
The rules of plutocracy evolved over thousands of years. We have far less time to come up with suitable rules for democratic alternatives. That search must quickly become a centerpiece of public discussion.
In a democracy, however, each person must have a voice in the control and management of the means of their living. That requires more than a vote expressing a preference for which establishment-vetted candidatewill be in power for the next few years.
My previous column, “Confronting the Great American Myth,” distinguished true democracy from government by the wealthy, a plutocracy. Contrary to popular belief, the U.S. Constitution was written by representatives of the new nation’s wealthy class to keep people like themselves in power.
On Jan. 4, the newly elected Democratic majority in the U.S. House of Representatives introduced HR1, the For the People Act of 2019. Its aim is to make voting easier, reduce the influence of big money, and curtail gerrymandering. Even before it was introduced, the champions of having rich people rule were falsely characterizing it as an attack on the freedom of speech of ordinary Americans.
The provisions of HR1 represent an important step in a transition from the plutocracy we have to the democracy most Americans want. Unfortunately, political gridlock assures that HR1 has no chance of becoming law until at least after the 2020 election. Yet the popular yearning for democracy reflected in that bill makes this a propitious moment for a serious conversation about what a true democracy might look like and why it would be a good idea.
We stand at an epic choice point for our nation and for humanity. The plutocracy now in place has put us on a path to self-extinction—a future with no winners, rich or poor. We must now seek a path that restores the health of Earth’s regenerative systems while securing equity, material sufficiency, peace, and spiritual abundance for all—exactly the opposite of the plutocrats’ drive to secure the power, privilege, and material excess for themselves. This makes democracy far more than just a good idea; it is now an imperative.
The power of plutocracy depends on keeping the people divided against each other along gender, racial, religious, or other fault lines. The goal is to divert our attention from themselves so that they can maintain their power and continue to amass wealth.
Champions of plutocracy would also have us believe that we must choose between two options: capitalism (private ownership and management) or socialism (government ownership and management). They prefer we not notice that in their most familiar forms, both capitalism and socialism feature an undemocratic concentration of control over the means of living in the hands of the few. Democracy is essential for either to work effectively for the benefit of all.
Plutocrats generally favor capitalism, because in the extreme form we now experience, it supports virtually unlimited concentrations of wealth and power. Its practitioners are also drawn by capitalism’s ideological claim that unregulated markets will assure that the presumed benefits of a growing economy will be shared by everyone, and so the rich need not bear any personal responsibility beyond maximizing their personal financial gain.
The critical economic and political question for humanity is not whether our means of living will be controlled by corporations or government, but whether control will be concentrated for the benefit of the few or dispersed, with benefits shared by everyone.
Support for the needed economic transition can come from many places. Just as people are not necessarily racist because they are White or misogynistic because they are male, people do not necessarily become plutocrats just because they are rich. Many wealthy people work actively for economic and political democracy and support radical wealth redistribution, including through support of progressive taxation and significant taxing of inherited wealth.
The political and economic democracy we seek cannot be easily characterized as either capitalist or socialist. It is a system of substantially self-reliant local economies composed of locally owned enterprises and community-secured safety nets with responsibilities shared by families, charities, and governments. Such a system facilitates self-organizing to create healthy, happy, and productive communities.
In our complex and interconnected world, this system will require national and global institutions responsive to the people’s will and well-being to support cooperation and sharing among communities, but the real power will be dispersed locally. There would be ample room for competition among local communities to be the most beautiful, healthy, democratic, creative, and generous. There is no place for colonizing the resources of others or for predatory corporations.
These communities will most likely feature cooperative and family ownership of businesses. They will also recognize the rights of nature and their shared responsibility to care for the commons and to share its gifts.
The rules of plutocracy evolved over thousands of years. We have far less time to come up with suitable rules for democratic alternatives. That search must quickly become a centerpiece of public discussion.
Six people who prove capitalism is broken in America
Over the last few years, the Guardian talked to many people for whom capitalism isn’t working – here are a few of their stories
Lauren Aratani
the guardian
Thu 2 May 2019 10.43 EDT
Work hard, get paid, thrive. That’s the way the system is supposed to work. If you’re not thriving, according to this logic, you’re simply not working hard enough.
But that’s not the reality many people live, even in wealthy, industrialized nations like the United States. For many Americans, long hours and unrelenting dedication to their job are not enough to save them from homelessness, debt, and other humiliations.
In 2018, the world’s richest 2,200 billionaires saw a 12% increase in wealth, according to a report by the development charity Oxfam, while the world’s poorest half saw an 11% drop in wealth. And in the United States today, the richest three Americans hold more wealth than the bottom 50% of the country.
This widening gulf means, on the one hand, stories of the children of billionaires ruining their parents’ multimillion-dollar paintings with cornflakes – and, on the other, the many employees of billion-dollar companies who struggle to pay rent.
Over the last few years, the Guardian talked to many people for whom capitalism as we know it isn’t working. Here are a few of their stories:
The Lyft driver who says she’s lucky to make $8 an hour, after expenses
Many Uber and Lyft drivers in the United States get paid less than minimum wage and struggle to cover the expenses of the job. Some drivers, like Nicole Moore, have begun to organize to fight for their rights as drivers. “There is no reason this should be the fastest-growing low-wage job in America,” she said.
The Amazon warehouse worker who lives out of her car
Numerous Amazon warehouse workers have filed cases against the company for leaving them to suffer through workplace injuries with little to no pay to cover health costs. Vickie Shannon Allen, who works at a fulfillment center in Haslet, Texas, hurt her back while working as a lineman. Between healthcare costs and weeks when her back prevented her from working and getting paid, she has become homeless. She started living in her car, parked outside the very warehouse where she works. “They cost me my home, they screwed me over and I go days without eating,” she told the Guardian last year.
The Virginia boy who takes classes in plywood trailers while the state promises Amazon huge tax breaks
With too many students and not enough space in its school district, Fairfax county in Virginia has turned to desperate measures to accommodate its students. Over 22,000 students in the county – the third-richest in America – attend classes in trailers made of cheaply constructed plywood. The state’s governor has proposed increasing education funding by $269m, yet he offered Amazon nearly three times as much in tax breaks, leaving teachers and parents feeling like their children are being robbed.
Rachna Sizemore, whose son is autistic and was transferred to a school nearly half an hour away because of overcrowding, is worried about the potential dangers of learning in a trailer. “In this era of school shootings, having our children in trailers, which [are] open to the public without any of the security that we have for the buildings … that’s not safe and that’s not a good learning environment,” she told the Guardian.
A Tesla factory worker who was told to keep working after his co-worker on the assembly line passed out from exhaustion
“I’ve seen people pass out, hit the floor like a pancake and smash their face open,” Jonathan Galescu, a production technician at Tesla, told the Guardian in 2017. “They just send us to work around him while he’s still lying on the floor.”
The single mother of two who works six days a week at a fast food restaurant, yet is homeless
Fran Marion works six days a week at a Popeyes in Kansas City for $9.50 an hour. When the city condemned the house she was living in because her landlord refused to make repairs, she was made homeless. Her two teenage children live with a friend, and she stays with a co-worker. “Not having a home, honestly, you guys, it makes me feel like I am a failure. Like I have let my kids down,” Marion told the Guardian in August 2017.
The laid-off GM worker who feels cheated by Trump’s broken promises
“It’s been two years now since [Trump’s] election and all I see is more job losses,” Tommy Wolikow of Lordstown, Ohio, said last year. “I went back to school, I’m a qualified diesel technician, I got my class A [commercial] driver’s license. I did what you are supposed to do. The jobs that are out there in my area are all low-paying. I can’t raise my three daughters on those wages. People are picking up and leaving.”
But that’s not the reality many people live, even in wealthy, industrialized nations like the United States. For many Americans, long hours and unrelenting dedication to their job are not enough to save them from homelessness, debt, and other humiliations.
In 2018, the world’s richest 2,200 billionaires saw a 12% increase in wealth, according to a report by the development charity Oxfam, while the world’s poorest half saw an 11% drop in wealth. And in the United States today, the richest three Americans hold more wealth than the bottom 50% of the country.
This widening gulf means, on the one hand, stories of the children of billionaires ruining their parents’ multimillion-dollar paintings with cornflakes – and, on the other, the many employees of billion-dollar companies who struggle to pay rent.
Over the last few years, the Guardian talked to many people for whom capitalism as we know it isn’t working. Here are a few of their stories:
The Lyft driver who says she’s lucky to make $8 an hour, after expenses
Many Uber and Lyft drivers in the United States get paid less than minimum wage and struggle to cover the expenses of the job. Some drivers, like Nicole Moore, have begun to organize to fight for their rights as drivers. “There is no reason this should be the fastest-growing low-wage job in America,” she said.
The Amazon warehouse worker who lives out of her car
Numerous Amazon warehouse workers have filed cases against the company for leaving them to suffer through workplace injuries with little to no pay to cover health costs. Vickie Shannon Allen, who works at a fulfillment center in Haslet, Texas, hurt her back while working as a lineman. Between healthcare costs and weeks when her back prevented her from working and getting paid, she has become homeless. She started living in her car, parked outside the very warehouse where she works. “They cost me my home, they screwed me over and I go days without eating,” she told the Guardian last year.
The Virginia boy who takes classes in plywood trailers while the state promises Amazon huge tax breaks
With too many students and not enough space in its school district, Fairfax county in Virginia has turned to desperate measures to accommodate its students. Over 22,000 students in the county – the third-richest in America – attend classes in trailers made of cheaply constructed plywood. The state’s governor has proposed increasing education funding by $269m, yet he offered Amazon nearly three times as much in tax breaks, leaving teachers and parents feeling like their children are being robbed.
Rachna Sizemore, whose son is autistic and was transferred to a school nearly half an hour away because of overcrowding, is worried about the potential dangers of learning in a trailer. “In this era of school shootings, having our children in trailers, which [are] open to the public without any of the security that we have for the buildings … that’s not safe and that’s not a good learning environment,” she told the Guardian.
A Tesla factory worker who was told to keep working after his co-worker on the assembly line passed out from exhaustion
“I’ve seen people pass out, hit the floor like a pancake and smash their face open,” Jonathan Galescu, a production technician at Tesla, told the Guardian in 2017. “They just send us to work around him while he’s still lying on the floor.”
The single mother of two who works six days a week at a fast food restaurant, yet is homeless
Fran Marion works six days a week at a Popeyes in Kansas City for $9.50 an hour. When the city condemned the house she was living in because her landlord refused to make repairs, she was made homeless. Her two teenage children live with a friend, and she stays with a co-worker. “Not having a home, honestly, you guys, it makes me feel like I am a failure. Like I have let my kids down,” Marion told the Guardian in August 2017.
The laid-off GM worker who feels cheated by Trump’s broken promises
“It’s been two years now since [Trump’s] election and all I see is more job losses,” Tommy Wolikow of Lordstown, Ohio, said last year. “I went back to school, I’m a qualified diesel technician, I got my class A [commercial] driver’s license. I did what you are supposed to do. The jobs that are out there in my area are all low-paying. I can’t raise my three daughters on those wages. People are picking up and leaving.”
Here’s Exactly Who’s Profiting from the War on Yemen
And how the U.S. could stop weapon sales if it wanted to.
the fundamentals of slave-capitalism!!!
Here’s the big problem with American capitalism
MARSHALL AUERBACK, INDEPENDENT MEDIA INSTITUTE - COMMENTARY - raw story
18 DEC 2018 AT 09:14 ET
It’s part of the American experience to find yourself in an elevator, in an airplane terminal, or at home, looking at a screen with stock numbers whizzing by, and people yammering about how America is somewhere on the spectrum between wonderful or about to disintegrate because of a 5 percent swing in Boeing or Microsoft stock. How did we get to a national economic conversation that is dominated by chatter on the rise and fall of stocks, when it’s just a small part of economic life for most of the 300 million people who live in this country?
American-style shareholder capitalism, with its incessant focus on maximizing stock value, started gaining primacy over European/Japanese-style stakeholder capitalism in the 1980s. It was premised on a notion best epitomized by Milton Friedman that the only social responsibility of a corporation is to increase its profits, laying the groundwork for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits therefore should be generated first and foremost with a view toward maximizing the interests of shareholders, not the executives or managers who (according to the theory) were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large. The economists who built on Friedman’s work, along with increasingly aggressive institutional investors, devised solutions to ensure the primacy of enhancing shareholder value, via the advocacy of hostile takeovers, the promotion of massive stock buybacks or repurchases (which increased the stock value), higher dividend payouts and, most importantly, the introduction of stock-based pay for top executives in order to align their interests to those of the shareholders. These ideas were influenced by the idea that corporate efficiency and profitability were impinged upon by archaic regulation and unionization, which, according to the theory, precluded the ability to compete globally.
While tying corporate decision-making and its performance to stock price to incentivize efficient resource allocation and productive transformations sounds superficially attractive, the champions of this theory never bothered to show how these outcomes could be achieved if shareholder capitalism was fully implemented. In fact, the historical experience has been abysmal. GM and GE, to cite two prominent examples, were once poster boys for the success of American capitalism. More recently, they are presumed to be speculative candidates for bankruptcy. They are but a symptom of the bigger problem. And there is a growing skepticism in the ability of American capitalism to deliver on its economic promise of prosperity.
In the 1980s, we were still at the embryonic stages of shareholder capitalism, and American institutional investors aggressively proselytized both domestically and abroad. During that time, when I was working as a fund manager in Japan, Toyota became a particularly prominent target, on the grounds that the company wasn’t using its substantial cash pile “productively.” The argument was made that the company’s management was maximizing their self-regarding interests over shareholder value. Holding onto the cash reserves was thought to be a mistake, lest managers be tempted to make unproductive investments. This despite that fact that by any traditional metric—profitability, market share, sales, return on investments—Toyota remained a remarkably successful company.
Backed by domestic institutions (particularly from their associated companies), Toyota’s management resisted the push of the foreign investors like myself, many of whom were leading the charge to distribute the company cash pile to shareholders. Toyota management made the seemingly anachronistic decision that the cash was best retained to invest in future lines and cope with changing market conditions, as well as retaining valuable and skilled employees, who were key to the company’s growing productivity and global sales success (even at a cost of some short-term harm to profitability). They also argued that elevating dividend payouts would derogate from needed research and development, which was required to retain the company’s edge over global competitors.
Given that Toyota has retained the ranking of most valuable car brand in the world six years running (in fact, number one in 11 of the 13 years in which the survey has been conducted), senior management’s strategy appears to have been vindicated. There is stable ownership and decision-making structure. Focus is on enterprise-specific skill development and cultivating capabilities in-house. Toyota consolidates product and its production process planning and ensures that sufficient training and equipment (pertaining to processes required for new products) are provided or developed in-house. It largely finances operations using its internal cash flow. Neither stock buybacks nor high-dividend payouts are the norm. In short, the company has developed a long-term development strategy that fuses innovation with high-quality, sustainable management practices that operate durably at scale for many millions of customers around the world.
By contrast, Professor William Lazonick’s seminal study, “Profits without Prosperity,” underscores the notion that top-level U.S. executives, whose incentives have been increasingly based on stock-based financial targets, have lost the ability to develop the innovative capabilities of an enterprise. Instead, spurred by the prospect of stock gains, the executives have channeled their focus toward “short-termist” achievement of targets (such as by giving out excessive loans to finance customers’ purchases to boost quarterly sales targets, as Detroit’s “Big Three” have done repeatedly), increasing share valuations and increasing the variable component of their compensation (by share repurchases). As a result, their enterprises have become financialized, and their balance sheets severely weakened. The shortcomings of the companies that have fallen victim to this trend have been masked by the performance of the company stock, in itself a mirage brought about by financial engineering to boost share prices, as Rana Foroohar has documented in her book, Makers and Takers.
The focus on short-termism has ultimately degraded the financial health of the corporations concerned, as well as cannibalizing future investment opportunities. As Lazonick pointed out, in many instances where U.S. executives have resorted to stock repurchases, payouts were well above the net income, and in many cases occurred even when the company wasn’t profitable; certainly, there was little correlation to company performance per se. Cash that could be deployed toward creating a better product line has instead been spent on stock buybacks, while the strategy of expanding loans to customers to purchase the underlying product effectively steals from future sales, as well as expanding corporate leverage. Another way companies catered to shareholder capitalism was by selling off capital-intensive, but cash flow-generative businesses, as Jack Welch did when he became CEO of GE and shifted the company focus away from sales of jet engines, nuclear reactors and mining equipment, instead building up GE Capital, which ultimately became another “too big to fail” financial behemoth (and has done much to contribute to GE’s deterioration).
Additionally, a deregulated labor market that allows for “costless” hiring or firing (“costless” only from the perspective of management, obviously, not labor) in reality has reinforced this short-termism and further degraded long-term corporate performance. Executives abuse the “benefits” of a largely deregulated labor market to sack workers with impunity, thereby generating the “free” cash flow that can be used instead for share repurchases, even as the company loses valuable labor expertise, which can generate future production bottlenecks.
One must also question the notion that the stock market is an efficient gauge of corporate performance, especially when management is prone to what Professor Bill Black calls “control fraud.” There is an asymmetry of information between corporate insiders and institutional shareholders, which means that putting a “price” on managerialism so as to discipline them if the management engages in unproductive investments is a fantasy. Exposed to the harsh light of reality, this is an especially absurd idea that only an economist could love, given the divergent time frames between institutional investors monitored on the basis of quarterly performance versus executives who must make investment decisions, the results of which may not be established for years. This is exacerbated by the ludicrous notion that dilettante fund managers, relatively unschooled in anything (other than MBA degrees that propagate concepts like maximizing shareholder value), could possibly be superior judges of corporate performance and allocators of capital against those who have literally learned the business from the factory floor up.
In the “downsize and distribute” regime of American shareholder capitalism, the labor force is downsized, certain operations are discontinued, and the cash retrieved from these processes is distributed rather than retaining and reinvesting in developing the productive capabilities. American executives have proven all too willing to disgorge cash annually on buybacks at the expense of identifying the investments in organization and technology that were needed to remain competitive in the industry in which they operated.
In contrast to Germany or Japan, real engineering has been replaced by financial engineering. This is what the doctrine of “shareholder value” has actually delivered: unproductive share buybacks, which manipulate short-term share price performance, even as it derogates from long-term research and development, engenders persistent short-termism in corporate decision-making, and induces value extraction, rather than value creation. All of this financial vandalism has created multiple economic crises, long recessions, growing inequality and decades of stagnant incomes for the average American worker. Shareholder value in truth has created no real value at all.
American-style shareholder capitalism, with its incessant focus on maximizing stock value, started gaining primacy over European/Japanese-style stakeholder capitalism in the 1980s. It was premised on a notion best epitomized by Milton Friedman that the only social responsibility of a corporation is to increase its profits, laying the groundwork for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits therefore should be generated first and foremost with a view toward maximizing the interests of shareholders, not the executives or managers who (according to the theory) were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large. The economists who built on Friedman’s work, along with increasingly aggressive institutional investors, devised solutions to ensure the primacy of enhancing shareholder value, via the advocacy of hostile takeovers, the promotion of massive stock buybacks or repurchases (which increased the stock value), higher dividend payouts and, most importantly, the introduction of stock-based pay for top executives in order to align their interests to those of the shareholders. These ideas were influenced by the idea that corporate efficiency and profitability were impinged upon by archaic regulation and unionization, which, according to the theory, precluded the ability to compete globally.
While tying corporate decision-making and its performance to stock price to incentivize efficient resource allocation and productive transformations sounds superficially attractive, the champions of this theory never bothered to show how these outcomes could be achieved if shareholder capitalism was fully implemented. In fact, the historical experience has been abysmal. GM and GE, to cite two prominent examples, were once poster boys for the success of American capitalism. More recently, they are presumed to be speculative candidates for bankruptcy. They are but a symptom of the bigger problem. And there is a growing skepticism in the ability of American capitalism to deliver on its economic promise of prosperity.
In the 1980s, we were still at the embryonic stages of shareholder capitalism, and American institutional investors aggressively proselytized both domestically and abroad. During that time, when I was working as a fund manager in Japan, Toyota became a particularly prominent target, on the grounds that the company wasn’t using its substantial cash pile “productively.” The argument was made that the company’s management was maximizing their self-regarding interests over shareholder value. Holding onto the cash reserves was thought to be a mistake, lest managers be tempted to make unproductive investments. This despite that fact that by any traditional metric—profitability, market share, sales, return on investments—Toyota remained a remarkably successful company.
Backed by domestic institutions (particularly from their associated companies), Toyota’s management resisted the push of the foreign investors like myself, many of whom were leading the charge to distribute the company cash pile to shareholders. Toyota management made the seemingly anachronistic decision that the cash was best retained to invest in future lines and cope with changing market conditions, as well as retaining valuable and skilled employees, who were key to the company’s growing productivity and global sales success (even at a cost of some short-term harm to profitability). They also argued that elevating dividend payouts would derogate from needed research and development, which was required to retain the company’s edge over global competitors.
Given that Toyota has retained the ranking of most valuable car brand in the world six years running (in fact, number one in 11 of the 13 years in which the survey has been conducted), senior management’s strategy appears to have been vindicated. There is stable ownership and decision-making structure. Focus is on enterprise-specific skill development and cultivating capabilities in-house. Toyota consolidates product and its production process planning and ensures that sufficient training and equipment (pertaining to processes required for new products) are provided or developed in-house. It largely finances operations using its internal cash flow. Neither stock buybacks nor high-dividend payouts are the norm. In short, the company has developed a long-term development strategy that fuses innovation with high-quality, sustainable management practices that operate durably at scale for many millions of customers around the world.
By contrast, Professor William Lazonick’s seminal study, “Profits without Prosperity,” underscores the notion that top-level U.S. executives, whose incentives have been increasingly based on stock-based financial targets, have lost the ability to develop the innovative capabilities of an enterprise. Instead, spurred by the prospect of stock gains, the executives have channeled their focus toward “short-termist” achievement of targets (such as by giving out excessive loans to finance customers’ purchases to boost quarterly sales targets, as Detroit’s “Big Three” have done repeatedly), increasing share valuations and increasing the variable component of their compensation (by share repurchases). As a result, their enterprises have become financialized, and their balance sheets severely weakened. The shortcomings of the companies that have fallen victim to this trend have been masked by the performance of the company stock, in itself a mirage brought about by financial engineering to boost share prices, as Rana Foroohar has documented in her book, Makers and Takers.
The focus on short-termism has ultimately degraded the financial health of the corporations concerned, as well as cannibalizing future investment opportunities. As Lazonick pointed out, in many instances where U.S. executives have resorted to stock repurchases, payouts were well above the net income, and in many cases occurred even when the company wasn’t profitable; certainly, there was little correlation to company performance per se. Cash that could be deployed toward creating a better product line has instead been spent on stock buybacks, while the strategy of expanding loans to customers to purchase the underlying product effectively steals from future sales, as well as expanding corporate leverage. Another way companies catered to shareholder capitalism was by selling off capital-intensive, but cash flow-generative businesses, as Jack Welch did when he became CEO of GE and shifted the company focus away from sales of jet engines, nuclear reactors and mining equipment, instead building up GE Capital, which ultimately became another “too big to fail” financial behemoth (and has done much to contribute to GE’s deterioration).
Additionally, a deregulated labor market that allows for “costless” hiring or firing (“costless” only from the perspective of management, obviously, not labor) in reality has reinforced this short-termism and further degraded long-term corporate performance. Executives abuse the “benefits” of a largely deregulated labor market to sack workers with impunity, thereby generating the “free” cash flow that can be used instead for share repurchases, even as the company loses valuable labor expertise, which can generate future production bottlenecks.
One must also question the notion that the stock market is an efficient gauge of corporate performance, especially when management is prone to what Professor Bill Black calls “control fraud.” There is an asymmetry of information between corporate insiders and institutional shareholders, which means that putting a “price” on managerialism so as to discipline them if the management engages in unproductive investments is a fantasy. Exposed to the harsh light of reality, this is an especially absurd idea that only an economist could love, given the divergent time frames between institutional investors monitored on the basis of quarterly performance versus executives who must make investment decisions, the results of which may not be established for years. This is exacerbated by the ludicrous notion that dilettante fund managers, relatively unschooled in anything (other than MBA degrees that propagate concepts like maximizing shareholder value), could possibly be superior judges of corporate performance and allocators of capital against those who have literally learned the business from the factory floor up.
In the “downsize and distribute” regime of American shareholder capitalism, the labor force is downsized, certain operations are discontinued, and the cash retrieved from these processes is distributed rather than retaining and reinvesting in developing the productive capabilities. American executives have proven all too willing to disgorge cash annually on buybacks at the expense of identifying the investments in organization and technology that were needed to remain competitive in the industry in which they operated.
In contrast to Germany or Japan, real engineering has been replaced by financial engineering. This is what the doctrine of “shareholder value” has actually delivered: unproductive share buybacks, which manipulate short-term share price performance, even as it derogates from long-term research and development, engenders persistent short-termism in corporate decision-making, and induces value extraction, rather than value creation. All of this financial vandalism has created multiple economic crises, long recessions, growing inequality and decades of stagnant incomes for the average American worker. Shareholder value in truth has created no real value at all.
Capitalism Is Not the “Market System”
BY
Richard D. Wolff Truthout
With the Democratic Socialists of America now counting 48,000 people within its membership and socialist candidates such as Alexandria Ocasio-Cortez pushing for free universities and Medicare for All, Americans are once again discussing capitalism versus socialism. Fortunately, they are not doing so in the old Cold War manner of uncritically celebrating one while demonizing the other. Rather, it’s a debate over the choice Americans must make now between keeping capitalism or changing the system to some form of socialism. As debates often do, this debate awakens us to problems and differences in how we understand its basic terms. For clarity and to make progress in this important debate, we need to stop conflating “capitalism” with the market. This is done far too often and on all sides of the debate.
Markets are a means of distributing resources and products, goods and services. Quid pro quo exchange defines markets: one person offers to sell to another who offers to buy at a mutually agreed ratio that may or may not be mediated by money. To say that a market exists means that such an exchange system is what accomplishes distribution. To say that a market exists says nothing about how production is accomplished or how resources are converted into products. Capitalism, on the other hand, is a description of how the production of goods and services is organized, and how the participants relate to one another in the process of production. Thus conflating “capitalism” with “the market system” loses sight of the fact that markets can exist in relation to different systems of production.
We can get at this in other words. Markets were mechanisms of distribution in societies with very different production systems. For example, in economies based on the enslavement of people, resulting in a production system involving masters and slaves, “inputs” and “outputs” — including enslaved people — were often bought and sold in markets. We might then speak of slave markets: when a slave production system coexisted with a market distribution system.
If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system.
To take another example, feudal manors were production systems that juxtaposed lords and serfs. Since serfs were not slaves, no market in serfs existed. They were distributed via other, non-market systems. However, their non-human inputs and outputs could be distributed via markets, and in European feudalism often were distributed via market exchanges. Capitalist production systems – organized around the employer-employee (rather than the master-slave or lord-serf) relationship – could likewise coexist with market systems of distribution. Under capitalism, non-human inputs, labor power (the capacity to do labor), and outputs are all often distributed via market exchanges.
Thus it is confused to refer to capitalism as a “market system.” Market distribution systems vary in their specific qualities according to the different production systems and systems of exploitation with which they co-exist. Capitalist markets differ from slave markets, and both differ from feudal markets, but they are all markets. Moreover, markets usually coexist and interact with state apparatuses. Those interactions are marked with greater or lesser degrees of state interventions: from rigid regulation of exchanges all the way over to “free” trade or markets where regulation is minimized or absent. The state apparatus can also abolish the market system and replace it with an alternative system of distribution.
In that event, however, capitalism is not abolished because the market has been abolished. If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system. For the state to replace markets with some administrative (e.g., planned) system of distribution says nothing about the production system. The resources and products of a capitalist system of production can be distributed via more or less state-regulated markets or via non-market distribution systems. The same applies to the resources and products of slave and feudal production systems.
Why does it matter to differentiate markets and other distribution systems from production systems? The answer emerges from the recognition that most economic systems combine one or more production systems with one or more distribution systems. For a long time, the observers of such combinations – both celebrants and critics – have tended to conflate the two systems combined, as if they were one. Indeed, defining capitalism as “the market” or the “free market” system is precisely such a conflation.
Karl Marx went to considerable lengths to differentiate critiques of market exchange from his critique of capitalist production. He believed that major social problems of his time – inequality, cyclical instability, etc. – emerged from the capitalist production system as much or more than from the market system. He was a critic of both, but he kept the criticisms separate for basic reasons of analytical clarity and revolutionary strategy.
From capitalism’s beginnings, reformers have sought to soften its hard edges often by means of state interventions in markets. Minimum wages, maximum interest rates, progressive taxation, and so on are among their chosen mechanisms. More generally, reformers responded to capitalism’s profit-driven distribution of wealth by having the state redistribute that wealth according to non-capitalist (non-profit) criteria.
A more extreme criticism of markets displaced them in favor of other mechanisms of distributing resources and products such as centralized or decentralized state institutions charged with distribution, private institutions similarly charged, etc. However, if and when the production system continued to juxtapose employers and employees, all the different distribution systems discussed above – “free” market, regulated market, and non-market – coexist and interact with a capitalist production system.
To the extent that capitalism’s problems – inequality, instability (cycles/crises), etc. – stem in part from its production relationships, reforms focused exclusively on regulating or supplanting markets will not succeed in solving them. For example, Keynesian monetary policies (focused on raising or lowering the quantity of money in circulation and, correspondingly, interest rates) do not touch the employer-employee relationship, however much their variations redistribute wealth, regulate markets, or displace markets in favor of state-administered investment decisions. Likewise, Keynesian fiscal policies (raising or lowering taxes and government spending) do not address the employer-employee relationship.
Keynesian policies also never ended the cyclical instability of capitalism. The New Deal and European social democracy left capitalism in place in both state and private units (enterprises) of production notwithstanding their massive reform agendas and programs. They thereby left capitalist employers facing the incentives and receiving the resources (profits) to evade, weaken and eventually dissolve most of those programs.
It is far better not to distribute wealth unequally in the first place than to re-distribute it after to undo the inequality. For example, FDR proposed in 1944 that the government establish a maximum income alongside a minimum wage; that is one among the various ways inequality could be limited and thereby redistribution avoided. Efforts to redistribute encounter evasions, oppositions, and failures that compound the effects of unequal distribution itself. Social peace and cohesion are the victims of redistribution sooner or later. Reforming markets while leaving the relations/organization of capitalist production unchanged is like redistribution. Just as redistribution schemes fail to solve the problems rooted in distribution, market-focused reforms fail to solve the problems rooted in production.
Since 2008, capitalism has showed us all yet again its deep and unsolved problems of cyclical instability, deepening inequality and the injustices they both entail. Their persistence mirrors that of the capitalist organization of production. To successfully confront and solve the problems of economic cycles, income and wealth inequality, and so on, we need to go beyond the capitalist employer-employee system of production. The democratization of enterprises – transitioning from employer-employee hierarchies to worker cooperatives – is a key way available here and now to realize the change we need.
Worker coops democratically decide the distribution of income (wages, bonuses, benefits, profit shares, etc.) among their members. No small group of owners and the boards of directors they choose would, as in capitalist corporations, make such decisions. Thus, for example, it would be far less likely that a few individuals in a worker coop would earn millions while most others could not afford to send children to college. A democratic worker coop decision on the distribution of enterprise income would be far less unequal than what typifies capitalist enterprises. A socialism for the 21st century could and should include the transition from a capitalist to a worker-coop-based economic system as central to its commitments to less inequality and less social conflict over redistribution.
Markets are a means of distributing resources and products, goods and services. Quid pro quo exchange defines markets: one person offers to sell to another who offers to buy at a mutually agreed ratio that may or may not be mediated by money. To say that a market exists means that such an exchange system is what accomplishes distribution. To say that a market exists says nothing about how production is accomplished or how resources are converted into products. Capitalism, on the other hand, is a description of how the production of goods and services is organized, and how the participants relate to one another in the process of production. Thus conflating “capitalism” with “the market system” loses sight of the fact that markets can exist in relation to different systems of production.
We can get at this in other words. Markets were mechanisms of distribution in societies with very different production systems. For example, in economies based on the enslavement of people, resulting in a production system involving masters and slaves, “inputs” and “outputs” — including enslaved people — were often bought and sold in markets. We might then speak of slave markets: when a slave production system coexisted with a market distribution system.
If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system.
To take another example, feudal manors were production systems that juxtaposed lords and serfs. Since serfs were not slaves, no market in serfs existed. They were distributed via other, non-market systems. However, their non-human inputs and outputs could be distributed via markets, and in European feudalism often were distributed via market exchanges. Capitalist production systems – organized around the employer-employee (rather than the master-slave or lord-serf) relationship – could likewise coexist with market systems of distribution. Under capitalism, non-human inputs, labor power (the capacity to do labor), and outputs are all often distributed via market exchanges.
Thus it is confused to refer to capitalism as a “market system.” Market distribution systems vary in their specific qualities according to the different production systems and systems of exploitation with which they co-exist. Capitalist markets differ from slave markets, and both differ from feudal markets, but they are all markets. Moreover, markets usually coexist and interact with state apparatuses. Those interactions are marked with greater or lesser degrees of state interventions: from rigid regulation of exchanges all the way over to “free” trade or markets where regulation is minimized or absent. The state apparatus can also abolish the market system and replace it with an alternative system of distribution.
In that event, however, capitalism is not abolished because the market has been abolished. If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system. For the state to replace markets with some administrative (e.g., planned) system of distribution says nothing about the production system. The resources and products of a capitalist system of production can be distributed via more or less state-regulated markets or via non-market distribution systems. The same applies to the resources and products of slave and feudal production systems.
Why does it matter to differentiate markets and other distribution systems from production systems? The answer emerges from the recognition that most economic systems combine one or more production systems with one or more distribution systems. For a long time, the observers of such combinations – both celebrants and critics – have tended to conflate the two systems combined, as if they were one. Indeed, defining capitalism as “the market” or the “free market” system is precisely such a conflation.
Karl Marx went to considerable lengths to differentiate critiques of market exchange from his critique of capitalist production. He believed that major social problems of his time – inequality, cyclical instability, etc. – emerged from the capitalist production system as much or more than from the market system. He was a critic of both, but he kept the criticisms separate for basic reasons of analytical clarity and revolutionary strategy.
From capitalism’s beginnings, reformers have sought to soften its hard edges often by means of state interventions in markets. Minimum wages, maximum interest rates, progressive taxation, and so on are among their chosen mechanisms. More generally, reformers responded to capitalism’s profit-driven distribution of wealth by having the state redistribute that wealth according to non-capitalist (non-profit) criteria.
A more extreme criticism of markets displaced them in favor of other mechanisms of distributing resources and products such as centralized or decentralized state institutions charged with distribution, private institutions similarly charged, etc. However, if and when the production system continued to juxtapose employers and employees, all the different distribution systems discussed above – “free” market, regulated market, and non-market – coexist and interact with a capitalist production system.
To the extent that capitalism’s problems – inequality, instability (cycles/crises), etc. – stem in part from its production relationships, reforms focused exclusively on regulating or supplanting markets will not succeed in solving them. For example, Keynesian monetary policies (focused on raising or lowering the quantity of money in circulation and, correspondingly, interest rates) do not touch the employer-employee relationship, however much their variations redistribute wealth, regulate markets, or displace markets in favor of state-administered investment decisions. Likewise, Keynesian fiscal policies (raising or lowering taxes and government spending) do not address the employer-employee relationship.
Keynesian policies also never ended the cyclical instability of capitalism. The New Deal and European social democracy left capitalism in place in both state and private units (enterprises) of production notwithstanding their massive reform agendas and programs. They thereby left capitalist employers facing the incentives and receiving the resources (profits) to evade, weaken and eventually dissolve most of those programs.
It is far better not to distribute wealth unequally in the first place than to re-distribute it after to undo the inequality. For example, FDR proposed in 1944 that the government establish a maximum income alongside a minimum wage; that is one among the various ways inequality could be limited and thereby redistribution avoided. Efforts to redistribute encounter evasions, oppositions, and failures that compound the effects of unequal distribution itself. Social peace and cohesion are the victims of redistribution sooner or later. Reforming markets while leaving the relations/organization of capitalist production unchanged is like redistribution. Just as redistribution schemes fail to solve the problems rooted in distribution, market-focused reforms fail to solve the problems rooted in production.
Since 2008, capitalism has showed us all yet again its deep and unsolved problems of cyclical instability, deepening inequality and the injustices they both entail. Their persistence mirrors that of the capitalist organization of production. To successfully confront and solve the problems of economic cycles, income and wealth inequality, and so on, we need to go beyond the capitalist employer-employee system of production. The democratization of enterprises – transitioning from employer-employee hierarchies to worker cooperatives – is a key way available here and now to realize the change we need.
Worker coops democratically decide the distribution of income (wages, bonuses, benefits, profit shares, etc.) among their members. No small group of owners and the boards of directors they choose would, as in capitalist corporations, make such decisions. Thus, for example, it would be far less likely that a few individuals in a worker coop would earn millions while most others could not afford to send children to college. A democratic worker coop decision on the distribution of enterprise income would be far less unequal than what typifies capitalist enterprises. A socialism for the 21st century could and should include the transition from a capitalist to a worker-coop-based economic system as central to its commitments to less inequality and less social conflict over redistribution.
'Corporations Are People' Is Built on an Incredible 19th-Century Lie
How a farcical series of events in the 1880s produced an enduring and controversial legal
precedent
ADAM WINKLER - the atlantic
Somewhat unintuitively, American corporations today enjoy many of the same rights as American citizens. Both, for instance, are entitled to the freedom of speech and the freedom of religion. How exactly did corporations come to be understood as “people” bestowed with the most fundamental constitutional rights? The answer can be found in a bizarre—even farcical—series of lawsuits over 130 years ago involving a lawyer who lied to the Supreme Court, an ethically challenged justice, and one of the most powerful corporations of the day.
That corporation was the Southern Pacific Railroad Company, owned by the robber baron Leland Stanford. In 1881, after California lawmakers imposed a special tax on railroad property, Southern Pacific pushed back, making the bold argument that the law was an act of unconstitutional discrimination under the Fourteenth Amendment. Adopted after the Civil War to protect the rights of the freed slaves, that amendment guarantees to every “person” the “equal protection of the laws.” Stanford’s railroad argued that it was a person too, reasoning that just as the Constitution prohibited discrimination on the basis of racial identity, so did it bar discrimination against Southern Pacific on the basis of its corporate identity.
The head lawyer representing Southern Pacific was a man named Roscoe Conkling. A leader of the Republican Party for more than a decade, Conkling had even been nominated to the Supreme Court twice. He begged off both times, the second time after the Senate had confirmed him. (He remains the last person to turn down a Supreme Court seat after winning confirmation). More than most lawyers, Conkling was seen by the justices as a peer.
It was a trust Conkling would betray. As he spoke before the Court on Southern Pacific’s behalf, Conkling recounted an astonishing tale. In the 1860s, when he was a young congressman, Conkling had served on the drafting committee that was responsible for writing the Fourteenth Amendment. Then the last member of the committee still living, Conkling told the justices that the drafters had changed the wording of the amendment, replacing “citizens” with “persons” in order to cover corporations too. Laws referring to “persons,” he said, have “by long and constant acceptance … been held to embrace artificial persons as well as natural persons.” Conkling buttressed his account with a surprising piece of evidence: a musty old journal he claimed was a previously unpublished record of the deliberations of the drafting committee.
Years later, historians would discover that Conkling’s journal was real but his story was a fraud. The journal was in fact a record of the congressional committee’s deliberations but, upon close examination, it offered no evidence that the drafters intended to protect corporations. It showed, in fact, that the language of the equal-protection clause was never changed from “citizen” to “person.” So far as anyone can tell, the rights of corporations were not raised in the public debates over the ratification of the Fourteenth Amendment or in any of the states’ ratifying conventions. And, prior to Conkling’s appearance on behalf of Southern Pacific, no member of the drafting committee had ever suggested that corporations were covered.
There’s reason to suspect Conkling’s deception was uncovered back in his time too. The justices held onto the case for three years without ever issuing a decision, until Southern Pacific unexpectedly settled the case. Then, shortly after, another case from Southern Pacific reached the Supreme Court, raising the exact same legal question. The company had the same team of lawyers, with the exception of Conkling. Tellingly, Southern Pacific’s lawyers omitted any mention of Conkling’s drafting history or his journal. Had those lawyers believed Conkling, it would have been malpractice to leave out his story.
When the Court issued its decision on this second case, the justices expressly declined to decide if corporations were people. The dispute could be, and was, resolved on other grounds, prompting an angry rebuke from one justice, Stephen J. Field, who castigated his colleagues for failing to address “the important constitutional questions involved.” “At the present day, nearly all great enterprises are conducted by corporations,” he wrote, and they deserved to know if they had equal rights too.
Rumored to carry a gun with him at all times, the colorful Field was the only sitting justice ever arrested—and the charge was murder. He was innocent, but nonetheless guilty of serious ethical violations in the Southern Pacific cases, at least by modern standards: A confidant of Leland Stanford, Field had advised the company on which lawyers to hire for this very series of cases and thus should have recused himself from them. He refused to—and, even worse, while the first case was pending, covertly shared internal memoranda of the justices with Southern Pacific’s legal team.
The rules of judicial ethics were not well developed in the Gilded Age, however, and the self-assured Field, who feared the forces of socialism, did not hesitate to weigh in. Taxing the property of railroads differently, he said, was like allowing deductions for property “owned by white men or by old men, and not deducted if owned by black men or young men.”
So, with Field on the Court, still more twists were yet to come. The Supreme Court’s opinions are officially published in volumes edited by an administrator called the reporter of decisions. By tradition, the reporter writes up a summary of the Court’s opinion and includes it at the beginning of the opinion. The reporter in the 1880s was J.C. Bancroft Davis, whose wildly inaccurate summary of the Southern Pacific case said that the Court had ruled that “corporations are persons within … the Fourteenth Amendment.” Whether his summary was an error or something more nefarious—Davis had once been the president of the Newburgh and New York Railway Company—will likely never be known.
Field nonetheless saw Davis’s erroneous summary as an opportunity. A few years later, in an opinion in an unrelated case, Field wrote that “corporations are persons within the meaning” of the Fourteenth Amendment. “It was so held in Santa Clara County v. Southern Pacific Railroad,” explained Field, who knew very well that the Court had done no such thing.
His gambit worked. In the following years, the case would be cited over and over by courts across the nation, including the Supreme Court, for deciding that corporations had rights under the Fourteenth Amendment.
Indeed, the faux precedent in the Southern Pacific case would go on to be used by a Supreme Court that in the early 20th century became famous for striking down numerous economic regulations, including federal child-labor laws, zoning laws, and wage-and-hour laws. Meanwhile, in cases like the notorious Plessy v. Ferguson (1896), those same justices refused to read the Constitution as protecting the rights of African Americans, the real intended beneficiaries of the Fourteenth Amendment. Between 1868, when the amendment was ratified, and 1912, the Supreme Court would rule on 28 cases involving the rights of African Americans and an astonishing 312 cases on the rights of corporations.
The day back in 1882 when the Supreme Court first heard Roscoe Conkling’s argument, the New-York Daily Tribune featured a story on the case with a headline that would turn out to be prophetic: “Civil Rights of Corporations.” Indeed, in a feat of deceitful legal alchemy, Southern Pacific and its wily legal team had, with the help of an audacious Supreme Court justice, set up the Fourteenth Amendment to be more of a bulwark for the rights of businesses than the rights of minorities.
That corporation was the Southern Pacific Railroad Company, owned by the robber baron Leland Stanford. In 1881, after California lawmakers imposed a special tax on railroad property, Southern Pacific pushed back, making the bold argument that the law was an act of unconstitutional discrimination under the Fourteenth Amendment. Adopted after the Civil War to protect the rights of the freed slaves, that amendment guarantees to every “person” the “equal protection of the laws.” Stanford’s railroad argued that it was a person too, reasoning that just as the Constitution prohibited discrimination on the basis of racial identity, so did it bar discrimination against Southern Pacific on the basis of its corporate identity.
The head lawyer representing Southern Pacific was a man named Roscoe Conkling. A leader of the Republican Party for more than a decade, Conkling had even been nominated to the Supreme Court twice. He begged off both times, the second time after the Senate had confirmed him. (He remains the last person to turn down a Supreme Court seat after winning confirmation). More than most lawyers, Conkling was seen by the justices as a peer.
It was a trust Conkling would betray. As he spoke before the Court on Southern Pacific’s behalf, Conkling recounted an astonishing tale. In the 1860s, when he was a young congressman, Conkling had served on the drafting committee that was responsible for writing the Fourteenth Amendment. Then the last member of the committee still living, Conkling told the justices that the drafters had changed the wording of the amendment, replacing “citizens” with “persons” in order to cover corporations too. Laws referring to “persons,” he said, have “by long and constant acceptance … been held to embrace artificial persons as well as natural persons.” Conkling buttressed his account with a surprising piece of evidence: a musty old journal he claimed was a previously unpublished record of the deliberations of the drafting committee.
Years later, historians would discover that Conkling’s journal was real but his story was a fraud. The journal was in fact a record of the congressional committee’s deliberations but, upon close examination, it offered no evidence that the drafters intended to protect corporations. It showed, in fact, that the language of the equal-protection clause was never changed from “citizen” to “person.” So far as anyone can tell, the rights of corporations were not raised in the public debates over the ratification of the Fourteenth Amendment or in any of the states’ ratifying conventions. And, prior to Conkling’s appearance on behalf of Southern Pacific, no member of the drafting committee had ever suggested that corporations were covered.
There’s reason to suspect Conkling’s deception was uncovered back in his time too. The justices held onto the case for three years without ever issuing a decision, until Southern Pacific unexpectedly settled the case. Then, shortly after, another case from Southern Pacific reached the Supreme Court, raising the exact same legal question. The company had the same team of lawyers, with the exception of Conkling. Tellingly, Southern Pacific’s lawyers omitted any mention of Conkling’s drafting history or his journal. Had those lawyers believed Conkling, it would have been malpractice to leave out his story.
When the Court issued its decision on this second case, the justices expressly declined to decide if corporations were people. The dispute could be, and was, resolved on other grounds, prompting an angry rebuke from one justice, Stephen J. Field, who castigated his colleagues for failing to address “the important constitutional questions involved.” “At the present day, nearly all great enterprises are conducted by corporations,” he wrote, and they deserved to know if they had equal rights too.
Rumored to carry a gun with him at all times, the colorful Field was the only sitting justice ever arrested—and the charge was murder. He was innocent, but nonetheless guilty of serious ethical violations in the Southern Pacific cases, at least by modern standards: A confidant of Leland Stanford, Field had advised the company on which lawyers to hire for this very series of cases and thus should have recused himself from them. He refused to—and, even worse, while the first case was pending, covertly shared internal memoranda of the justices with Southern Pacific’s legal team.
The rules of judicial ethics were not well developed in the Gilded Age, however, and the self-assured Field, who feared the forces of socialism, did not hesitate to weigh in. Taxing the property of railroads differently, he said, was like allowing deductions for property “owned by white men or by old men, and not deducted if owned by black men or young men.”
So, with Field on the Court, still more twists were yet to come. The Supreme Court’s opinions are officially published in volumes edited by an administrator called the reporter of decisions. By tradition, the reporter writes up a summary of the Court’s opinion and includes it at the beginning of the opinion. The reporter in the 1880s was J.C. Bancroft Davis, whose wildly inaccurate summary of the Southern Pacific case said that the Court had ruled that “corporations are persons within … the Fourteenth Amendment.” Whether his summary was an error or something more nefarious—Davis had once been the president of the Newburgh and New York Railway Company—will likely never be known.
Field nonetheless saw Davis’s erroneous summary as an opportunity. A few years later, in an opinion in an unrelated case, Field wrote that “corporations are persons within the meaning” of the Fourteenth Amendment. “It was so held in Santa Clara County v. Southern Pacific Railroad,” explained Field, who knew very well that the Court had done no such thing.
His gambit worked. In the following years, the case would be cited over and over by courts across the nation, including the Supreme Court, for deciding that corporations had rights under the Fourteenth Amendment.
Indeed, the faux precedent in the Southern Pacific case would go on to be used by a Supreme Court that in the early 20th century became famous for striking down numerous economic regulations, including federal child-labor laws, zoning laws, and wage-and-hour laws. Meanwhile, in cases like the notorious Plessy v. Ferguson (1896), those same justices refused to read the Constitution as protecting the rights of African Americans, the real intended beneficiaries of the Fourteenth Amendment. Between 1868, when the amendment was ratified, and 1912, the Supreme Court would rule on 28 cases involving the rights of African Americans and an astonishing 312 cases on the rights of corporations.
The day back in 1882 when the Supreme Court first heard Roscoe Conkling’s argument, the New-York Daily Tribune featured a story on the case with a headline that would turn out to be prophetic: “Civil Rights of Corporations.” Indeed, in a feat of deceitful legal alchemy, Southern Pacific and its wily legal team had, with the help of an audacious Supreme Court justice, set up the Fourteenth Amendment to be more of a bulwark for the rights of businesses than the rights of minorities.
5 Big Myths Sold by the Defenders of Capitalism
Our dominant economic system causes too many Americans too much pain.
By Valerie Vande Panne / AlterNet December 29, 2017, 11:22 AM GMT
I’ve been writing about the economic and environmental realities of marginalized communities for some time, primarily from the perspective of positive systems that are growing to support disenfranchised people. Many of these alternative economic networks, such as barter and time trade, are born out of necessity. As I explore these economies and some of the new ways communities are fostering and investing in health and growth, I am increasingly met by the same arguments against them—and every single one of these arguments is a myth. Capitalism is, at its core, an entrenched system of addiction, whose very root is the greed of over-consumption, whether it's food, sex, money, mouse clicks, or property.
Here are five myths people continue to promote that we’ll all be better off without.
1. Myth: Jobs Will Save Us!
Permits to pollute and tax breaks are just two of the things corporations receive when they promise jobs to local populations. In a city like Detroit, which has struggled for decades with unemployment and economic decay, oil companies, real estate moguls and sports teams have all offered jobs in exchange for getting something big in return. At the end of the day, the promised jobs aren’t necessarily fulfilled. The rich get richer while the poor fund corporate projects, die from corporate pollution or end up on welfare because they never got the jobs promised in the first place.
---
2. Myth: Brand Loyalty Over Small Businesses
You know it when you see it: Nike, Adidas, Apple, Polo. People identify by the logos they wear, and they’ll pay top dollar for that logo. But why pay top dollar to advertise a company you have no connection to? Brands should pay you for your loyalty, but unless you’re Instafamous, they don't. For the hundreds you spend on a label, you could pay a local tailor or seamstress to make something tailored just for you. Retail doesn’t want you to do that, but why not give it a try? You might be surprised to find what replacing brand loyalty with real-world community loyalty can bring you.
3. Myth: Trickledown Economics Works
We’ve been talking about this issue as long as I can remember, and it still doesn’t work. Just because the rich received a special tax break that will make them exponentially richer does not mean they will spend any money on you, or contribute anything healthy or beneficial to any community other than their own. Isn’t that what "A Christmas Carol" was all about? That the only way the wealthy will ever share their wealth is if they are terrorized by ghosts? Believing in the benevolent goodness of the super-rich is one of the most perverse things we do in the U.S., and perhaps it’s rooted in the myth that you, too, can one day be wealthy.
4. Myth: Pull Yourself up by Your Bootstraps
The myth that if you just work hard enough you will one day be rich is a pervasive idea in the United States. This myth relies on the absence of inherited wealth and ignores the grievous injustices often committed in creating that wealth, and denies racism, marginalization and generational disenfranchisement. Yet people continue to preach it as gospel. The exceptions are held up as rules, without a close examination of how those folks got to where they are. No one in this world makes it to the top alone, and the lower one is on the ladder, the harder it is to get to the top—especially when the structure is the ladder of capitalism. Make the system a jungle gym, and have the community work together to navigate it, and see how much more successful and happy everyone can be.
5. Myth: Everyone Is Free in a Capitalist Society
In an age of clicks, sponsored content and fake news, it’s sometimes hard to tell capitalism from freedom. After all, capitalism is marketed to you every day as freedom, on television, social media and even NPR. But capitalism doesn’t equate freedom. Look at the prison industrial complex or the number of people going to debtors prison for unaffordable and unpaid civil infractions. Look at the nearly 20,000 households in Detroit that had their water shut off just this year as a result of unpaid water bills. Look at the homelessness created by bad mortgages from which lenders continue to profit. Capitalism in each of these cases isn’t promoting freedom, but robbing freedom from millions of Americans who could, in another time and under a humane system of economic governance, might prosper in communities they are able to contribute to and benefit from.
Capitalism is fueled by many more myths than just these. But these five might be nice places to start disassembling the dominant economic system that is causing too many Americans pain.
Here are five myths people continue to promote that we’ll all be better off without.
1. Myth: Jobs Will Save Us!
Permits to pollute and tax breaks are just two of the things corporations receive when they promise jobs to local populations. In a city like Detroit, which has struggled for decades with unemployment and economic decay, oil companies, real estate moguls and sports teams have all offered jobs in exchange for getting something big in return. At the end of the day, the promised jobs aren’t necessarily fulfilled. The rich get richer while the poor fund corporate projects, die from corporate pollution or end up on welfare because they never got the jobs promised in the first place.
---
2. Myth: Brand Loyalty Over Small Businesses
You know it when you see it: Nike, Adidas, Apple, Polo. People identify by the logos they wear, and they’ll pay top dollar for that logo. But why pay top dollar to advertise a company you have no connection to? Brands should pay you for your loyalty, but unless you’re Instafamous, they don't. For the hundreds you spend on a label, you could pay a local tailor or seamstress to make something tailored just for you. Retail doesn’t want you to do that, but why not give it a try? You might be surprised to find what replacing brand loyalty with real-world community loyalty can bring you.
3. Myth: Trickledown Economics Works
We’ve been talking about this issue as long as I can remember, and it still doesn’t work. Just because the rich received a special tax break that will make them exponentially richer does not mean they will spend any money on you, or contribute anything healthy or beneficial to any community other than their own. Isn’t that what "A Christmas Carol" was all about? That the only way the wealthy will ever share their wealth is if they are terrorized by ghosts? Believing in the benevolent goodness of the super-rich is one of the most perverse things we do in the U.S., and perhaps it’s rooted in the myth that you, too, can one day be wealthy.
4. Myth: Pull Yourself up by Your Bootstraps
The myth that if you just work hard enough you will one day be rich is a pervasive idea in the United States. This myth relies on the absence of inherited wealth and ignores the grievous injustices often committed in creating that wealth, and denies racism, marginalization and generational disenfranchisement. Yet people continue to preach it as gospel. The exceptions are held up as rules, without a close examination of how those folks got to where they are. No one in this world makes it to the top alone, and the lower one is on the ladder, the harder it is to get to the top—especially when the structure is the ladder of capitalism. Make the system a jungle gym, and have the community work together to navigate it, and see how much more successful and happy everyone can be.
5. Myth: Everyone Is Free in a Capitalist Society
In an age of clicks, sponsored content and fake news, it’s sometimes hard to tell capitalism from freedom. After all, capitalism is marketed to you every day as freedom, on television, social media and even NPR. But capitalism doesn’t equate freedom. Look at the prison industrial complex or the number of people going to debtors prison for unaffordable and unpaid civil infractions. Look at the nearly 20,000 households in Detroit that had their water shut off just this year as a result of unpaid water bills. Look at the homelessness created by bad mortgages from which lenders continue to profit. Capitalism in each of these cases isn’t promoting freedom, but robbing freedom from millions of Americans who could, in another time and under a humane system of economic governance, might prosper in communities they are able to contribute to and benefit from.
Capitalism is fueled by many more myths than just these. But these five might be nice places to start disassembling the dominant economic system that is causing too many Americans pain.
Capitalism: The Nightmare
Paul Street
From Truthdig: The neoliberal, arch-capitalist era we inhabit is chock full of statistics and stories that ought to send chills down the spines of any caring, morally sentient human. Nearly three-fourths (71 percent) of the world’s population is poor, living on $10 a day or less, and 11 percent (767 million people, including 385 million children) live in what the World Bank calls “extreme poverty” (less than a $1.90 a day). Meanwhile, Oxfam reliably reports that, surreal as it sounds, the world’s eight richest people possess among themselves as much wealth as the poorest half of the entire human race.
The United States, self-described homeland and headquarters of freedom and democracy, is no exception to the harshly unequal global reality. Six of the world’s eight most absurdly rich people are U.S. citizens: Bill Gates (whose net worth of $426 billion equals the wealth of 3.6 billion people), Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and Michael Bloomberg (former mayor of New York City). As Bernie Sanders said repeatedly on the campaign trail in 2016, the top 10th of the upper 1 percent in the U.S. has nearly as much wealth as the nation’s bottom 90 percent. Seven heirs of the Walton family’s Walmart fortune have among them a net worth equal to that of the nation’s poorest 40 percent. Half the U.S. population is poor or near-poor and half lacks any savings.
Just over a fifth of the nation’s children, including more than a third of black and Native American children, live below the federal government’s notoriously inadequate poverty level, while parasitic financers and other capitalist overlords enjoy unimaginable hyper-opulence. One in seven U.S. citizens relies on food banks in “the world’s richest country.” Many of them are in families with full-time wage-earners—a reflection of the fact that wages have stagnated even as U.S. labor productivity consistently has risen for more than four decades.
Failure by Design
These savage inequalities reflect government policy on behalf of “the 1 percent” (better, perhaps, to say “the 0.1 percent”). U.S. economic growth since the late 1970s has been unequally distributed, thanks to regressive policy choices that have served the rich and powerful at the expense of ordinary working people. As Joshua Bivens of the Economic Policy Institute showed in his important 2011 study, “Failure By Design,” the following interrelated, bipartisan and not-so-public policies across the long neoliberal era have brought us to a level of inequality that rivals the Gilded Age of the late 19th-century robber barons era. These policies include:
● Letting the value of the minimum wage be eroded by inflation.
● Slashing labor standards for overtime, safety and health.
● Tilting the laws governing union organizing and collective bargaining strongly in favor of employers.
● Weakening the social safety net.
● Privatizing public services.
● Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
● Shredding government oversight of international trade, currency, investment and lending.
● Deregulating the financial sector and financial markets.
● Valuing low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.
These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the 2007-09 Great Recession, sparked by the bursting of a housing bubble that resulted from the deregulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings.
After the crash, the government under both George W. Bush and Barack Obama bailed out the very financial predators who pushed the economy over the cliff. The Obama administration, populated by Goldman Sachs and Citigroup operatives, left the rest of us to wonder “Where’s our bailout?” as 95 percent of the nation’s new income went to the top 1 percent during his first term. (read more)
The United States, self-described homeland and headquarters of freedom and democracy, is no exception to the harshly unequal global reality. Six of the world’s eight most absurdly rich people are U.S. citizens: Bill Gates (whose net worth of $426 billion equals the wealth of 3.6 billion people), Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and Michael Bloomberg (former mayor of New York City). As Bernie Sanders said repeatedly on the campaign trail in 2016, the top 10th of the upper 1 percent in the U.S. has nearly as much wealth as the nation’s bottom 90 percent. Seven heirs of the Walton family’s Walmart fortune have among them a net worth equal to that of the nation’s poorest 40 percent. Half the U.S. population is poor or near-poor and half lacks any savings.
Just over a fifth of the nation’s children, including more than a third of black and Native American children, live below the federal government’s notoriously inadequate poverty level, while parasitic financers and other capitalist overlords enjoy unimaginable hyper-opulence. One in seven U.S. citizens relies on food banks in “the world’s richest country.” Many of them are in families with full-time wage-earners—a reflection of the fact that wages have stagnated even as U.S. labor productivity consistently has risen for more than four decades.
Failure by Design
These savage inequalities reflect government policy on behalf of “the 1 percent” (better, perhaps, to say “the 0.1 percent”). U.S. economic growth since the late 1970s has been unequally distributed, thanks to regressive policy choices that have served the rich and powerful at the expense of ordinary working people. As Joshua Bivens of the Economic Policy Institute showed in his important 2011 study, “Failure By Design,” the following interrelated, bipartisan and not-so-public policies across the long neoliberal era have brought us to a level of inequality that rivals the Gilded Age of the late 19th-century robber barons era. These policies include:
● Letting the value of the minimum wage be eroded by inflation.
● Slashing labor standards for overtime, safety and health.
● Tilting the laws governing union organizing and collective bargaining strongly in favor of employers.
● Weakening the social safety net.
● Privatizing public services.
● Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
● Shredding government oversight of international trade, currency, investment and lending.
● Deregulating the financial sector and financial markets.
● Valuing low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.
These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the 2007-09 Great Recession, sparked by the bursting of a housing bubble that resulted from the deregulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings.
After the crash, the government under both George W. Bush and Barack Obama bailed out the very financial predators who pushed the economy over the cliff. The Obama administration, populated by Goldman Sachs and Citigroup operatives, left the rest of us to wonder “Where’s our bailout?” as 95 percent of the nation’s new income went to the top 1 percent during his first term. (read more)
funnies and charts
Cartoon: Hedge fund nation
By Jen Sorensen
Tuesday Dec 19, 2017 · 5:01 AM PST
This Infographic Shows How Only 10 Companies Control All the World’s Brands
Tom Cahill | December 31, 2016
From U.S. Uncut: Almost all of the food and beverage brands we know are owned by just 10 global conglomerates, according to a blistering new report.
Oxfam’s 52-page “Behind the Brands” report goes into great detail about how just ten companies — Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously known as Kraft), Nestle, PepsiCo, and Unilever — own basically every brand of food sold in grocery stores around the globe. The report is part of Oxfam’s GROW campaign, which seeks to provide a sustainable food supply to an estimated global population of nine billion by 2050.
The “Behind the Brands” report grades each company through a series of scorecards, gauging how attentive it is toward core issues like how it treats farm workers, women, small-scale farmers, local land and water supplies, its climate change policy, and a company’s transparency. By and large, the scorecards found that the so-called “Big 10” food companies shirk their responsibility to local populations and the environment, falling far short of where they could be given their tremendous resources and influence. In some cases, Big 10 companies actually undermine food security, natural resources, and human rights, according to Oxfam:
• Companies are overly secretive about their agricultural supply chains, making claims of ‘sustainability’ and ‘social responsibility’ difficult to verify;
• None of the Big 10 have adequate policies to protect local communities from land and water grabs along their supply chains;
• Companies are not taking sufficient steps to curb massive agricultural greenhouse gas emissions responsible for climate changes now affecting farmers;
• Most companies do not provide small-scale farmers with equal access to their supply chains and no company has made a commitment to ensure that small-scale producers are paid a fair price;
• Only a minority of the Big 10 are doing anything at all to address the exploitation of women small-scale farmers and workers in their supply chains.
In addition to those damning declarations from Oxfam, the report also found that despite the enormous financial wealth concentrated among the Big 10 companies (an estimated $872.8 billion market cap amongst all but Mars, which is privately owned), the farmers working the land owned by these companies live in abject poverty.
Globally, some 450 million men and women work in the agriculture sector, and 60 percent of those live in poverty. In a cruel ironic twist, 80 percent of the global population classified as “chronically hungry” are farmers. The “Behind the Brands” report outlined how the practices of the Big 10 companies exacerbate the global problem of chronic hunger:
“[T]he use of valuable agricultural resources for the production of snacks and sodas means less fertile land and clean water is available to grow nutritious food for local communities. And changing weather patterns due to greenhouse gas emissions – a large percentage of which come from agricultural production – continue to make these small-scale farmers increasingly vulnerable… [T]he sourcing of commodities – cocoa, sugar, potatoes, tomatoes, soy, coffee, tea and corn – is still plagued with injustice and inequity, much as it was 100 years ago.”
But these concerns aren’t just coming from one nonprofit — in conducting research for the report, Oxfam found that where food comes from and whether or not a food producer is being socially and environmentally responsible is a top concern for a wide majority consumers in developed countries. This could also produce economic blowback for companies that don’t adhere to sustainable business standards. Weber Shandwick — a New York-based public relations firm — found that 70 percent of American consumers avoid buying products from companies they don’t like....
...As far as the scorecard for the Big 10 is concerned, none of the world’s largest food producers scored in the 8-10 (“good”) range on any of the criteria used for the evaluation. While Nestle and Unilever lead their competitors in several areas, they still fall short in how they treat the land, women, and small-scale farmers. The three worst offenders — General Mills, Kellogg’s and ABF — didn’t score above a 3 out of 10 score (“poor”) except for a scant few categories. And out of a maximum score of 70, Nestle, who ranked at #1 among the Big 10, still only scored 38 (only 54 percent). If the scorecard was a college exam, Nestle would still score an F.
Oxfam’s 52-page “Behind the Brands” report goes into great detail about how just ten companies — Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously known as Kraft), Nestle, PepsiCo, and Unilever — own basically every brand of food sold in grocery stores around the globe. The report is part of Oxfam’s GROW campaign, which seeks to provide a sustainable food supply to an estimated global population of nine billion by 2050.
The “Behind the Brands” report grades each company through a series of scorecards, gauging how attentive it is toward core issues like how it treats farm workers, women, small-scale farmers, local land and water supplies, its climate change policy, and a company’s transparency. By and large, the scorecards found that the so-called “Big 10” food companies shirk their responsibility to local populations and the environment, falling far short of where they could be given their tremendous resources and influence. In some cases, Big 10 companies actually undermine food security, natural resources, and human rights, according to Oxfam:
• Companies are overly secretive about their agricultural supply chains, making claims of ‘sustainability’ and ‘social responsibility’ difficult to verify;
• None of the Big 10 have adequate policies to protect local communities from land and water grabs along their supply chains;
• Companies are not taking sufficient steps to curb massive agricultural greenhouse gas emissions responsible for climate changes now affecting farmers;
• Most companies do not provide small-scale farmers with equal access to their supply chains and no company has made a commitment to ensure that small-scale producers are paid a fair price;
• Only a minority of the Big 10 are doing anything at all to address the exploitation of women small-scale farmers and workers in their supply chains.
In addition to those damning declarations from Oxfam, the report also found that despite the enormous financial wealth concentrated among the Big 10 companies (an estimated $872.8 billion market cap amongst all but Mars, which is privately owned), the farmers working the land owned by these companies live in abject poverty.
Globally, some 450 million men and women work in the agriculture sector, and 60 percent of those live in poverty. In a cruel ironic twist, 80 percent of the global population classified as “chronically hungry” are farmers. The “Behind the Brands” report outlined how the practices of the Big 10 companies exacerbate the global problem of chronic hunger:
“[T]he use of valuable agricultural resources for the production of snacks and sodas means less fertile land and clean water is available to grow nutritious food for local communities. And changing weather patterns due to greenhouse gas emissions – a large percentage of which come from agricultural production – continue to make these small-scale farmers increasingly vulnerable… [T]he sourcing of commodities – cocoa, sugar, potatoes, tomatoes, soy, coffee, tea and corn – is still plagued with injustice and inequity, much as it was 100 years ago.”
But these concerns aren’t just coming from one nonprofit — in conducting research for the report, Oxfam found that where food comes from and whether or not a food producer is being socially and environmentally responsible is a top concern for a wide majority consumers in developed countries. This could also produce economic blowback for companies that don’t adhere to sustainable business standards. Weber Shandwick — a New York-based public relations firm — found that 70 percent of American consumers avoid buying products from companies they don’t like....
...As far as the scorecard for the Big 10 is concerned, none of the world’s largest food producers scored in the 8-10 (“good”) range on any of the criteria used for the evaluation. While Nestle and Unilever lead their competitors in several areas, they still fall short in how they treat the land, women, and small-scale farmers. The three worst offenders — General Mills, Kellogg’s and ABF — didn’t score above a 3 out of 10 score (“poor”) except for a scant few categories. And out of a maximum score of 70, Nestle, who ranked at #1 among the Big 10, still only scored 38 (only 54 percent). If the scorecard was a college exam, Nestle would still score an F.
The "Golden Age of Capitalism" Was an Era of Racism and Secret Coups
By Emma Caterine, Truthout
From Bernie Sanders calling violently anti-Communist President Eisenhower a socialist, to a plethora of op-eds hailing the allegedly great policies the Republicans had toward labor and refugees, you have probably seen at least one liberal in your life mourn the loss of the Republicans of the so-called "Golden Age of Capitalism," the 1950s. These arguments usually rest on the achievements of that time, such as the desegregation of the military, a corporate tax rate of 50 percent, a top income tax rate of 91 percent, a rate of profit that stood above 20 percent throughout the decade and annual average Gross Domestic Product growth of 3.13 percent.
While most of these achievements are objectively true, this argument of the "once-good" Republican Party can only be sustained when one ignores the context in which these policies were created, the violent campaign against Communism domestically and abroad, and the caveats and exceptions to the policies that predominantly created wealth and welfare at the expense of people of color.
The Context
While there are disagreements as to the level of responsibility, it is generally agreed by economists and historians that the United States escaped the Great Depression, at least in part, by its engagement in World War II. There are two facets of how the war improved the economy: (1) Governmental investment and even takeover of industry created jobs and recycled stagnant fixed capital, such as factories and machinery; and (2) By bombing the post-war foreign competition out of existence, at least for a significant amount of time. The positive effect of the war on the economy was undeniable at the time, and it was a reality that the small government Republicans had to accommodate to.
But that certainly does not mean that they did not try to push for deregulation and a "free market" in the little ways that were politically feasible. President Eisenhower's election was in part due to the capitalists of the time becoming fed up with the Democrats' intervention, such as President Truman's failed attempt to seize the Youngstown Sheet & Tube Company to end strikes. President Eisenhower would employ the virtually opposite tactic during the Steel Strike of 1959 by using the "back-to-work" provision of the Taft-Harley Act. Ironically, the dispute was only settled by a politically ambitious then-Vice President Richard Nixon stepping in and telling steelmakers it was better to settle before the Democratic Congress began hearings on the strike, which would not be as supportive of the companies as Eisenhower was.
Republican US Imperialism at a Discount
With the current political debate around refugees, many liberals have pointed to the Refugee Relief Act of 1953 to shame the Republicans for their opposition to accepting more refugees. The Act did indeed result in 214,000 immigrants gaining admission to the country. But the problem is that under this Act, most -- if not all -- of the Syrian refugees would have been denied entry. The quotas for the Act were as follows: 90,000 West Germans and Austrians; 10,000 from NATO members, Turkey, Sweden, Iran and Trieste (now part of Italy); 2,000 Polish veterans; 60,000 Italians; 17,000 Greeks; 17,000 Dutch; 4,000 for those residing in US consulate districts in the "Far East;" 2,000 Chinese; and 2,000 for Jews and Palestinians of the new Israel who were part of the UN's refugee program.
These quotas show two things: (1) An obvious bias against people of color, with no quota whatsoever for North Africans who were affected by WWII and a pitifully small one for Chinese and Middle Eastern people; and (2) This Act was part of the Republican strategy against Communism abroad by rewarding NATO members and Western Europe. Iran is particularly notable because it was that same year, 1953, that Eisenhower's administration pioneered a new, cheaper version of overthrowing foreign democratic governments through a single CIA agent instigating a coup against the recently elected Prime Minister Mohammad Mosaddegh. The strategy was so successful that they did it again in Guatemala the next year, despite the previous Truman administration having aborted a similar mission in 1952 after public pressure.
Who Was Left Behind in the Golden Age?
US capitalism's "Golden Age" wasn't so golden for the people of color residing in the country. Despite the desegregation begun by President Truman and continued by President Eisenhower in the military, no effort was made to ensure that the Black veterans had equal access to the benefits of such service by either the Democrats or Republicans. President Eisenhower was the second Republican president in history get a plurality of the Southern votes during 1956, and despite his enforcement of the law at Little Rock, Arkansas (which he always maintained was not about integration, but about federal power), sympathized strongly with the Southern whites and their racist views on topics like "miscegenation."
The 83rd Republican-controlled Congress passed laws that criminalized affiliation with Communist organizations, which Attorney General Herbert Brownell, Jr., promptly used to shut down the Communist-affiliated Civil Rights Congress, which is most famous for the "We Charge Genocide" petition to the United Nations. Congress also began the privatization of the infamous Fannie Mae, ensuring that greed was prioritized over public good and setting the mortgage market down a path that has and continues to redline Black communities and systemically deprive them of wealth.
The Danger of Nostalgia
Many Bernie Sanders supporters have wondered why their candidate was not able to garner as much support from the Black community when his policy proposals were far more in favor of Black people than those proposed by Hillary Clinton. I have watched Senator Sanders' career for a long time, since I was a teenage community organizer lobbying for the Employee Free Choice Act, and I've observed him expressing the perverse kind of nostalgia that many older white leftists do for the 1950s and its middle class. Many women and people of color are justifiably skeptical about plans packaged as bringing back a "Golden Age" where they faced broad discrimination with little recourse. A political revolution against our current system would not be the return to a less megalomaniacal Republican Party, and certainly not the election of a xenophobic fascist billionaire who is an outsider in name only. The political revolution is happening every day, being carried about by the working class and the youth who know that this two-party system is a fraud. Consider this an invitation to join.
While most of these achievements are objectively true, this argument of the "once-good" Republican Party can only be sustained when one ignores the context in which these policies were created, the violent campaign against Communism domestically and abroad, and the caveats and exceptions to the policies that predominantly created wealth and welfare at the expense of people of color.
The Context
While there are disagreements as to the level of responsibility, it is generally agreed by economists and historians that the United States escaped the Great Depression, at least in part, by its engagement in World War II. There are two facets of how the war improved the economy: (1) Governmental investment and even takeover of industry created jobs and recycled stagnant fixed capital, such as factories and machinery; and (2) By bombing the post-war foreign competition out of existence, at least for a significant amount of time. The positive effect of the war on the economy was undeniable at the time, and it was a reality that the small government Republicans had to accommodate to.
But that certainly does not mean that they did not try to push for deregulation and a "free market" in the little ways that were politically feasible. President Eisenhower's election was in part due to the capitalists of the time becoming fed up with the Democrats' intervention, such as President Truman's failed attempt to seize the Youngstown Sheet & Tube Company to end strikes. President Eisenhower would employ the virtually opposite tactic during the Steel Strike of 1959 by using the "back-to-work" provision of the Taft-Harley Act. Ironically, the dispute was only settled by a politically ambitious then-Vice President Richard Nixon stepping in and telling steelmakers it was better to settle before the Democratic Congress began hearings on the strike, which would not be as supportive of the companies as Eisenhower was.
Republican US Imperialism at a Discount
With the current political debate around refugees, many liberals have pointed to the Refugee Relief Act of 1953 to shame the Republicans for their opposition to accepting more refugees. The Act did indeed result in 214,000 immigrants gaining admission to the country. But the problem is that under this Act, most -- if not all -- of the Syrian refugees would have been denied entry. The quotas for the Act were as follows: 90,000 West Germans and Austrians; 10,000 from NATO members, Turkey, Sweden, Iran and Trieste (now part of Italy); 2,000 Polish veterans; 60,000 Italians; 17,000 Greeks; 17,000 Dutch; 4,000 for those residing in US consulate districts in the "Far East;" 2,000 Chinese; and 2,000 for Jews and Palestinians of the new Israel who were part of the UN's refugee program.
These quotas show two things: (1) An obvious bias against people of color, with no quota whatsoever for North Africans who were affected by WWII and a pitifully small one for Chinese and Middle Eastern people; and (2) This Act was part of the Republican strategy against Communism abroad by rewarding NATO members and Western Europe. Iran is particularly notable because it was that same year, 1953, that Eisenhower's administration pioneered a new, cheaper version of overthrowing foreign democratic governments through a single CIA agent instigating a coup against the recently elected Prime Minister Mohammad Mosaddegh. The strategy was so successful that they did it again in Guatemala the next year, despite the previous Truman administration having aborted a similar mission in 1952 after public pressure.
Who Was Left Behind in the Golden Age?
US capitalism's "Golden Age" wasn't so golden for the people of color residing in the country. Despite the desegregation begun by President Truman and continued by President Eisenhower in the military, no effort was made to ensure that the Black veterans had equal access to the benefits of such service by either the Democrats or Republicans. President Eisenhower was the second Republican president in history get a plurality of the Southern votes during 1956, and despite his enforcement of the law at Little Rock, Arkansas (which he always maintained was not about integration, but about federal power), sympathized strongly with the Southern whites and their racist views on topics like "miscegenation."
The 83rd Republican-controlled Congress passed laws that criminalized affiliation with Communist organizations, which Attorney General Herbert Brownell, Jr., promptly used to shut down the Communist-affiliated Civil Rights Congress, which is most famous for the "We Charge Genocide" petition to the United Nations. Congress also began the privatization of the infamous Fannie Mae, ensuring that greed was prioritized over public good and setting the mortgage market down a path that has and continues to redline Black communities and systemically deprive them of wealth.
The Danger of Nostalgia
Many Bernie Sanders supporters have wondered why their candidate was not able to garner as much support from the Black community when his policy proposals were far more in favor of Black people than those proposed by Hillary Clinton. I have watched Senator Sanders' career for a long time, since I was a teenage community organizer lobbying for the Employee Free Choice Act, and I've observed him expressing the perverse kind of nostalgia that many older white leftists do for the 1950s and its middle class. Many women and people of color are justifiably skeptical about plans packaged as bringing back a "Golden Age" where they faced broad discrimination with little recourse. A political revolution against our current system would not be the return to a less megalomaniacal Republican Party, and certainly not the election of a xenophobic fascist billionaire who is an outsider in name only. The political revolution is happening every day, being carried about by the working class and the youth who know that this two-party system is a fraud. Consider this an invitation to join.
There’s No Such Thing as a ‘Free Market’
Capitalism with absolutely no government intervention is a myth — and always was.
By Jill Richardson
From Other Words: The debates leading up to the election this year will no doubt invoke the “American value” of capitalism. But what, exactly, does that mean? And what should it mean?
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.
In fact, the growing British Empire was undertaking economic interventions on a colossal scale — and would do even more in the centuries to come. The British set out all over the globe, claiming colonies in the New World and later India and Africa, setting up trade policies that benefited the British at the expense of the colonized.
The British imported cotton from their colonies for their own factories, as well as wheat to feed British workers in the isles. Colonial India, meanwhile, suffered several massive famines. Even as tens of millions of Indians starved to death, record amounts of Indian wheat were exported to feed British factory workers laboring in a so-called free market.
Before the Industrial Revolution, Indian textiles reigned supreme. But British authorities kept industrial textile technologies out of India in order to capture the global textile market, impoverishing the colony further.
Other British staples — tea and sugar — were also imported from British colonies. That sugar was produced by enslaved Africans in the Caribbean.
Some invisible hand.
Smith also overlooked the utter misery textile workers lived in, even in Britain. The system “worked” at making some people rich. But the squalid and wretched lifestyles of laborers, including children — which inspired the writing of Charles Dickens — were its cost.
We in America have meddled in markets plenty in our own right — not least through historical crimes like slavery and colonialism. But we’ve also developed more benign interventions that can actually help people.
We ban child labor, for example, and enforce (admittedly inadequate) minimum wage protections. We require businesses to offer safe and healthy workplaces. We ban the sale of dangerous drugs. We try to regulate pharmaceuticals to make sure they’re safe and effective.
In other words, capitalism with absolutely no government intervention is a myth — and always was.
We can debate the pros and cons of specific regulations. But if you hear a candidate claiming that capitalism means doing away with all regulations — or that any government interference in the market equates to socialism or communism — they’re being dishonest.
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.
In fact, the growing British Empire was undertaking economic interventions on a colossal scale — and would do even more in the centuries to come. The British set out all over the globe, claiming colonies in the New World and later India and Africa, setting up trade policies that benefited the British at the expense of the colonized.
The British imported cotton from their colonies for their own factories, as well as wheat to feed British workers in the isles. Colonial India, meanwhile, suffered several massive famines. Even as tens of millions of Indians starved to death, record amounts of Indian wheat were exported to feed British factory workers laboring in a so-called free market.
Before the Industrial Revolution, Indian textiles reigned supreme. But British authorities kept industrial textile technologies out of India in order to capture the global textile market, impoverishing the colony further.
Other British staples — tea and sugar — were also imported from British colonies. That sugar was produced by enslaved Africans in the Caribbean.
Some invisible hand.
Smith also overlooked the utter misery textile workers lived in, even in Britain. The system “worked” at making some people rich. But the squalid and wretched lifestyles of laborers, including children — which inspired the writing of Charles Dickens — were its cost.
We in America have meddled in markets plenty in our own right — not least through historical crimes like slavery and colonialism. But we’ve also developed more benign interventions that can actually help people.
We ban child labor, for example, and enforce (admittedly inadequate) minimum wage protections. We require businesses to offer safe and healthy workplaces. We ban the sale of dangerous drugs. We try to regulate pharmaceuticals to make sure they’re safe and effective.
In other words, capitalism with absolutely no government intervention is a myth — and always was.
We can debate the pros and cons of specific regulations. But if you hear a candidate claiming that capitalism means doing away with all regulations — or that any government interference in the market equates to socialism or communism — they’re being dishonest.
Why Tax Havens Are Political and Economic Disasters
Seeking prosperity through lax business and tax regulations leaves countries worse off
by Brooke Harrington
From The Atlantic: In the early 1990s, economists coined the term "the resource curse" to describe a paradox they observed in countries where valuable natural resources were discovered: Rather than thriving, such countries often crumbled, economically and politically. The newfound wealth, instead of raising living standards for all, generated violence, as well as accelerating the growth of inequality and corruption. Terry Karl, a Stanford political science professor, dubbed this the "paradox of plenty." The same story has played out again and again all over the world, from Venezuela (where Karl did her research on the destruction wrought by oil wealth) to Sierra Leone (home of blood diamonds) and Afghanistan (which, despite $3 trillion in mineral wealth, remains among the poorest and most corrupt countries in the world).
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable; the "resource" they discover is human capital, in the form of a population literate and numerate enough to provide financial services, such as the filing and compliance tasks linked to offshore corporations, trusts, and foundations. For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure, such as high-speed internet access.
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
This has led to increasing economic fragility for offshore financial centers, along with political corruption and social decline, as evidenced by a rise in crime and violence. I experienced the latter in my own research on the global wealth-management industry: In the course of visiting 18 tax havens in every major region of the world, I encountered this social decay directly through a number of experiences, including being robbed at Pae Moana in the Cook Islands. A local fisherman I met afterwards said the rise in burglary and violent crime in the islands began with the growth of the offshore industry. Not only the wealth it brought in, but also the new value system focused on exploitation and greed, meant that “everyone calls us the ‘Crook Islands’ now.” The finance industry had begun to eat away at the nation’s democratic institutions: Referring to a recent political-corruption scandal, the fisherman said, “They’ve got our government in their pockets. I hate what they've done to my country.”
But as I learned, the workings of the finance curse have shaped not only the development of small post-colonial nations like the Cook Islands, but also that of seemingly wealthy and well-established ones. For example, recent reporting on the Channel Island of Jersey has documented the crippling of the country's economy, government, and society in one of the world's leading financial centers—a place that was once considered a "miracle of plenty" and a role model for other would-be tax havens.
The corrosion described by the finance curse has affected even some of the wealthiest financial centers, such as Luxembourg, which is the domicile of choice for $3.5 trillion worth of mutual-fund shares and over 150 banks. As a result of a robust financial-services sector that contributes 27 percent of the country’s economic production, the Grand Duchy boasts the highest per capita GDP in the Europe, far outstripping its nearest rivals, Norway and Switzerland. At first blush, Luxembourg would appear to be in terrific shape: a wealthy democracy, thriving in the center of Western Europe.
However, as the economist Gabriel Zucman has shown, Luxembourg's role as a leading tax haven has benefitted foreigners at the expense of locals, across the board. Over 60 percent of the country’s workforce is comprised of foreigners, who reap virtually all the benefits of the wealth generated by the Duchy. The society, as a result, is fracturing along expat-versus-local lines, both in economic and political terms.
As Zucman documents, inequality in the Grand Duchy has skyrocketed, with poverty doubling since 1980, and real wages for ordinary Luxembourgers stagnating for the past 20 years. Meanwhile, salaries for expat wealth managers have exploded, tripling housing prices in Luxembourg City. However, even this new wealth has not benefitted the local economy: Due to Luxembourg’s tax policies, public institutions such as the educational system are in "accelerated decline," mainly to the detriment of locals. The result, Zucman observes, is that Luxembourg has become more of a free-trade zone than a state.[...]
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable; the "resource" they discover is human capital, in the form of a population literate and numerate enough to provide financial services, such as the filing and compliance tasks linked to offshore corporations, trusts, and foundations. For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure, such as high-speed internet access.
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
This has led to increasing economic fragility for offshore financial centers, along with political corruption and social decline, as evidenced by a rise in crime and violence. I experienced the latter in my own research on the global wealth-management industry: In the course of visiting 18 tax havens in every major region of the world, I encountered this social decay directly through a number of experiences, including being robbed at Pae Moana in the Cook Islands. A local fisherman I met afterwards said the rise in burglary and violent crime in the islands began with the growth of the offshore industry. Not only the wealth it brought in, but also the new value system focused on exploitation and greed, meant that “everyone calls us the ‘Crook Islands’ now.” The finance industry had begun to eat away at the nation’s democratic institutions: Referring to a recent political-corruption scandal, the fisherman said, “They’ve got our government in their pockets. I hate what they've done to my country.”
But as I learned, the workings of the finance curse have shaped not only the development of small post-colonial nations like the Cook Islands, but also that of seemingly wealthy and well-established ones. For example, recent reporting on the Channel Island of Jersey has documented the crippling of the country's economy, government, and society in one of the world's leading financial centers—a place that was once considered a "miracle of plenty" and a role model for other would-be tax havens.
The corrosion described by the finance curse has affected even some of the wealthiest financial centers, such as Luxembourg, which is the domicile of choice for $3.5 trillion worth of mutual-fund shares and over 150 banks. As a result of a robust financial-services sector that contributes 27 percent of the country’s economic production, the Grand Duchy boasts the highest per capita GDP in the Europe, far outstripping its nearest rivals, Norway and Switzerland. At first blush, Luxembourg would appear to be in terrific shape: a wealthy democracy, thriving in the center of Western Europe.
However, as the economist Gabriel Zucman has shown, Luxembourg's role as a leading tax haven has benefitted foreigners at the expense of locals, across the board. Over 60 percent of the country’s workforce is comprised of foreigners, who reap virtually all the benefits of the wealth generated by the Duchy. The society, as a result, is fracturing along expat-versus-local lines, both in economic and political terms.
As Zucman documents, inequality in the Grand Duchy has skyrocketed, with poverty doubling since 1980, and real wages for ordinary Luxembourgers stagnating for the past 20 years. Meanwhile, salaries for expat wealth managers have exploded, tripling housing prices in Luxembourg City. However, even this new wealth has not benefitted the local economy: Due to Luxembourg’s tax policies, public institutions such as the educational system are in "accelerated decline," mainly to the detriment of locals. The result, Zucman observes, is that Luxembourg has become more of a free-trade zone than a state.[...]
Reverse mortgages: The final blow killing middle class wealth
From Demo Underground: Many fellow Americans that have worked their entire lives, weathered several recessions and depressions, put their children through school, helped many in need, and faithfully paid their mortgages for decades are now being taken advantage of once again. Most have followed all the rules necessary to be considered fiscally responsible, yet because of "legal fraud" by the financial sector and policies effected by purchased politicians, their years in retirement will be compromised.
The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.
...........//snip
Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.
The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the heirs must pay 95 percent of what is owed to the bank with the government paying the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.
Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to survive.
The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.
...........//snip
Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.
The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the heirs must pay 95 percent of what is owed to the bank with the government paying the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.
Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to survive.
America’s Future Depends on Containing Neoliberalism
By Frank Fear ~ LA Progressive
The Rise and Evolution of Neoliberalism
The concept was born in 1930s Europe in reaction to The New Deal in America and The Nazi Movement in Germany. Both expressions were seen as totalitarian, squelching individual freedom and initiative. Over time, Neoliberalism morphed, becoming especially attractive to those who favored reducing regulatory oversight, downsizing government, and accentuating capitalism as the coin of the realm.
“The market” would take care of things—literally all things—and the market metaphor expanded to embrace a variety of domains associated with social and economic life. In Monbiot’s view, “Neoliberalism sees competition as the defining characteristic of human relations…. The market ensures that everyone gets what they deserve.”
It wasn’t until the early 1980s—with Margaret Thatcher in power in Great Britain and Ronald Reagan in the U.S.—that a neoliberal philosophy became a guiding force for national and international affairs. In famously declaring, “There is no alternative,” Thatcher showed how dedicated she was to free markets, free trade, and global capitalism. The American analogue, “Reaganomics” (aka supply-side economics), focused on redressing “an undue tax burden, excessive government regulation, and massive public spending programs that hampered growth.”
“Call it Reaganism or Thatcherism, economism, or market fundamentalism,” William Deresiewicz writes, “neoliberalism is an ideology that reduces all values to money values. The worth of a thing is the price of the thing. The worth of a person is the wealth of the person. Neoliberalism tells you that you are valuable exclusively in terms of your activity in the marketplace — or, in Wordsworth’s phrase, your ‘getting and spending’.”
Neoliberalism was no short-term political fancy, either. It persisted and expanded, promulgated by powerful advocates, to the point that it changed the way America does business. Nobel Prize-winning economist Joseph Stiglitz believes that Neoliberalism has “rewritten the rules” of the U.S. economy by privileging elites. It did so by deregulating business affairs, privatizing public and human services, cutting social services, lowering taxes, and reducing government size and scope. In exchange, elites promised “trickle down benefits” and declared “A Thousand Points of Light” would take care of human and social needs.
Impacts of Neoliberalism
Neoliberalism proceeded, undeterred, without a counterweight. In so doing, though, it created a stink in social affairs. Today, America is something different from what it was before. The unimaginable now happens. Consider three examples.
•Flint, Michigan. There was a time when what happened to Flint wouldn’t have happened in this country. Today it does, in part, because of lower taxes, corporate dependency, limited regulations, and cost-savings for public services. But “Flint,” the city, isn’t just one place. Metaphorically it’s everywhere: a racially concentrated population in socioeconomic distress with an affluent population living comfortably distant.
•Infant mortality. It’s mindboggling to conceive that 21st Century America would struggle in this domain, but it does. The Centers for Disease Control and Prevention reported recently that about 25 industrialized countries are doing better than the U.S. in keeping children alive. A recent New York Times headline was harsh and direct: The U.S. Is Failing in Infant Mortality, Starting at One Month Old.
•Income. According to a new report released by The Congressional Budget Office, American incomes increased differentially across income categories from 1975-2013. Incomes for the Top 1% increased nearly 200% during that 35-year period, but rose only 18% for those in the bottom four income quintiles. (Note: According The Economic Policy Institute, family income of about $400k per year is required in the U.S. to get into the 1% category; and the average income in that bracket is $1.2 million dollars. The average family income for everybody else is about $46k per annum). “Increased inequality is prominent,” conclude researchers at The World Bank. Stiglitz confirms that conclusion with this finding: “91% of all increases in income from 2009 to 2012 in the U.S. went to the wealthiest 1% of Americans.”
The challenge is clear: America won’t be America much longer—at least how we many of us perceive America to be—if circumstances and trends like these continue. But it won’t be easy to shift into a different gear. Neoliberalism is embedded in American psyche and culture. Around for such a long time, it has become “the way things are”—what’s “normal.”[...]