TO COMMENT CLICK HERE
august 20, 2018
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
Crony capitalism is defined as an economy tilted in favor of businesses that have close relationships with the government and lean on those relationships for special treatment — tax breaks or some other form of state intervention. To an extent, this arrangement has long been part of the American economy. But the problem has grown worldwide as globalization has taken off in the last two decades. This has meant a rise in billionaire wealth around the world and an enormous increase in the inequality gap between the world’s richest and poorest people.
articles
*Here's How Workers Get Scammed in the New Economy — As Corporations Get Richer and More Powerful(ARTICLE BELOW)
*Toys R Us May Be Gone, But Its Workers’ Fight Continues
(ARTICLE BELOW)
*US bosses now earn 312 times the average worker's wage, figures show
(ARTICLE BELOW)
*Climate Change Is the Inevitable Consequence of Capitalist Privatization
(ARTICLE BELOW)
*Trump’s Treasury Department Hands Banks a Windfall
(ARTICLE BELOW)
*In Trump’s ‘greatest economy,’ companies are underpaying their workers and enriching investors(ARTICLE BELOW)
*Deceased and still in debt: the student loans that don't get forgiven
(ARTICLE BELOW)
*‘Eye-popping’ payouts for CEOs follow Trump’s tax cuts
(ARTICLE BELOW)
*Reason Blackout At D.C. Appeals Court
(ARTICLE BELOW)
*CORPORATE TAX RECEIPTS PLUNGE, DEFICIT SOARS, AND REPUBLICANS PLOT SOCIAL PROGRAM CUTS IN GLEE(ARTICLE BELOW)
*U.S. Senate quietly votes to cut tariffs on hundreds of Chinese goods
(ARTICLE BELOW)
*Trump tariffs tank GM as trade war backfire grows
(ARTICLE BELOW)
*The Limits of Green Energy Under Capitalism
(ARTICLE BELOW)
*Cities and States Spend a Ton to Woo Big Companies. Is It Money Well Spent?
(ARTICLE BELOW)
*'All humanity has left the area': paying for Tesla's Gigafactory
(ARTICLE BELOW)
*How Monopoly Was Invented to Demonstrate the Evils of Capitalism
(ARTICLE BELOW)
*The Normalization of Corruption
(ARTICLE BELOW)
*'Corporations Are People' Is Built on an Incredible 19th-Century Lie
(ARTICLE BELOW)
*How Big Pharma Is Corrupting the Truth About the Drugs It Sells Us
(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
...Magical thinking is not limited to the beliefs and practices of pre-modern cultures. It defines the ideology of capitalism. Quotas and projected sales can always be met. Profits can always be raised. Growth is inevitable. The impossible is always possible. Human societies, if they bow before the dictates of the marketplace, will be ushered into capitalist paradise. It is only a question of having the right attitude and the right technique. When capitalism thrives, we are assured, we thrive. The merging of the self with the capitalist collective has robbed us of our agency, creativity, capacity for self-reflection and moral autonomy. We define our worth not by our independence or our character but by the material standards set by capitalism—personal wealth, brands, status and career advancement. We are molded into a compliant and repressed collective. This mass conformity is characteristic of totalitarian and authoritarian states. It is the Disneyfication of America, the land of eternally happy thoughts and positive attitudes. And when magical thinking does not work, we are told, and often accept, that we are the problem. We must have more faith. We must envision what we want. We must try harder. The system is never to blame. We failed it. It did not fail us...
Reign of Idiots By Chris Hedges - apr 30, 2017
fundamentals of american capitalism
*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
Here's How Workers Get Scammed in the New Economy — As Corporations Get Richer and More Powerful
As corporations embraced the notion that their only responsibility was to fill the pockets of shareholders, workers’ wages stagnated.
By Leo W. Gerard / Independent Media Institute - alternet
August 20, 2018, 5:55 AM GMT
The stock market is effervescent. Unemployment seems inexorably descendent. On financial news shows, someone always is singing, “Happy Days are Here Again.”
But the chorus isn’t so cheery on factory floors. There are no Happy Days at the Harley plant to be shuttered in Kansas City, destroying 800 jobs as the corporation spends its big fat tax break on stock buybacks instead. There’s no joy at a Kimberly-Clark plant in Wisconsin where hundreds learned in January that the corporation would use its tax break to cover the cost of closing their factory—and eight others.
In fact, there’s bitterness among blue-collar workers whose wages have flatlined for decades, then declined in May and June, even as CEO compensation skyrocketed 17.6 percent last year.
Happy Days? Only for the already rich—for stockholders and CEOs and trust fund babies. For the rest, every day still is a struggle. That’s the way it has worked in the United States for the past several decades. But it didn’t before that. And it doesn’t have to now. Citizens have the right, and arguably the responsibility, to change the rules under which corporations operate. Doing that would alter outcomes for American workers, give them more say in corporate governance, raise their pay and reduce offshoring.
It works in Germany. There, half of the members of boards of directors for large corporations are chosen by workers. It’s unsurprising that the priorities of workers often differ from those of CEOs and wealthy shareholders—the people who typically populate American corporate boards. If half of the Harley board were workers who assembled motorcycles, it’s unlikely that they’d have approved closing the Kansas City plant. They would have respected the corporation’s obligations to its workers, communities and customers, not just its shareholders.
Perhaps, as is more typical in Germany, they’d have voted to move some low-skill, low-value production offshore. But they’d have preserved high-skill jobs and the Kansas City tax base instead of spending their federal tax break on making rich shareholders richer with stock buybacks.
In Germany, populating corporate boards with workers works well. Germany maintains a positive trade balance, unlike the United States, which suffers a sustained and massive trade deficit. German manufacturing workers make about $10 an hour more than their U.S. counterparts. And manufacturing accounts for about a quarter of the German economy, while in the United States, it has declined to less than half of that.
American corporations weren’t always shareholder-centered. For about three decades after World War II, worker wages rose in tandem with productivity. This was a time during which corporations subscribed to the philosophy that they were obligated to serve their customers, communities, workers and shareholders.
Over the past 30 years, however, U.S. corporations embraced a new notion, which is that they had only one responsibility, to fill the pockets of shareholders.
That is the same 30 years during which workers’ wages stagnated and CEO pay rose no matter how badly the executive performed. That is the same 30 years in which private equity firms bought manufacturers, loaded them up with debt, sold them off at massive profit then shrugged when a stumble threw the firm into bankruptcy, closed factories and killed good, family-supporting American jobs. That is the same 30 years when American corporations moved manufacturing from the United States to low-wage, high-pollution countries like Mexico and China.
The lawmakers who supposedly represent American workers have acted like they’re helpless to stop this destruction. Often they blame the workers, saying they should have accepted massive wage and benefit cuts to prevent a corporation from offshoring a factory. Carrier suggested its workers accept the poverty wages of Mexican workers—pay below U.S. minimum wage—to keep high-skill jobs in Indiana.
Those lawmakers contend workers have no right to demand a reasonable share of the profits their labor creates.
And those lawmakers are wrong. Workers need more representatives like U.S. Sen. Elizabeth Warren, who introduced legislation last week to mend the broken relationship between corporations and their workers and communities.
In the Accountable Capitalism Act, Warren would require that 40 percent of a large corporation’s board of directors be elected by its workers. She would mandate that 75 percent of directors and shareholders vote to approve any political expenditure by the corporation. And she would forbid directors and corporate officers from selling shares within five years of receiving them or within three years of a stock buy-back.
These changes promote the benefit corporation model, under which the welfare of shareholders isn’t the only focus. That is, shareholders aren’t corporations’ only beneficiaries. Customers, workers and communities also must be considered.
This isn’t some kind of wacky concept. Thirty-four states already authorize benefit corporations. And these aren’t obscure, weirdo companies either. More than 500 operate in the United States, including Patagonia, the apparel manufacturer, and Seventh Generation, the household products company.
Corporations are not people. They are legal constructs. Americans grant them charters under which they receive special perks and privileges. This includes limited legal liability for shareholders when the corporation screws up. Americans are hardly demanding too much in return when they insist that corporations pay family-supporting wages and benefits to workers, carefully handle toxic substances to prevent poisoning communities, and never even consider jacking up prices on vital commodities just because they can.
But the chorus isn’t so cheery on factory floors. There are no Happy Days at the Harley plant to be shuttered in Kansas City, destroying 800 jobs as the corporation spends its big fat tax break on stock buybacks instead. There’s no joy at a Kimberly-Clark plant in Wisconsin where hundreds learned in January that the corporation would use its tax break to cover the cost of closing their factory—and eight others.
In fact, there’s bitterness among blue-collar workers whose wages have flatlined for decades, then declined in May and June, even as CEO compensation skyrocketed 17.6 percent last year.
Happy Days? Only for the already rich—for stockholders and CEOs and trust fund babies. For the rest, every day still is a struggle. That’s the way it has worked in the United States for the past several decades. But it didn’t before that. And it doesn’t have to now. Citizens have the right, and arguably the responsibility, to change the rules under which corporations operate. Doing that would alter outcomes for American workers, give them more say in corporate governance, raise their pay and reduce offshoring.
It works in Germany. There, half of the members of boards of directors for large corporations are chosen by workers. It’s unsurprising that the priorities of workers often differ from those of CEOs and wealthy shareholders—the people who typically populate American corporate boards. If half of the Harley board were workers who assembled motorcycles, it’s unlikely that they’d have approved closing the Kansas City plant. They would have respected the corporation’s obligations to its workers, communities and customers, not just its shareholders.
Perhaps, as is more typical in Germany, they’d have voted to move some low-skill, low-value production offshore. But they’d have preserved high-skill jobs and the Kansas City tax base instead of spending their federal tax break on making rich shareholders richer with stock buybacks.
In Germany, populating corporate boards with workers works well. Germany maintains a positive trade balance, unlike the United States, which suffers a sustained and massive trade deficit. German manufacturing workers make about $10 an hour more than their U.S. counterparts. And manufacturing accounts for about a quarter of the German economy, while in the United States, it has declined to less than half of that.
American corporations weren’t always shareholder-centered. For about three decades after World War II, worker wages rose in tandem with productivity. This was a time during which corporations subscribed to the philosophy that they were obligated to serve their customers, communities, workers and shareholders.
Over the past 30 years, however, U.S. corporations embraced a new notion, which is that they had only one responsibility, to fill the pockets of shareholders.
That is the same 30 years during which workers’ wages stagnated and CEO pay rose no matter how badly the executive performed. That is the same 30 years in which private equity firms bought manufacturers, loaded them up with debt, sold them off at massive profit then shrugged when a stumble threw the firm into bankruptcy, closed factories and killed good, family-supporting American jobs. That is the same 30 years when American corporations moved manufacturing from the United States to low-wage, high-pollution countries like Mexico and China.
The lawmakers who supposedly represent American workers have acted like they’re helpless to stop this destruction. Often they blame the workers, saying they should have accepted massive wage and benefit cuts to prevent a corporation from offshoring a factory. Carrier suggested its workers accept the poverty wages of Mexican workers—pay below U.S. minimum wage—to keep high-skill jobs in Indiana.
Those lawmakers contend workers have no right to demand a reasonable share of the profits their labor creates.
And those lawmakers are wrong. Workers need more representatives like U.S. Sen. Elizabeth Warren, who introduced legislation last week to mend the broken relationship between corporations and their workers and communities.
In the Accountable Capitalism Act, Warren would require that 40 percent of a large corporation’s board of directors be elected by its workers. She would mandate that 75 percent of directors and shareholders vote to approve any political expenditure by the corporation. And she would forbid directors and corporate officers from selling shares within five years of receiving them or within three years of a stock buy-back.
These changes promote the benefit corporation model, under which the welfare of shareholders isn’t the only focus. That is, shareholders aren’t corporations’ only beneficiaries. Customers, workers and communities also must be considered.
This isn’t some kind of wacky concept. Thirty-four states already authorize benefit corporations. And these aren’t obscure, weirdo companies either. More than 500 operate in the United States, including Patagonia, the apparel manufacturer, and Seventh Generation, the household products company.
Corporations are not people. They are legal constructs. Americans grant them charters under which they receive special perks and privileges. This includes limited legal liability for shareholders when the corporation screws up. Americans are hardly demanding too much in return when they insist that corporations pay family-supporting wages and benefits to workers, carefully handle toxic substances to prevent poisoning communities, and never even consider jacking up prices on vital commodities just because they can.
Toys R Us May Be Gone, But Its Workers’ Fight Continues
by Negin Owliaei | the smiring chimp
August 18, 2018 - 6:13am
It was once the biggest toy company in the world. But Toys ‘R’ Us turned off the lights in its remaining stores for the last time this summer, becoming the most recent casualty of Wall Street greed.
As Toys ‘R’ Us first began its descent into bankruptcy and liquidation, it was seen as another point on the “retail apocalypse” continuum, with many in the media blaming e-commerce and changing shopping habits for store bankruptcies around the country. But the narrative is shifting to place the blame on the private equity firms that purchased the company with a leveraged buyout in 2005, only to saddle it with billions of dollars in debt.
That shift is due in no small part to the biggest victims of the buyout — the more than 30,000 Toys ‘R’ Us employees now out of a job. Those workers are fighting hard for a fair severance — and consequences for the Wall Street firms that turned a profit while leaving them in financial insecurity.
The private equity companies KKR and Bain Capital and real estate firm Vornado were able to squeeze $470 million in fees out of the debt-ridden toy store after acquiring it in 2005. Top execs even won approval to hand out millions in bonuses last year while in the midst of bankruptcy proceedings, arguing to the court that the chain “rewards team members at all levels of the company.”
Tell that to the workers, many of whom spent decades at the toy store, who received far less. Store employees were shocked to learn they wouldn’t receive severance upon losing their jobs, and the hefty exec bonuses were salt in the wound. In the weeks preceding the chain’s closing, employees mobilized to demand fair severance pay and decry the corporate greed that left them unemployed.
Tens of thousands of people signed petitions calling on Toys ‘R’ Us owners to pay workers out of the sizable private equity profits. Workers gathered in Bain Capital’s New York City lobby, creating a mock graveyard to mourn the toy store “killed by Wall Street greed.” They protested at the private equity firms that owned the company, outside the home of former CEO David Brandon, and within their local stores.
The store’s former employees are also doing their best to deal a blow where it would hurt most — the profits of the private equity firms that took Toys ‘R’ Us down. Workers and labor advocates have been encouraging public pension boards across the country to divest their funds from private equity firms that played a role in the toy store’s demise.
The California pension board heard from Nadia Romo, a store manager in Ventura who worked at the company alongside her fiance and step-son. The combined loss of income meant the family had to try to downsize their home in order to cover her newborn daughter’s medical insurance. She’d heard similar stories from Toys ‘R’ Us workers around the country facing everything from cancer to miscarriages, all while dealing with the loss of their jobs.
“KKR, Bain Capital, and Vornado never put their hearts into a 70-year old company to grow with a great good investments in return,” Romo said. “They just took advantage of investors like you and took advantage of hard workers like us.”
Romo was joined by other Toys ‘R’ Us employees, including Sandra Lopez, a manager who worked her way up from a part-time position over the course of 22 years. Lopez told the board that she’d missed countless family events while working at the store as a single mother. “Our work in retail has value for the families we help at the stores, and our families at home. We can’t let Wall Street and we can’t let Bain and KKR take it all away,” Lopez said.
“Please, I’m asking you to do your homework and make sure you’re not investing in companies that are all about corporate greed instead of workers’ needs.”
As Toys ‘R’ Us first began its descent into bankruptcy and liquidation, it was seen as another point on the “retail apocalypse” continuum, with many in the media blaming e-commerce and changing shopping habits for store bankruptcies around the country. But the narrative is shifting to place the blame on the private equity firms that purchased the company with a leveraged buyout in 2005, only to saddle it with billions of dollars in debt.
That shift is due in no small part to the biggest victims of the buyout — the more than 30,000 Toys ‘R’ Us employees now out of a job. Those workers are fighting hard for a fair severance — and consequences for the Wall Street firms that turned a profit while leaving them in financial insecurity.
The private equity companies KKR and Bain Capital and real estate firm Vornado were able to squeeze $470 million in fees out of the debt-ridden toy store after acquiring it in 2005. Top execs even won approval to hand out millions in bonuses last year while in the midst of bankruptcy proceedings, arguing to the court that the chain “rewards team members at all levels of the company.”
Tell that to the workers, many of whom spent decades at the toy store, who received far less. Store employees were shocked to learn they wouldn’t receive severance upon losing their jobs, and the hefty exec bonuses were salt in the wound. In the weeks preceding the chain’s closing, employees mobilized to demand fair severance pay and decry the corporate greed that left them unemployed.
Tens of thousands of people signed petitions calling on Toys ‘R’ Us owners to pay workers out of the sizable private equity profits. Workers gathered in Bain Capital’s New York City lobby, creating a mock graveyard to mourn the toy store “killed by Wall Street greed.” They protested at the private equity firms that owned the company, outside the home of former CEO David Brandon, and within their local stores.
The store’s former employees are also doing their best to deal a blow where it would hurt most — the profits of the private equity firms that took Toys ‘R’ Us down. Workers and labor advocates have been encouraging public pension boards across the country to divest their funds from private equity firms that played a role in the toy store’s demise.
The California pension board heard from Nadia Romo, a store manager in Ventura who worked at the company alongside her fiance and step-son. The combined loss of income meant the family had to try to downsize their home in order to cover her newborn daughter’s medical insurance. She’d heard similar stories from Toys ‘R’ Us workers around the country facing everything from cancer to miscarriages, all while dealing with the loss of their jobs.
“KKR, Bain Capital, and Vornado never put their hearts into a 70-year old company to grow with a great good investments in return,” Romo said. “They just took advantage of investors like you and took advantage of hard workers like us.”
Romo was joined by other Toys ‘R’ Us employees, including Sandra Lopez, a manager who worked her way up from a part-time position over the course of 22 years. Lopez told the board that she’d missed countless family events while working at the store as a single mother. “Our work in retail has value for the families we help at the stores, and our families at home. We can’t let Wall Street and we can’t let Bain and KKR take it all away,” Lopez said.
“Please, I’m asking you to do your homework and make sure you’re not investing in companies that are all about corporate greed instead of workers’ needs.”
greed, greed, greed!!!
US bosses now earn 312 times the average worker's wage, figures show
Astronomical gap between the pay of workers and bosses exposed in report on
earnings of America’s top 350 CEOs
Dominic Rushe in New York
the guardian
Thu 16 Aug 2018 05.00 EDT
The chief executives of America’s top 350 companies earned 312 times more than their workers on average last year, according to a new report published Thursday by the Economic Policy Institute.
The rise came after the bosses of America’s largest companies got an average pay rise of 17.6% in 2017, taking home an average of $18.9m in compensation while their employees’ wages stalled, rising just 0.3% over the year.
The pay gap has risen dramatically, with some fluctuations, since the 1990s. In 1965 the ratio of CEO to worker pay was 20-to-one; that figure had risen to 58-to-one by in 1989 and peaked in 2000 when CEOs earned 344 times the wage of their average worker.
CEO pay dipped in the early 2000s and during the last recession but has been rising rapidly since 2009. Chief executives are even leaving the 0.1% in the dust. The bosses of large firms now earn 5.5 times as much as the average earner in the top 0.1%.
The astronomical gap between the remuneration of workers and bosses has been brought into sharper focus by a new financial disclosure rule that forces companies to publish the ratio of CEO to worker pay. Last year McDonald’s CEO Steve Easterbrook earned $21.7m while the McDonald’s workers earned a median wage of just $7,017 – a CEO to worker pay ratio of 3,101-to-one. The average Walmart worker earned $19,177 in 2017 while CEO Doug McMillon took home $22.8m – a ratio of 1,188-to-one.
But the average is skewed by outliers, particularly the tech companies, where the CEO founders may own large chunks of the company but not take home much in compensation, relatively speaking. Amazon’s boss, Jeff Bezos, the world’s richest man, took home $1.7m in 2017 while the average Amazon worker earned $28,446 - a ratio of 59-to-one. Facebook co-founder Mark Zuckerberg’s compensation was $8.8m in 2017 while his well paid workforce earned an average of $240,430 – a ratio of 37-to-one. But neither man is waiting on his monthly paycheck. Bezos’s personal fortune now tops $154bn while Zuckerberg’s is close to $66bn, according to Forbes.
The compensation bonanza was driven by stock-related components of CEO compensation such as stock awards or the opportunity to cash in stock options, said Lawrence Mishel, a distinguished fellow at the Economic Policy Institute.
But the rise in their compensation can not be explained entirely by rising stock markets. CEO rewards have outstripped both stock prices and corporate profits, EPI found. Between 1978 and 2017 CEO compensation has increased by 979%. Over the same period the S&P 500 Index of the US’s largest companies grew 637%. The typical workers’ pay package rose just 11.2% over the same time frame.
“Over time I think there has been a loosening of norms.” said Mishel. “Everyone wants to believe their CEO is one of the best, so they look around and see what everyone else is being paid and then they pay them a lot more. They think everyone is better than average.”
The outsize pay packets have had a direct impact on people down the corporate ladder, Mishel claims. “The redistribution of wages to the top 5%, but particularly the top 1%, affected the wage growth of the bottom 90%. As a mathematical matter, had there not been the redistribution upward – to the top 5%, but which is mostly about to the top 1% – the wages of the bottom 90% could have grown twice as fast as it actually did.”
The rise came after the bosses of America’s largest companies got an average pay rise of 17.6% in 2017, taking home an average of $18.9m in compensation while their employees’ wages stalled, rising just 0.3% over the year.
The pay gap has risen dramatically, with some fluctuations, since the 1990s. In 1965 the ratio of CEO to worker pay was 20-to-one; that figure had risen to 58-to-one by in 1989 and peaked in 2000 when CEOs earned 344 times the wage of their average worker.
CEO pay dipped in the early 2000s and during the last recession but has been rising rapidly since 2009. Chief executives are even leaving the 0.1% in the dust. The bosses of large firms now earn 5.5 times as much as the average earner in the top 0.1%.
The astronomical gap between the remuneration of workers and bosses has been brought into sharper focus by a new financial disclosure rule that forces companies to publish the ratio of CEO to worker pay. Last year McDonald’s CEO Steve Easterbrook earned $21.7m while the McDonald’s workers earned a median wage of just $7,017 – a CEO to worker pay ratio of 3,101-to-one. The average Walmart worker earned $19,177 in 2017 while CEO Doug McMillon took home $22.8m – a ratio of 1,188-to-one.
But the average is skewed by outliers, particularly the tech companies, where the CEO founders may own large chunks of the company but not take home much in compensation, relatively speaking. Amazon’s boss, Jeff Bezos, the world’s richest man, took home $1.7m in 2017 while the average Amazon worker earned $28,446 - a ratio of 59-to-one. Facebook co-founder Mark Zuckerberg’s compensation was $8.8m in 2017 while his well paid workforce earned an average of $240,430 – a ratio of 37-to-one. But neither man is waiting on his monthly paycheck. Bezos’s personal fortune now tops $154bn while Zuckerberg’s is close to $66bn, according to Forbes.
The compensation bonanza was driven by stock-related components of CEO compensation such as stock awards or the opportunity to cash in stock options, said Lawrence Mishel, a distinguished fellow at the Economic Policy Institute.
But the rise in their compensation can not be explained entirely by rising stock markets. CEO rewards have outstripped both stock prices and corporate profits, EPI found. Between 1978 and 2017 CEO compensation has increased by 979%. Over the same period the S&P 500 Index of the US’s largest companies grew 637%. The typical workers’ pay package rose just 11.2% over the same time frame.
“Over time I think there has been a loosening of norms.” said Mishel. “Everyone wants to believe their CEO is one of the best, so they look around and see what everyone else is being paid and then they pay them a lot more. They think everyone is better than average.”
The outsize pay packets have had a direct impact on people down the corporate ladder, Mishel claims. “The redistribution of wages to the top 5%, but particularly the top 1%, affected the wage growth of the bottom 90%. As a mathematical matter, had there not been the redistribution upward – to the top 5%, but which is mostly about to the top 1% – the wages of the bottom 90% could have grown twice as fast as it actually did.”
Climate Change Is the Inevitable Consequence of Capitalist Privatization
by Nathaniel Matthews-Trigg | the smirking chimp
August 13, 2018 - 5:36am
The notion of the commons refers to shared land, publicly available for all people to access for leisure and when times get tough, for survival. Publicly shared lands have existed since humans first walked the earth but have progressively been enclosed for individual sustenance or for profit. The most profound period of enclosures came with the introduction of European capitalism, and mass displacement of agricultural people to toil in industrial factories.
Throughout European and U.S. colonialism, the genocide, enslavement, and displacement of indigenous people from their lands was “justified” via the pseudo-science concept of Social Darwinism—the notion that humans inherently compete for resources and the most violent and coercive are rightfully in charge. Similarly, the pseudo-science tragedy of the commons was created to justify the privatization of public lands. This “tragedy” was based on the premise that shared resources will inherently be exploited and destroyed by the unruly public. That if left to their own volition people are inherently greedy, they don’t think in the long-term, they don’t communicate, and just like Social Darwinism, they must compete. Economist Elinor Ostrom debunked the tragedy of the commons and in doing so became the first woman to win a Nobel Peace Prize for Economics.
Our atmosphere, a publicly needed space containing many vital resources such as nitrogen, oxygen, and carbon dioxide—may seem to the untrained eye to be the tragedy of the commons playing out above our heads. But this is hardly the case, and one must only take their head out of the clouds and refocus on the social developments on-the-ground to see that climate change is really the tragedy of the enclosures, the inevitable consequence of capitalist privatization.
"Capitalism's grow-or-die imperative stands radically at odds with ecology's imperative of interdependence and limit. The two imperatives can no longer coexist with each other; nor can any society founded on the myth that they can be reconciled hope to survive. Either we will establish an ecological society or society will go under for everyone, irrespective of his or her status." —Murray Bookchin
Capitalism is an economic system based on competition, and competition is a state of constant warfare. The competing corporation must always be in the process of growing, strengthening, improving in combat, and always ready to strike—or risk losing everything to someone or something that’s biggest, stronger, or more strategic. For corporations, success is based on profit, and profits are used to continue the cycle of growth, exploitation, and political influence.
The long-term consequences of a corporation’s actions are ignored by the corporation because short-term threats and successes are paramount. The moral implications of a corporation’s actions are ignored by the corporation because short-term threats and successes are everything. It’s a toxic environment of immediacy, anxiety, and violence—that leaves an epoch of garbage, pollutants, and suffering in its wake.
We can see how Social Darwinism describes un-regulated capitalism, a constant state of competition. A dog-eat-dog world. The constant struggle of pulling oneself up by their bootstraps—an impossible task if you’ve ever tried it. Similarly, the tragedy of the commons describes capitalism much more accurately than pastoral human relationships. It’s a rhetorical tool that says, “well that’s human nature folks, so there’s nothing we can do about it. Trying to change it is as futile as trying to change our biology.”
But just as the tragedy of the commons started as a thought experiment amongst colonial British economists in the 19th century, let’s invert it and use it to imagine ways that we can intervene to stop capitalism from exhausting the finite resources we all need to survive. Let’s imagine a forest, that if we did nothing, a corporation would clear-cut, drill for oil, mine for metals, and finally sell off to another corporation to dump garbage onto. Now we could intervene by regulating the corporation, requiring them to plant trees where they’ve cut one down, pay taxes for every ton of carbon they emit, and going back to our analogy of warring parties, we would introduce a referee into the wargames of capitalism.
But there are other options to consider. A government or community could stop the corporations from being able to purchase the forest in the first place. The workers of the corporation could take over production from the CEO and run the corporation in a way that benefits the local community and local environment. Just as diverse as we humans are, so too are the creative ways we can organize ourselves to create a more sustainable future.
“The assumption that what currently exists must necessarily exist is the acid that corrodes all visionary thinking.” —Bookchin
Ostrom, who debunked the tragedy of the commons, was a strong advocate for polycentricity, the notion that complex problems require a diverse set of solutions—that sustainable resource management requires a bottom-up approach and that communities must decide how to address these issues themselves. In other words, there is no one solution, and we must embrace a diversity of tactics. This is why, according to Ostrom in a 2017 interview with Big Think, “Any top-down government, whether on the right or the left, is unlikely to be able to solve many of the problems of resource sustainability in the world.”
The late radical social ecologist Murray Bookchin theorized how diverse communities, utilizing diverse tactics, could work together based on shared principles of sustainability, direct democracy, and equality. He coined this “communalism”—and many theorists and activists have further developed these theories and put them into practice. At its core, communalism is about bringing people together into assemblies to discuss the short-term and long-term challenges they face, and democratically decide on how to best address these challenges. This is how successful commons are regulated and maintained via community participation and shared interests, and how our future atmosphere must be maintained. That is, once we as a society recognize our atmosphere as a vital component of our commonly inhabited planet.
“Partial measures are far from sufficient, and approaches to renewable energy development that merely replicate capitalist forms may likely turn out to be a dead end. However, the cumulative impact of [communal] municipal efforts to challenge entrenched interests and actualize living alternatives – combined with coherent revolutionary visions, organizations, and strategies towards a radically transformed society- could perhaps be enough to fend off a dystopian future of deprivation and authoritarianism.” --Brian Tokar
Throughout European and U.S. colonialism, the genocide, enslavement, and displacement of indigenous people from their lands was “justified” via the pseudo-science concept of Social Darwinism—the notion that humans inherently compete for resources and the most violent and coercive are rightfully in charge. Similarly, the pseudo-science tragedy of the commons was created to justify the privatization of public lands. This “tragedy” was based on the premise that shared resources will inherently be exploited and destroyed by the unruly public. That if left to their own volition people are inherently greedy, they don’t think in the long-term, they don’t communicate, and just like Social Darwinism, they must compete. Economist Elinor Ostrom debunked the tragedy of the commons and in doing so became the first woman to win a Nobel Peace Prize for Economics.
Our atmosphere, a publicly needed space containing many vital resources such as nitrogen, oxygen, and carbon dioxide—may seem to the untrained eye to be the tragedy of the commons playing out above our heads. But this is hardly the case, and one must only take their head out of the clouds and refocus on the social developments on-the-ground to see that climate change is really the tragedy of the enclosures, the inevitable consequence of capitalist privatization.
"Capitalism's grow-or-die imperative stands radically at odds with ecology's imperative of interdependence and limit. The two imperatives can no longer coexist with each other; nor can any society founded on the myth that they can be reconciled hope to survive. Either we will establish an ecological society or society will go under for everyone, irrespective of his or her status." —Murray Bookchin
Capitalism is an economic system based on competition, and competition is a state of constant warfare. The competing corporation must always be in the process of growing, strengthening, improving in combat, and always ready to strike—or risk losing everything to someone or something that’s biggest, stronger, or more strategic. For corporations, success is based on profit, and profits are used to continue the cycle of growth, exploitation, and political influence.
The long-term consequences of a corporation’s actions are ignored by the corporation because short-term threats and successes are paramount. The moral implications of a corporation’s actions are ignored by the corporation because short-term threats and successes are everything. It’s a toxic environment of immediacy, anxiety, and violence—that leaves an epoch of garbage, pollutants, and suffering in its wake.
We can see how Social Darwinism describes un-regulated capitalism, a constant state of competition. A dog-eat-dog world. The constant struggle of pulling oneself up by their bootstraps—an impossible task if you’ve ever tried it. Similarly, the tragedy of the commons describes capitalism much more accurately than pastoral human relationships. It’s a rhetorical tool that says, “well that’s human nature folks, so there’s nothing we can do about it. Trying to change it is as futile as trying to change our biology.”
But just as the tragedy of the commons started as a thought experiment amongst colonial British economists in the 19th century, let’s invert it and use it to imagine ways that we can intervene to stop capitalism from exhausting the finite resources we all need to survive. Let’s imagine a forest, that if we did nothing, a corporation would clear-cut, drill for oil, mine for metals, and finally sell off to another corporation to dump garbage onto. Now we could intervene by regulating the corporation, requiring them to plant trees where they’ve cut one down, pay taxes for every ton of carbon they emit, and going back to our analogy of warring parties, we would introduce a referee into the wargames of capitalism.
But there are other options to consider. A government or community could stop the corporations from being able to purchase the forest in the first place. The workers of the corporation could take over production from the CEO and run the corporation in a way that benefits the local community and local environment. Just as diverse as we humans are, so too are the creative ways we can organize ourselves to create a more sustainable future.
“The assumption that what currently exists must necessarily exist is the acid that corrodes all visionary thinking.” —Bookchin
Ostrom, who debunked the tragedy of the commons, was a strong advocate for polycentricity, the notion that complex problems require a diverse set of solutions—that sustainable resource management requires a bottom-up approach and that communities must decide how to address these issues themselves. In other words, there is no one solution, and we must embrace a diversity of tactics. This is why, according to Ostrom in a 2017 interview with Big Think, “Any top-down government, whether on the right or the left, is unlikely to be able to solve many of the problems of resource sustainability in the world.”
The late radical social ecologist Murray Bookchin theorized how diverse communities, utilizing diverse tactics, could work together based on shared principles of sustainability, direct democracy, and equality. He coined this “communalism”—and many theorists and activists have further developed these theories and put them into practice. At its core, communalism is about bringing people together into assemblies to discuss the short-term and long-term challenges they face, and democratically decide on how to best address these challenges. This is how successful commons are regulated and maintained via community participation and shared interests, and how our future atmosphere must be maintained. That is, once we as a society recognize our atmosphere as a vital component of our commonly inhabited planet.
“Partial measures are far from sufficient, and approaches to renewable energy development that merely replicate capitalist forms may likely turn out to be a dead end. However, the cumulative impact of [communal] municipal efforts to challenge entrenched interests and actualize living alternatives – combined with coherent revolutionary visions, organizations, and strategies towards a radically transformed society- could perhaps be enough to fend off a dystopian future of deprivation and authoritarianism.” --Brian Tokar
Trump’s Treasury Department Hands Banks a Windfall
The Treasury Department not only sided with banking lobbyists’ definition of “financial services,” but its new rule’s fine print echoed their interpretations of the 2017 federal tax law.
David Sirota - capital & main
Published on August 8, 2018
Do “financial services” include banking? Not according to the Trump administration, whose new rule, issued Wednesday by the Treasury Department, argues there is a difference — and then cites the alleged difference as a means of extending lucrative tax breaks to the banking industry. The new rule represents more than semantic hairsplitting and hands a huge windfall to the banking industry.
At issue is the Trump tax bill’s treatment of so-called pass-through income — or income that is gleaned from partnerships, LLCs and S corporations. The 2017 Republican tax legislation dramatically slashed tax rates on income from such entities, generating a firestorm of criticism that it was a giveaway to real estate moguls like Trump, U.S. Senator Bob Corker (R-TN) and other Republican backers of the legislation who have such entities in their personal portfolios. (The criticism became known as the “Corker Kickback” scandal.)
To reduce some of the cost of the overall tax cut bill — and to mute some of the specific criticism of the pass-through sections — GOP lawmakers included provisions prohibiting certain kinds of businesses from qualifying for the pass-through tax cut. One such business was “financial services,” and its removal countered assertions that the bill could enrich big banks.
However, less than a year after passage of the tax legislation, the Treasury Department, headed by former banker Steve Mnuchin, issued the proposed rule whose fine print asserts that “financial services” actually do not include banking. If that interpretation of the tax bill stands, hundreds of banks operating as S corporations — as well as their owners — could claim the tax cut.
“This is illustrative of the rigged process behind the bill, which was rushed through Congress without a single public hearing,” the Center for American Progress’ Seth Hanlon told Capital & Main. Hanlon served on President Obama’s National Economic Council. “How many members of Congress, let alone members of the public, understood that ‘financial services’ didn’t mean banking, and therefore that bankers would get a massive tax cut? This is the opposite of real tax reform.”
Banking industry lobbyists pushed for the interpretation — acknowledging that the bill generally blocked pass-through tax cuts for businesses in financial services, but arguing that “financial services are, however, clearly something other than banking.”
“We had extensive discussions with Congressional staff and various members in both the House and Senate,” wrote the American Bankers Association, Independent Community Bankers of America and Subchapter S Bank Association in a letter to the Treasury Department. “In the course of these discussions, we were assured repeatedly that S Banks would qualify for the lower tax rate for pass-through businesses.”
The Trump Treasury Department not only sided with the lobbyists, but in the fine print of its new rule, which is now subject to a public comment period before it goes into force, echoed their views.
“Commenters requested guidance as to whether financial services includes banking,” the Treasury Department said, referring to the banking industry. “The Treasury Department and the IRS agree with such commenters [that] financial services should be more narrowly interpreted here.”
The department then concluded that its interpretation “limits the definition of financial services to services typically performed by financial advisers and investment bankers…This includes services provided by financial advisers, investment bankers, wealth planners, and retirement advisers and other similar professionals, but does not include taking deposits or making loans.”
Tax attorney David Miller of the Proskauer law firm told Capital & Main: “The interpretation is consistent with denying the flow-through deduction only to labor-intensive industries. Banks tend to be capital, and not labor, intensive.”
“Treasury’s decision delivers a benefit to roughly 2,000 banks around the country that qualify as S corporations,” said University of Chicago tax law professor Daniel Hemel. “It’s a safe bet that most of the S corporation shareholders benefited by today’s decision will fall into the upper reaches of the top one percent — not many middle-class folks own a bank. The notion that ‘financial services’ excludes banking should be quite a surprise to members of the House Financial Services Committee, which thought that it had jurisdiction over banking.”
Hemel calculated that banks would end up reaping a big payout from the interpretation.
“If you assume a return on assets of around one percent and S corporation bank assets in the range of $400 billion, then the move reduces the total tax liability of S corporation bank shareholders by $300 million per year for 2018 through 2025,” he said. “We’re talking about something like $2.5 billion total. Small in comparison to the magnitude of the rest of the December 2017 giveaway, but $2.5 billion isn’t chump change.”
Steve Rosenthal of the Urban Institute said that while the Treasury Department fine print explicitly solidifies the tax cut for bankers, he said he believes the interpretation does not contradict congressional intent.
“I thought Congress gave away the house in the legislation, and I spoke to Hill staffers who said subchapter S banks are going to get a 20 percent deduction, and so I don’t think the new Treasury rule runs contrary to what Congress wanted,” he told
Capital & Main. “This is definitely a huge giveaway — I just think it was Congress that did the original giveaway.”
At issue is the Trump tax bill’s treatment of so-called pass-through income — or income that is gleaned from partnerships, LLCs and S corporations. The 2017 Republican tax legislation dramatically slashed tax rates on income from such entities, generating a firestorm of criticism that it was a giveaway to real estate moguls like Trump, U.S. Senator Bob Corker (R-TN) and other Republican backers of the legislation who have such entities in their personal portfolios. (The criticism became known as the “Corker Kickback” scandal.)
To reduce some of the cost of the overall tax cut bill — and to mute some of the specific criticism of the pass-through sections — GOP lawmakers included provisions prohibiting certain kinds of businesses from qualifying for the pass-through tax cut. One such business was “financial services,” and its removal countered assertions that the bill could enrich big banks.
However, less than a year after passage of the tax legislation, the Treasury Department, headed by former banker Steve Mnuchin, issued the proposed rule whose fine print asserts that “financial services” actually do not include banking. If that interpretation of the tax bill stands, hundreds of banks operating as S corporations — as well as their owners — could claim the tax cut.
“This is illustrative of the rigged process behind the bill, which was rushed through Congress without a single public hearing,” the Center for American Progress’ Seth Hanlon told Capital & Main. Hanlon served on President Obama’s National Economic Council. “How many members of Congress, let alone members of the public, understood that ‘financial services’ didn’t mean banking, and therefore that bankers would get a massive tax cut? This is the opposite of real tax reform.”
Banking industry lobbyists pushed for the interpretation — acknowledging that the bill generally blocked pass-through tax cuts for businesses in financial services, but arguing that “financial services are, however, clearly something other than banking.”
“We had extensive discussions with Congressional staff and various members in both the House and Senate,” wrote the American Bankers Association, Independent Community Bankers of America and Subchapter S Bank Association in a letter to the Treasury Department. “In the course of these discussions, we were assured repeatedly that S Banks would qualify for the lower tax rate for pass-through businesses.”
The Trump Treasury Department not only sided with the lobbyists, but in the fine print of its new rule, which is now subject to a public comment period before it goes into force, echoed their views.
“Commenters requested guidance as to whether financial services includes banking,” the Treasury Department said, referring to the banking industry. “The Treasury Department and the IRS agree with such commenters [that] financial services should be more narrowly interpreted here.”
The department then concluded that its interpretation “limits the definition of financial services to services typically performed by financial advisers and investment bankers…This includes services provided by financial advisers, investment bankers, wealth planners, and retirement advisers and other similar professionals, but does not include taking deposits or making loans.”
Tax attorney David Miller of the Proskauer law firm told Capital & Main: “The interpretation is consistent with denying the flow-through deduction only to labor-intensive industries. Banks tend to be capital, and not labor, intensive.”
“Treasury’s decision delivers a benefit to roughly 2,000 banks around the country that qualify as S corporations,” said University of Chicago tax law professor Daniel Hemel. “It’s a safe bet that most of the S corporation shareholders benefited by today’s decision will fall into the upper reaches of the top one percent — not many middle-class folks own a bank. The notion that ‘financial services’ excludes banking should be quite a surprise to members of the House Financial Services Committee, which thought that it had jurisdiction over banking.”
Hemel calculated that banks would end up reaping a big payout from the interpretation.
“If you assume a return on assets of around one percent and S corporation bank assets in the range of $400 billion, then the move reduces the total tax liability of S corporation bank shareholders by $300 million per year for 2018 through 2025,” he said. “We’re talking about something like $2.5 billion total. Small in comparison to the magnitude of the rest of the December 2017 giveaway, but $2.5 billion isn’t chump change.”
Steve Rosenthal of the Urban Institute said that while the Treasury Department fine print explicitly solidifies the tax cut for bankers, he said he believes the interpretation does not contradict congressional intent.
“I thought Congress gave away the house in the legislation, and I spoke to Hill staffers who said subchapter S banks are going to get a 20 percent deduction, and so I don’t think the new Treasury rule runs contrary to what Congress wanted,” he told
Capital & Main. “This is definitely a huge giveaway — I just think it was Congress that did the original giveaway.”
In Trump’s ‘greatest economy,’ companies are underpaying their workers and enriching investors
A new analysis finds that median worker income is shockingly low.
RYAN KORONOWSKI - thinkprogress
AUG 1, 2018, 12:44 PM
According to Pr*sident Trump, we are living in “the greatest economy in the HISTORY of America and the best time EVER to look for a job.”
The details reveal something a little different. While unemployment may be low, workers are experiencing historically low wage growth, while companies are responding to Trump’s recent tax cut by routing their profits predominantly to top executives and big shareholders in the form of stock buybacks.
A Wall Street Journal analysis of how 1,111 companies pay their workers released Wednesday morning illustrates this in stark terms. While “median pay lies between about $44,000 and $95,000 for about half of the 1,111 companies in the S&P 1,500 index that have disclosed median employee pay,” zooming into specific large companies that have been actively padding the wallets of their largest shareholders through stock buyback programs reveals that the true priority here is not sustainable long-term raises for middle-class workers.
The Journal’s Theo Francis and Yaryna Serkez found that “employing low-wage workers directly drags median pay down. Median pay at McDonald’s was much lower, at $7,017, in part because McDonald’s directly employs hourly servers at more of its restaurants.” The low median pay at McDonald’s comes as the fast-food behemoth bought back $1.6 billion in stock in the first quarter of 2018 alone.
“At Walmart, with 2.3 million workers, half made less than $19,177,” the Francis and Serkez found. Late last year, Walmart launched a stock buyback initiative to the tune of $20 billion in order to boost its stock prices, which disproportionately enriches the biggest stockholders in the company.
Gap’s very low median pay of $5,375 per year coincided with the company buying back $100 million in stock last quarter.
The median pay at Chipotle was $13,582 — last year it offered a $100 million stock buyback program. They did it again in April. Yum Brands, the parent company of brands like Taco Bell, KFC, and Pizza Hut, paid its workers a median yearly wage of $9,111. Late last year they offered a $1.5 billion stock buyback program, and recently reporting $528 million in buybacks in the first quarter of 2018 alone.
Amazon, anomalous with the companies on this list, has not run a stock buyback in six years, and its median pay was $28,446, according to the Journal.
Some of these figures are misleading — median pay at Dunkin Donuts appears high because most of its direct employees are office workers, for example, with nearly all of the people who work in or operate the retail stores working for franchisees. Similarly, Hasbro reported a median pay of $74,207 as it outsourced factory workers who earn far less, while Mattel’s figure of $6,271 reflects the fact that it directly employs its factory workers rather than using secondary employment tactics. Other companies employ many seasonal or part-time workers.
Overall, however, this is what weak wage growth looks like.
This is also how corporate America works. A study from the National Employment Law Project and the Roosevelt Institute, released Tuesday, found that between 2015 and 2017, “companies spent almost 60 percent of net profits on buybacks.” They do this instead of investing in worker pay.
In fact, the restaurant industry spent more money on stock buybacks than they actually earned in profits, fueling the buybacks with debt and existing cash reserves. “Companies in the retail and food manufacturing industries spent 79.2 percent and 58.2 percent, respectively, of their net profits on share buybacks,” the report’s authors found. This was the state of play just before the tax cut, passed late last year, caused an even higher surge of buybacks — which reveals the priorities of these companies, and the politicians who fought so hard to cut corporate taxes.
If McDonald’s had spent the money it poured into stock buybacks between 2015 and 2017, it could have given raises of $4,000 per year to its 1.9 million workers, according to the new study.
The effort to make the nation’s wealthiest investors even richer doesn’t stop with tax cuts and stock buybacks — the Trump administration is also considering a ploy to bypass Congress and let people who sell their assets pay even less in capital gains, which would mean a $100 billion tax cut for the rich.
The details reveal something a little different. While unemployment may be low, workers are experiencing historically low wage growth, while companies are responding to Trump’s recent tax cut by routing their profits predominantly to top executives and big shareholders in the form of stock buybacks.
A Wall Street Journal analysis of how 1,111 companies pay their workers released Wednesday morning illustrates this in stark terms. While “median pay lies between about $44,000 and $95,000 for about half of the 1,111 companies in the S&P 1,500 index that have disclosed median employee pay,” zooming into specific large companies that have been actively padding the wallets of their largest shareholders through stock buyback programs reveals that the true priority here is not sustainable long-term raises for middle-class workers.
The Journal’s Theo Francis and Yaryna Serkez found that “employing low-wage workers directly drags median pay down. Median pay at McDonald’s was much lower, at $7,017, in part because McDonald’s directly employs hourly servers at more of its restaurants.” The low median pay at McDonald’s comes as the fast-food behemoth bought back $1.6 billion in stock in the first quarter of 2018 alone.
“At Walmart, with 2.3 million workers, half made less than $19,177,” the Francis and Serkez found. Late last year, Walmart launched a stock buyback initiative to the tune of $20 billion in order to boost its stock prices, which disproportionately enriches the biggest stockholders in the company.
Gap’s very low median pay of $5,375 per year coincided with the company buying back $100 million in stock last quarter.
The median pay at Chipotle was $13,582 — last year it offered a $100 million stock buyback program. They did it again in April. Yum Brands, the parent company of brands like Taco Bell, KFC, and Pizza Hut, paid its workers a median yearly wage of $9,111. Late last year they offered a $1.5 billion stock buyback program, and recently reporting $528 million in buybacks in the first quarter of 2018 alone.
Amazon, anomalous with the companies on this list, has not run a stock buyback in six years, and its median pay was $28,446, according to the Journal.
Some of these figures are misleading — median pay at Dunkin Donuts appears high because most of its direct employees are office workers, for example, with nearly all of the people who work in or operate the retail stores working for franchisees. Similarly, Hasbro reported a median pay of $74,207 as it outsourced factory workers who earn far less, while Mattel’s figure of $6,271 reflects the fact that it directly employs its factory workers rather than using secondary employment tactics. Other companies employ many seasonal or part-time workers.
Overall, however, this is what weak wage growth looks like.
This is also how corporate America works. A study from the National Employment Law Project and the Roosevelt Institute, released Tuesday, found that between 2015 and 2017, “companies spent almost 60 percent of net profits on buybacks.” They do this instead of investing in worker pay.
In fact, the restaurant industry spent more money on stock buybacks than they actually earned in profits, fueling the buybacks with debt and existing cash reserves. “Companies in the retail and food manufacturing industries spent 79.2 percent and 58.2 percent, respectively, of their net profits on share buybacks,” the report’s authors found. This was the state of play just before the tax cut, passed late last year, caused an even higher surge of buybacks — which reveals the priorities of these companies, and the politicians who fought so hard to cut corporate taxes.
If McDonald’s had spent the money it poured into stock buybacks between 2015 and 2017, it could have given raises of $4,000 per year to its 1.9 million workers, according to the new study.
The effort to make the nation’s wealthiest investors even richer doesn’t stop with tax cuts and stock buybacks — the Trump administration is also considering a ploy to bypass Congress and let people who sell their assets pay even less in capital gains, which would mean a $100 billion tax cut for the rich.
Deceased and still in debt: the student loans that don't get forgiven
It’s not clear how many deceased students Navient is chasing for money but the company has been riddled with controversy
Mona Chalabi
the guardian
Wed 1 Aug 2018 06.00 EDT
In 2005, Sean Bennett took out a student loan with Sallie Mae, in 2010 he graduated from college and in 2011, when Sean was 23 years old, he died in a car accident.
At first, Sallie Mae sent out a letter of condolence to Sean’s parents explaining that they had a policy of forgiving debt if the recipient dies before they have repaid (they could afford to forgive – in the first quarter of this year alone, Sallie Mae made $333m in interest repayments from student loans).
Their policy of debt forgiveness is available on their website but it’s also in a file which Sean’s parents have meticulously maintained. It contains Sean’s loan application, his death certificate and the letters they received from Sean’s lenders when they decided to chase the debt after all.
Five years went by as Sean’s family tried to rebuild their lives without a son and a brother. Then, in 2017, the guarantors of Sean’s student loan (friends of the family who have asked not to be named here) received a bill for $48,824.82. At the bottom of the letter, a breakdown of the amount owed – $39,605.55 for for the principal plus $9,219.27 in unpaid interest and unpaid fees. At the top of the letter, there was a name neither Sean’s guarantors nor his family had ever heard of: Navient.
Sallie Mae split into two companies in 2014 – Sallie Mae and Navient – and the latter has lucrative contracts to collect payments on behalf of banks, government and other lenders. Navient became responsible for Sean’s student loan as well as 12m others but the company soon ran into trouble. In 2017, a lawsuit filed by the Consumer Financial Protection Bureau alleged that Navient “systematically and illegally [failed] borrowers at every stage of repayment”. The accusations were important for the one in four student loan borrowers with debt managed by Navient.
Student loans are the only form of consumer debt that continued to grow in the wake of the housing crisis – a report published earlier this year found that the US student debt appear to be heading towards a similar crisis. The report, published by the Brookings Institution analyzed data on the $1.3tn of US student loan debt and found that nearly 40% of borrowers could default on their student loans by 2023.
Accusations against Navient include abusive interest charges, hurting disabled military veterans by making inaccurate reports to credit companies about them and making repayments harder than necessary. But perhaps the firm’s future looks brighter. The Trump administration has repeatedly sought to curtail the Consumer Financial Protection Bureau, which filed the lawsuit against Navient, most recently in a proposal to cut the Bureau’s budget by a quarter. Such attacks were probably anticipated – immediately after the election, Navient’s stock jumped from $13 to $18.
The financial aid application that Sean filed in 2005 includes details of his family’s assets. Their household earned $45,000 per year, and had over $13,000 in debt. Sean needed guarantors and, believing that Sean was a reliable kid who would get a job and pay off the loan, two family friends stepped in. Just before he died, Sean had finally gotten his first big job working at a mobile phone network in Jamaica. His brother said he was “over the moon”.
It’s not clear how many other deceased students Navient is chasing for money but the company’s short history has been riddled with controversy. Last year alone, 6,708 federal complaints were filed about the company, in addition to 4,185 private complaints – more than any other student loan lender.
In response to questions about Sean’s case and the company’s practices regarding loan forgiveness in case of death, Navient responded: “We extend our sympathies to our customers experiencing a loss of a loved one and we work with them to offer assistance, which may include writing off or reducing the loan balance, lowering the interest rate and reducing the loan payments.”
At first, Sallie Mae sent out a letter of condolence to Sean’s parents explaining that they had a policy of forgiving debt if the recipient dies before they have repaid (they could afford to forgive – in the first quarter of this year alone, Sallie Mae made $333m in interest repayments from student loans).
Their policy of debt forgiveness is available on their website but it’s also in a file which Sean’s parents have meticulously maintained. It contains Sean’s loan application, his death certificate and the letters they received from Sean’s lenders when they decided to chase the debt after all.
Five years went by as Sean’s family tried to rebuild their lives without a son and a brother. Then, in 2017, the guarantors of Sean’s student loan (friends of the family who have asked not to be named here) received a bill for $48,824.82. At the bottom of the letter, a breakdown of the amount owed – $39,605.55 for for the principal plus $9,219.27 in unpaid interest and unpaid fees. At the top of the letter, there was a name neither Sean’s guarantors nor his family had ever heard of: Navient.
Sallie Mae split into two companies in 2014 – Sallie Mae and Navient – and the latter has lucrative contracts to collect payments on behalf of banks, government and other lenders. Navient became responsible for Sean’s student loan as well as 12m others but the company soon ran into trouble. In 2017, a lawsuit filed by the Consumer Financial Protection Bureau alleged that Navient “systematically and illegally [failed] borrowers at every stage of repayment”. The accusations were important for the one in four student loan borrowers with debt managed by Navient.
Student loans are the only form of consumer debt that continued to grow in the wake of the housing crisis – a report published earlier this year found that the US student debt appear to be heading towards a similar crisis. The report, published by the Brookings Institution analyzed data on the $1.3tn of US student loan debt and found that nearly 40% of borrowers could default on their student loans by 2023.
Accusations against Navient include abusive interest charges, hurting disabled military veterans by making inaccurate reports to credit companies about them and making repayments harder than necessary. But perhaps the firm’s future looks brighter. The Trump administration has repeatedly sought to curtail the Consumer Financial Protection Bureau, which filed the lawsuit against Navient, most recently in a proposal to cut the Bureau’s budget by a quarter. Such attacks were probably anticipated – immediately after the election, Navient’s stock jumped from $13 to $18.
The financial aid application that Sean filed in 2005 includes details of his family’s assets. Their household earned $45,000 per year, and had over $13,000 in debt. Sean needed guarantors and, believing that Sean was a reliable kid who would get a job and pay off the loan, two family friends stepped in. Just before he died, Sean had finally gotten his first big job working at a mobile phone network in Jamaica. His brother said he was “over the moon”.
It’s not clear how many other deceased students Navient is chasing for money but the company’s short history has been riddled with controversy. Last year alone, 6,708 federal complaints were filed about the company, in addition to 4,185 private complaints – more than any other student loan lender.
In response to questions about Sean’s case and the company’s practices regarding loan forgiveness in case of death, Navient responded: “We extend our sympathies to our customers experiencing a loss of a loved one and we work with them to offer assistance, which may include writing off or reducing the loan balance, lowering the interest rate and reducing the loan payments.”
‘Eye-popping’ payouts for CEOs follow Trump’s tax cuts
The insider sales feed the narrative that corporate tax cuts enrich executives in the short term while yielding less clear long-term benefits for workers.
By PATRICK TEMPLE-WEST and VICTORIA GUIDA - politico
07/30/2018 05:00 AM EDT
Some of the biggest winners from President Donald Trump’s new tax law are corporate executives who have reaped gains as their companies buy back a record amount of stock, a practice that rewards shareholders by boosting the value of existing shares.
A POLITICO review of data disclosed in SEC filings shows the executives, who often receive most of their compensation in stock, have been profiting handsomely by selling shares since Trump signed the law on Dec. 22 and slashed corporate tax rates to 21 percent. That trend is likely to increase as Wall Street analysts expect buyback activity to accelerate in the coming weeks.
“It is going to be a parade of eye-popping numbers,” said Pat McGurn, the head of strategic research and analysis at Institutional Shareholder Services, a shareholder advisory firm.
That could undercut the political messaging value of the tax cuts in the Republican campaign to maintain control of Congress in the midterm elections.
Since the tax cuts were enacted, Oracle Corp. CEO Safra Catz sold $250 million worth of shares in her company — the largest executive payday this year. Product development head Thomas Kurian sold $85 million. The sales came after the company announced a $12 billion share repurchase.
Mastercard CEO Ajay Banga sold $44.4 million of stock in May, the largest single cash-out by an executive of the company in at least 10 years, months after the company announced a $4 billion buyback of its own stock.
Two days after Eastman Chemical announced it would purchase $2 billion of its own stock, CEO Mark Costa sold 55,000 shares for $5.4 million.
The SEC requires company executives to disclose share purchases or sales within two business days. Companies emphasize that their executives’ share sales are often scheduled at regular intervals well in advance. In Banga’s case, he has routinely sold shares once a year, and always in May, since 2013.
Yet the insider sales feed the narrative that corporate tax cuts enrich executives in the short term while yielding less clear long-term benefits for workers and the broader economy. Critics of insider sales argue that they diminish the value of paying C-suite employees in shares — a practice that’s intended to give them a greater stake in the long-term health of the company — and can even raise questions about the motivation for the buybacks themselves.
Following the tax cuts, roughly 28 percent of companies in the S&P 500 mentioned plans to return some of their tax savings to shareholders, according to Morgan Stanley. Public companies announced more than $600 billion in buybacks in the first half of this year — already toppling the previous annual record.
Year to date, buybacks have doubled from the same period a year ago, Merrill Lynch said in a July 24 report, citing its clients’ trading activity. “Last week we noted that buyback activity [was] poised to accelerate over the next six weeks, and indeed, corporate clients’ buybacks picked up to a two-month high and the 6th-highest level in our data history,” the company said.
The correlation between corporate buybacks and insider sales is clear, according to SEC Commissioner Robert Jackson, a Democrat. He studied 385 buybacks since the beginning of 2017 and found that after half of them, at least one executive sold shares within the next month.
The link between the tax cuts and big executive payouts, fueled by buybacks, is also plain, according to one institutional research firm.
“Stock buyback announcements in the U.S. have swelled to the highest levels on record in the wake of last year’s corporate tax cut,” said TrimTabs Investment Research in a July 10 report. “Corporate America’s actions suggest that most of the benefits of the corporate tax cut will flow to investors in general and top corporate executives in particular.”
To be sure, 44 percent of companies say they also plan to reinvest some savings in their operations through initiatives like new factories, research and development and higher wages, according to Morgan Stanley. That's the kind of uses that featured prominently in Republicans’ marketing of their tax bill.
But that spending hasn’t been as immediate and could be headed off by economic headwinds. The Federal Reserve has cited anecdotal evidence of companies scaling back planned capital expenditures over fears of a trade war. And while more than two dozen companies announced one-time bonuses to employees after the tax bill, wage growth is still sitting at a lackluster 2.7 percent.
“What did companies do with their cash?” said the Morgan Stanley analysis. “In short, a large increase in stock buybacks was the biggest change” in the first quarter of this year from the last quarter of 2017.
Republicans and business groups point to ways that the tax cuts are helping the middle class.
“Most Americans are invested [in stocks] either directly or through 401ks or through pension funds or through some mechanism,” said Rep. Tom MacArthur, a member of the House Financial Services Committee and a former CEO.
As more people are retiring and selling their shares, companies are scooping them up with buybacks, the New Jersey Republican said. “Personally, I don't think that’s usually a good way to create value for a company, to buy back its own stock. But let’s not forget who they buy their stock back from.”
“Evaluating tax reform through the lens of executive compensation misses the majority of the picture,” said Chris Netram, the vice president of tax and domestic economic policy at the National Association of Manufacturers, a lobbying group.
“Lower [tax] rates and investment incentives have led to robust increases in hiring, equipment purchases and worker pay and benefits,” he said, adding that surveys of NAM members show businesses plan to invest their tax savings in their operations, hire employees and increase wages and benefits.
Yet the lower rates have also led to robust stock sales by executives.
In a speech last month, the SEC’s Jackson said, “There is clear evidence that a substantial number of corporate executives today use buybacks as a chance to cash out the shares of the company they received as executive pay.
“In fact, twice as many companies have insiders selling in the eight days after a buyback announcement as sell on an ordinary day,” he said.
On Feb. 28, TJX Cos., the parent company of T.J. Maxx stores, announced a new stock buyback plan as part of an earnings announcement, boosting the department store’s stock above $82. On March 1, Carol Meyrowitz, an executive and former CEO, sold $11 million in shares. In the 30 days following the buyback announcement, TJX CEO Ernie Herrman sold $2.8 million of shares.
Erika Tower, a TJX spokeswoman, said executives were prohibited from trading in 2018 prior to the Feb. 28 announcement. Meyrowitz and Herrman have sold stock for years while the share price has kept going up, she said. “Meyrowitz and Herrman continue to hold very large stakes in the company,” Tower said.
On Jan. 26, the North Chicago-based AbbVie announced strong profits and increased its earnings guidance for 2018. The pharmaceutical company estimated an effective tax rate of about 9 percent in 2018. AbbVie’s shares jumped to a multiyear high above $120.
On Feb. 15, the company announced a new, $10 billion stock buyback plan. From Feb. 20 through March 1, eight executives sold a total of $26.8 million worth of stock. Throughout this period, the stock stayed above $114. It has since dipped to $90.56 as of July 27.
Cigarette-maker Altria announced a $1 billion buyback on Feb. 1. From Feb. 8 through March 2, four executives sold a total of $1.8 million. Chief Executive Craig Johnson sold $995,734 eight days after the buyback was announced. No Altria executives sold shares prior to the buyback announcement in 2018.
Representatives for Eastman Chemical and AbbVie declined to comment. Altria did not immediately respond to a request for comment. Oracle also declined to comment.
Mastercard spokesman Seth Eisen said: “You’re trying to make a connection where one doesn’t exist. There’s nothing notable about this transaction,” he said of Banga's share sale. Banga’s annual financial management plan was preplanned, he said.
These legal trades occur routinely regardless of a firm’s share price. Executives will often prearrange sales of their stock to avoid a perception that they are selling at the most valuable point in time for them.
Charles Gabriel, president of Capital Alpha, a Washington analysis firm, said executive compensation “will unlikely prove decisive this fall, with the Trump message machine on the improving economy."
Still, he said, it “will become a hardened talking point for House Democrats in their campaign messaging.”
A POLITICO review of data disclosed in SEC filings shows the executives, who often receive most of their compensation in stock, have been profiting handsomely by selling shares since Trump signed the law on Dec. 22 and slashed corporate tax rates to 21 percent. That trend is likely to increase as Wall Street analysts expect buyback activity to accelerate in the coming weeks.
“It is going to be a parade of eye-popping numbers,” said Pat McGurn, the head of strategic research and analysis at Institutional Shareholder Services, a shareholder advisory firm.
That could undercut the political messaging value of the tax cuts in the Republican campaign to maintain control of Congress in the midterm elections.
Since the tax cuts were enacted, Oracle Corp. CEO Safra Catz sold $250 million worth of shares in her company — the largest executive payday this year. Product development head Thomas Kurian sold $85 million. The sales came after the company announced a $12 billion share repurchase.
Mastercard CEO Ajay Banga sold $44.4 million of stock in May, the largest single cash-out by an executive of the company in at least 10 years, months after the company announced a $4 billion buyback of its own stock.
Two days after Eastman Chemical announced it would purchase $2 billion of its own stock, CEO Mark Costa sold 55,000 shares for $5.4 million.
The SEC requires company executives to disclose share purchases or sales within two business days. Companies emphasize that their executives’ share sales are often scheduled at regular intervals well in advance. In Banga’s case, he has routinely sold shares once a year, and always in May, since 2013.
Yet the insider sales feed the narrative that corporate tax cuts enrich executives in the short term while yielding less clear long-term benefits for workers and the broader economy. Critics of insider sales argue that they diminish the value of paying C-suite employees in shares — a practice that’s intended to give them a greater stake in the long-term health of the company — and can even raise questions about the motivation for the buybacks themselves.
Following the tax cuts, roughly 28 percent of companies in the S&P 500 mentioned plans to return some of their tax savings to shareholders, according to Morgan Stanley. Public companies announced more than $600 billion in buybacks in the first half of this year — already toppling the previous annual record.
Year to date, buybacks have doubled from the same period a year ago, Merrill Lynch said in a July 24 report, citing its clients’ trading activity. “Last week we noted that buyback activity [was] poised to accelerate over the next six weeks, and indeed, corporate clients’ buybacks picked up to a two-month high and the 6th-highest level in our data history,” the company said.
The correlation between corporate buybacks and insider sales is clear, according to SEC Commissioner Robert Jackson, a Democrat. He studied 385 buybacks since the beginning of 2017 and found that after half of them, at least one executive sold shares within the next month.
The link between the tax cuts and big executive payouts, fueled by buybacks, is also plain, according to one institutional research firm.
“Stock buyback announcements in the U.S. have swelled to the highest levels on record in the wake of last year’s corporate tax cut,” said TrimTabs Investment Research in a July 10 report. “Corporate America’s actions suggest that most of the benefits of the corporate tax cut will flow to investors in general and top corporate executives in particular.”
To be sure, 44 percent of companies say they also plan to reinvest some savings in their operations through initiatives like new factories, research and development and higher wages, according to Morgan Stanley. That's the kind of uses that featured prominently in Republicans’ marketing of their tax bill.
But that spending hasn’t been as immediate and could be headed off by economic headwinds. The Federal Reserve has cited anecdotal evidence of companies scaling back planned capital expenditures over fears of a trade war. And while more than two dozen companies announced one-time bonuses to employees after the tax bill, wage growth is still sitting at a lackluster 2.7 percent.
“What did companies do with their cash?” said the Morgan Stanley analysis. “In short, a large increase in stock buybacks was the biggest change” in the first quarter of this year from the last quarter of 2017.
Republicans and business groups point to ways that the tax cuts are helping the middle class.
“Most Americans are invested [in stocks] either directly or through 401ks or through pension funds or through some mechanism,” said Rep. Tom MacArthur, a member of the House Financial Services Committee and a former CEO.
As more people are retiring and selling their shares, companies are scooping them up with buybacks, the New Jersey Republican said. “Personally, I don't think that’s usually a good way to create value for a company, to buy back its own stock. But let’s not forget who they buy their stock back from.”
“Evaluating tax reform through the lens of executive compensation misses the majority of the picture,” said Chris Netram, the vice president of tax and domestic economic policy at the National Association of Manufacturers, a lobbying group.
“Lower [tax] rates and investment incentives have led to robust increases in hiring, equipment purchases and worker pay and benefits,” he said, adding that surveys of NAM members show businesses plan to invest their tax savings in their operations, hire employees and increase wages and benefits.
Yet the lower rates have also led to robust stock sales by executives.
In a speech last month, the SEC’s Jackson said, “There is clear evidence that a substantial number of corporate executives today use buybacks as a chance to cash out the shares of the company they received as executive pay.
“In fact, twice as many companies have insiders selling in the eight days after a buyback announcement as sell on an ordinary day,” he said.
On Feb. 28, TJX Cos., the parent company of T.J. Maxx stores, announced a new stock buyback plan as part of an earnings announcement, boosting the department store’s stock above $82. On March 1, Carol Meyrowitz, an executive and former CEO, sold $11 million in shares. In the 30 days following the buyback announcement, TJX CEO Ernie Herrman sold $2.8 million of shares.
Erika Tower, a TJX spokeswoman, said executives were prohibited from trading in 2018 prior to the Feb. 28 announcement. Meyrowitz and Herrman have sold stock for years while the share price has kept going up, she said. “Meyrowitz and Herrman continue to hold very large stakes in the company,” Tower said.
On Jan. 26, the North Chicago-based AbbVie announced strong profits and increased its earnings guidance for 2018. The pharmaceutical company estimated an effective tax rate of about 9 percent in 2018. AbbVie’s shares jumped to a multiyear high above $120.
On Feb. 15, the company announced a new, $10 billion stock buyback plan. From Feb. 20 through March 1, eight executives sold a total of $26.8 million worth of stock. Throughout this period, the stock stayed above $114. It has since dipped to $90.56 as of July 27.
Cigarette-maker Altria announced a $1 billion buyback on Feb. 1. From Feb. 8 through March 2, four executives sold a total of $1.8 million. Chief Executive Craig Johnson sold $995,734 eight days after the buyback was announced. No Altria executives sold shares prior to the buyback announcement in 2018.
Representatives for Eastman Chemical and AbbVie declined to comment. Altria did not immediately respond to a request for comment. Oracle also declined to comment.
Mastercard spokesman Seth Eisen said: “You’re trying to make a connection where one doesn’t exist. There’s nothing notable about this transaction,” he said of Banga's share sale. Banga’s annual financial management plan was preplanned, he said.
These legal trades occur routinely regardless of a firm’s share price. Executives will often prearrange sales of their stock to avoid a perception that they are selling at the most valuable point in time for them.
Charles Gabriel, president of Capital Alpha, a Washington analysis firm, said executive compensation “will unlikely prove decisive this fall, with the Trump message machine on the improving economy."
Still, he said, it “will become a hardened talking point for House Democrats in their campaign messaging.”
Reason Blackout At D.C. Appeals Court
‘Yes, Wall Street Rigged Energy Prices. Yes, You Were Ripped-Off … But No Case Here.’
By David Cay Johnston, DCReport Editor-in-Chief
New England electricity prices were inflated by up to $2.4 billion last year, a July 25 ruling by a federal appeals court confirms, but the court did not order any money returned to customers.
The US Court of Appeals for the D.C. Circuit* also held that it cannot correct two additional years of manipulations, which cost electricity customers about $1.4 billion more, because of a legal technicality. That technicality? Judith W. Rogers, the presiding judge, created it, as we will explain. She could easily correct it—if she cares to.
Consistent with actions by the Trump Administration, the federal appeals court in Washington sent a clear signal to those who manipulate the so-called electricity markets that they are pretty much free to gouge customers without worrying that they will be forced to disgorge their ill-got gains, much less pay penalties.
When the federal judiciary turns its backs on substantial complaints of government-approved price gouging – a fancy word for theft – what hope do ordinary Americans have that our government will protect them from any bandits armed with ink pens, spreadsheets and complex financial contracts?
At issue is the purchase of 17 electricity generating plants in 2014 by five former Wall Street energy traders. The buyers abruptly withdrew the largest power plant from the market, causing a spike in electricity prices by significantly reducing generating capacity.
Last year, this year and next year, customers will pay up to $3.8 billion extra because that power plant, known as Brayton Point, shut down. That’s roughly $1,000 taken from each American family of four through market manipulation.
The court ruling matters far beyond New England.
By our reading, the court is, yet again, not applying settled law, but instead looking for ways to escape the admittedly tedious complexities of energy regulatory law. That certainly makes life more convenient for jurists, but it damages Americans and our economy.
The court decision comes after Donald Trump, on his first working day in the White House, signaled Wall Streeters who manipulate the price of electricity that he has their backs. As we reported at the time, Trump appointed a sightless sheriff to chair the Federal Energy Regulatory Commission (FERC).
We reported in February 2017 that “the Trump administration has made its first move to raise electricity and other utility prices, actions that will cost families while pleasing the Wall Street traders whose manipulations of those markets will now be much easier.”
It was the first of what are now many official acts that directly contradict Trump’s campaign promise to drain the swamp in Washington and his inaugural address pledge to stand up for the Forgotten Man. Trump later appointed two more FERC commissioners known for siding with industry against consumers, one of whom said Americans who challenge utility regulators are waging “jihad.”
This is an ongoing story that we have reported on since, unlike most of the mainstream news media.
The appeals court ruled July 25 that an organization questioning the electricity market had no legal right, known as standing, to challenge the New England electricity auctions for 2018 and 2019. The aggrieved party is the Utility Workers Union of America Local 464, whose members operate electric power plants and who are also electricity customers whose pockets were picked through the auction process.
The court held that there is no proven link between spikes in electricity prices and the manipulation of the 2014 auction. Without that link, the court said it cannot act, which means the owners get to keep the billions in extra profit. Moreover, by finding the utility workers lacked standing, the court was saying they had no right even to have their complaint heard.
Why no link? Because there was no affidavit from the utility workers’ expert witness calculating the excess costs. The cost, calculated as a range between high and low, is not in dispute – the math of how electricity price auctions work is well known.
What makes the detailed opinion by Judge Cornelia Pillard astonishing is that during oral argument the lawyer for the utility workers, Daniel Sponseller, asked if the court wanted an affidavit specifying the expert’s calculations of price gouging. Indeed, the transcript shows that Sponseller, who is handling the case for free, offered a second time to provide an affidavit, only to be told if one was needed he’d be told.
Sponseller declined to comment on this, which is understandable because he risks their wrath if he does.
As someone who has been exposing regulatory issues, including abuses, for a half century, I believe the actions of these three judges go beyond the pale. This is atrocious misconduct by the court, though it could easily correct it by withdrawing its opinion and issuing a new one.
So presiding judge Rogers created the technicality and her fellow judges cited that technicality to justify not addressing the very real issues of price gouging. This is not just judicial chutzpah. This is contemptible and should prompt the three judges to revise their unanimous decision.
The ruling is the latest in a long line of examples where citizens show how legal monopolies that are supposed to be regulated in the public interest inflate prices, but the court then finds creative ways to say it cannot act on behalf of citizens who are victims of such orchestrated thievery. I’ve written about this in the context of pipelines that include a 54% to 75% markup of their net profits to cover the corporate income tax, even though they are exempt from that tax. After I detailed the inconsistent positions taken by Judge David B. Sentelle, the next time the issue came up the judge returned to the principled basis for his first ruling, in which he held that a tax that never gets to the government is not properly forced on customers.
Laws regulating electricity, natural gas, water and other legal monopolies are based on the principle of “just and reasonable.” That means owners are entitled to just and reasonable profits so they will invest and customers are entitled to just and reasonable prices that provide normal, not artificially inflated, profits.
The standard set in an important utility court case is that even one dollar of excess profit violates this standard, as Gordon Gooch, former general counsel for what is now the Federal Regulatory Commission, has repeatedly reminded the commission and the courts, but they then routinely dismiss his point even when billions of dollars of excess profit are generated through manipulating the regulatory system to create unjust and unreasonable excess profits.
The federal appeals court acknowledged that to artificially jack up New England electricity prices, the new owners of one of the biggest electric power plants in Massachusetts announced plans to close it just before the 8th annual auction in 2014. Judge Pillard did not, as judges usually do, couch the decision in terms of what the plaintiffs allege, but wrote of it as established fact, going on for several long paragraphs.
Here are the opening words of her opinion:
Petitioners challenge the failure of the Federal Energy Regulatory Commission to account for the effect on electricity prices of the permanent retirement of the Brayton Point Power Station, a coal-fired electric plant in Somerset, Massachusetts. Brayton Point’s owners announced the closure just before the New England regional independent system operator ran its eighth annual forward capacity auction—too late for other wholesale electricity suppliers to participate in the auction and pick up the slack. The resulting constricted supply contributed to a spike in the auction clearing price, to the benefit of the owner’s other plants and to the detriment of retail electricity customers.
The judges sent this issue back to FERC, also on technical grounds.
So there is at least a sliver of justice here: the biggest year of price gouging must be looked at again by FERC. My reading of the opinion is that Pillard holds no brief for FERC, which makes the phony excuse for not dealing with the other two years even more disturbing.
All three judges in this case were appointed by Democratic presidents, Pillard and the third judge by President Obama, Rogers by President Clinton.
Imagine what will happen to consumers in the future as more judges are appointed by Trump, who makes clear his own disdain for the rule of law and who has gone out of his way to nominate judges whose past decisions demonstrate even less respect for what Trump calls the Forgotten Man than these three judges have by ginning up a technicality to get out of doing the work we pay them to do.
The US Court of Appeals for the D.C. Circuit* also held that it cannot correct two additional years of manipulations, which cost electricity customers about $1.4 billion more, because of a legal technicality. That technicality? Judith W. Rogers, the presiding judge, created it, as we will explain. She could easily correct it—if she cares to.
Consistent with actions by the Trump Administration, the federal appeals court in Washington sent a clear signal to those who manipulate the so-called electricity markets that they are pretty much free to gouge customers without worrying that they will be forced to disgorge their ill-got gains, much less pay penalties.
When the federal judiciary turns its backs on substantial complaints of government-approved price gouging – a fancy word for theft – what hope do ordinary Americans have that our government will protect them from any bandits armed with ink pens, spreadsheets and complex financial contracts?
At issue is the purchase of 17 electricity generating plants in 2014 by five former Wall Street energy traders. The buyers abruptly withdrew the largest power plant from the market, causing a spike in electricity prices by significantly reducing generating capacity.
Last year, this year and next year, customers will pay up to $3.8 billion extra because that power plant, known as Brayton Point, shut down. That’s roughly $1,000 taken from each American family of four through market manipulation.
The court ruling matters far beyond New England.
By our reading, the court is, yet again, not applying settled law, but instead looking for ways to escape the admittedly tedious complexities of energy regulatory law. That certainly makes life more convenient for jurists, but it damages Americans and our economy.
The court decision comes after Donald Trump, on his first working day in the White House, signaled Wall Streeters who manipulate the price of electricity that he has their backs. As we reported at the time, Trump appointed a sightless sheriff to chair the Federal Energy Regulatory Commission (FERC).
We reported in February 2017 that “the Trump administration has made its first move to raise electricity and other utility prices, actions that will cost families while pleasing the Wall Street traders whose manipulations of those markets will now be much easier.”
It was the first of what are now many official acts that directly contradict Trump’s campaign promise to drain the swamp in Washington and his inaugural address pledge to stand up for the Forgotten Man. Trump later appointed two more FERC commissioners known for siding with industry against consumers, one of whom said Americans who challenge utility regulators are waging “jihad.”
This is an ongoing story that we have reported on since, unlike most of the mainstream news media.
The appeals court ruled July 25 that an organization questioning the electricity market had no legal right, known as standing, to challenge the New England electricity auctions for 2018 and 2019. The aggrieved party is the Utility Workers Union of America Local 464, whose members operate electric power plants and who are also electricity customers whose pockets were picked through the auction process.
The court held that there is no proven link between spikes in electricity prices and the manipulation of the 2014 auction. Without that link, the court said it cannot act, which means the owners get to keep the billions in extra profit. Moreover, by finding the utility workers lacked standing, the court was saying they had no right even to have their complaint heard.
Why no link? Because there was no affidavit from the utility workers’ expert witness calculating the excess costs. The cost, calculated as a range between high and low, is not in dispute – the math of how electricity price auctions work is well known.
What makes the detailed opinion by Judge Cornelia Pillard astonishing is that during oral argument the lawyer for the utility workers, Daniel Sponseller, asked if the court wanted an affidavit specifying the expert’s calculations of price gouging. Indeed, the transcript shows that Sponseller, who is handling the case for free, offered a second time to provide an affidavit, only to be told if one was needed he’d be told.
Sponseller declined to comment on this, which is understandable because he risks their wrath if he does.
As someone who has been exposing regulatory issues, including abuses, for a half century, I believe the actions of these three judges go beyond the pale. This is atrocious misconduct by the court, though it could easily correct it by withdrawing its opinion and issuing a new one.
So presiding judge Rogers created the technicality and her fellow judges cited that technicality to justify not addressing the very real issues of price gouging. This is not just judicial chutzpah. This is contemptible and should prompt the three judges to revise their unanimous decision.
The ruling is the latest in a long line of examples where citizens show how legal monopolies that are supposed to be regulated in the public interest inflate prices, but the court then finds creative ways to say it cannot act on behalf of citizens who are victims of such orchestrated thievery. I’ve written about this in the context of pipelines that include a 54% to 75% markup of their net profits to cover the corporate income tax, even though they are exempt from that tax. After I detailed the inconsistent positions taken by Judge David B. Sentelle, the next time the issue came up the judge returned to the principled basis for his first ruling, in which he held that a tax that never gets to the government is not properly forced on customers.
Laws regulating electricity, natural gas, water and other legal monopolies are based on the principle of “just and reasonable.” That means owners are entitled to just and reasonable profits so they will invest and customers are entitled to just and reasonable prices that provide normal, not artificially inflated, profits.
The standard set in an important utility court case is that even one dollar of excess profit violates this standard, as Gordon Gooch, former general counsel for what is now the Federal Regulatory Commission, has repeatedly reminded the commission and the courts, but they then routinely dismiss his point even when billions of dollars of excess profit are generated through manipulating the regulatory system to create unjust and unreasonable excess profits.
The federal appeals court acknowledged that to artificially jack up New England electricity prices, the new owners of one of the biggest electric power plants in Massachusetts announced plans to close it just before the 8th annual auction in 2014. Judge Pillard did not, as judges usually do, couch the decision in terms of what the plaintiffs allege, but wrote of it as established fact, going on for several long paragraphs.
Here are the opening words of her opinion:
Petitioners challenge the failure of the Federal Energy Regulatory Commission to account for the effect on electricity prices of the permanent retirement of the Brayton Point Power Station, a coal-fired electric plant in Somerset, Massachusetts. Brayton Point’s owners announced the closure just before the New England regional independent system operator ran its eighth annual forward capacity auction—too late for other wholesale electricity suppliers to participate in the auction and pick up the slack. The resulting constricted supply contributed to a spike in the auction clearing price, to the benefit of the owner’s other plants and to the detriment of retail electricity customers.
The judges sent this issue back to FERC, also on technical grounds.
So there is at least a sliver of justice here: the biggest year of price gouging must be looked at again by FERC. My reading of the opinion is that Pillard holds no brief for FERC, which makes the phony excuse for not dealing with the other two years even more disturbing.
All three judges in this case were appointed by Democratic presidents, Pillard and the third judge by President Obama, Rogers by President Clinton.
Imagine what will happen to consumers in the future as more judges are appointed by Trump, who makes clear his own disdain for the rule of law and who has gone out of his way to nominate judges whose past decisions demonstrate even less respect for what Trump calls the Forgotten Man than these three judges have by ginning up a technicality to get out of doing the work we pay them to do.
Corporate tax receipts plunge, deficit soars, and Republicans plot social program cuts in glee
Joan McCarter
Daily Kos Staff
Thursday July 26, 2018 · 5:10 PM PDT
Republicans don't care about the deficit. Republicans have never cared about the deficit. It's just what they use as an excuse to fight Democratic presidents on spending and when they're trying to cut social insurance programs. That's been true since the last massive tax cut a Republican president pushed through for rich people, and it's true with this one, too. Corporate tax revenues have plummeted this year, thanks to that tax scam.
The new standard corporate tax rate of 21 percent, down from 35 percent, coupled with a bunch of new deductions it allowed for corporations means that tax receipts from corporations as a share of the economy are at a 75-year low. Which means, of course, the deficit is ballooning. Even the Trump administration has had to acknowledge that, and has revised its deficit forecast to acknowledge that we'll have $1 trillion in additonal debt over the next decade, "on average, almost $100 billion more a year in deficits."
One economist, Kimberly A. Clausing at Reed College, says that it's reversing a trend in revenues that was coming from a strong corporate performance. "If we hadn't changed our tax system, you would be expecting rising revenues," she said. Meanwhile, Trump's out there doing things like offering up $12 billion in emergency spending for farmers, we're in hurricane and infectious disease season, wildfires are raging across the country and the government needs to be funded at the end of September. The only thing that's going to save Medicaid and Medicare in that budget fight is that it's an election year.
Meanwhile, the White House is spinning madly. "We are very much looking forward to the second quarter G.D.P. numbers, which we anticipate will keep us on track to a four-quarter growth rate over 3 percent for the first time in 13 years," chairman of the Council of Economic Advisers blusters. "That’s a growth rate nobody thought was possible and we are glad to see the naysayers will be proved wrong." Of course, that's not really true: "Between 2009 and 2016, GDP growth reached at or above 3% on a quarterly basis about eight times." Annual growth rate under President Obama didn't hit 3 percent—it did reach 2.9—but that mark isn't some massive achievement by any means. It was a regular occurrence before the last Republican president trashed the economy and oversaw the great recession.
Which makes it a good time to bring out that wonderful old chart from the Center on Budget and Policy Priorities showing just how costly Republican policies are. If Trump plays his cards right and gets us into another war, he could bump that deficit to $2 trillion.
Don't think, though, that there is no method to this madness. This is about blowing up the deficit so they can create enough pressure to decimate all the things that are good. Social Security, Medicare, Medicaid, food and housing and utility assistance. Everything. The war on poor peoplehas already begun.
The new standard corporate tax rate of 21 percent, down from 35 percent, coupled with a bunch of new deductions it allowed for corporations means that tax receipts from corporations as a share of the economy are at a 75-year low. Which means, of course, the deficit is ballooning. Even the Trump administration has had to acknowledge that, and has revised its deficit forecast to acknowledge that we'll have $1 trillion in additonal debt over the next decade, "on average, almost $100 billion more a year in deficits."
One economist, Kimberly A. Clausing at Reed College, says that it's reversing a trend in revenues that was coming from a strong corporate performance. "If we hadn't changed our tax system, you would be expecting rising revenues," she said. Meanwhile, Trump's out there doing things like offering up $12 billion in emergency spending for farmers, we're in hurricane and infectious disease season, wildfires are raging across the country and the government needs to be funded at the end of September. The only thing that's going to save Medicaid and Medicare in that budget fight is that it's an election year.
Meanwhile, the White House is spinning madly. "We are very much looking forward to the second quarter G.D.P. numbers, which we anticipate will keep us on track to a four-quarter growth rate over 3 percent for the first time in 13 years," chairman of the Council of Economic Advisers blusters. "That’s a growth rate nobody thought was possible and we are glad to see the naysayers will be proved wrong." Of course, that's not really true: "Between 2009 and 2016, GDP growth reached at or above 3% on a quarterly basis about eight times." Annual growth rate under President Obama didn't hit 3 percent—it did reach 2.9—but that mark isn't some massive achievement by any means. It was a regular occurrence before the last Republican president trashed the economy and oversaw the great recession.
Which makes it a good time to bring out that wonderful old chart from the Center on Budget and Policy Priorities showing just how costly Republican policies are. If Trump plays his cards right and gets us into another war, he could bump that deficit to $2 trillion.
Don't think, though, that there is no method to this madness. This is about blowing up the deficit so they can create enough pressure to decimate all the things that are good. Social Security, Medicare, Medicaid, food and housing and utility assistance. Everything. The war on poor peoplehas already begun.
encourages companies to move overseas!!!
U.S. Senate quietly votes to cut tariffs on hundreds of Chinese goods
Andy Sullivan - reuters
July 26, 2018 / 4:16 PM
WASHINGTON (Reuters) - As trade tensions escalate between Washington and Beijing, the U.S. Senate quietly passed legislation on Thursday that would lower trade barriers on hundreds of items made in China.
With no debate, the Senate unanimously passed a bill that would cut or eliminate tariffs on toasters, chemicals and roughly 1,660 other items made outside the United States.
Nearly half of those items are produced in China, according to a Reuters analysis of government records.
The United States and China, the world’s two largest economies, are increasingly at loggerheads over trade.
U.S. President Donald Trump has announced a series of punitive tariffs on Chinese imports in a bid to halt a Chinese surge in high-technology industries that threatens to displace U.S. dominance. China has retaliated with its own duties on imports from the United States.
The White House has not publicly taken a position on the so-called miscellaneous tariff bill, which has now passed both the Senate and the House of Representatives unanimously. The two chambers need to resolve minor differences before they can send the legislation to Trump to sign into law.
Supporters of the bill have said it would boost the economy by getting rid of tariffs set up to protect industries that no longer exist in the United States. The National Association of Manufacturers has said U.S. businesses pay $1 million a day on such import duties.
“It makes no sense because it is a direct and punishing tax on making things in America and for creating jobs in America,” the trade group’s president, Jay Timmons, said in a prepared statement celebrating the bill’s passage.
Among the beneficiaries are companies that have moved production offshore.
Hamilton Beach Brands Holding Co (HBB.N), for example, would pay reduced tariffs on Chinese-made toaster ovens, steam irons and other household appliances it used to make domestically.
Some domestic manufacturers have complained the bill would undercut their business by making it easier for rivals to bring in cheap foreign goods. They said the bill punished smaller firms that lack the ability to defend their interests in Washington.
The version of the bill that passed the House in January included 145 items that are made domestically, according to a Reuters analysis. [L2N1QN00P]
“There’s no reason to block opportunity U.S. manufacturers might have for rebuilding our manufacturing base,” Michael Korchmar, the head of a family-owned travel goods company in Florida, said in a phone interview earlier this month.
Korchmar earlier this year planned to hire up to 30 workers in his Naples, Florida, factory, but he put those plans on hold after being told by Reuters that the bill would lower tariffs on an insulated food bag that he planned to produce.
Korchmar said he may yet decide to expand production, because Democratic Senator Bill Nelson removed that item from the bill after Reuters wrote about it in March.
“We’ve got a good shot - we’ve lost a good bit of time and we have to re-evaluate the market,” Korchmar said.
With no debate, the Senate unanimously passed a bill that would cut or eliminate tariffs on toasters, chemicals and roughly 1,660 other items made outside the United States.
Nearly half of those items are produced in China, according to a Reuters analysis of government records.
The United States and China, the world’s two largest economies, are increasingly at loggerheads over trade.
U.S. President Donald Trump has announced a series of punitive tariffs on Chinese imports in a bid to halt a Chinese surge in high-technology industries that threatens to displace U.S. dominance. China has retaliated with its own duties on imports from the United States.
The White House has not publicly taken a position on the so-called miscellaneous tariff bill, which has now passed both the Senate and the House of Representatives unanimously. The two chambers need to resolve minor differences before they can send the legislation to Trump to sign into law.
Supporters of the bill have said it would boost the economy by getting rid of tariffs set up to protect industries that no longer exist in the United States. The National Association of Manufacturers has said U.S. businesses pay $1 million a day on such import duties.
“It makes no sense because it is a direct and punishing tax on making things in America and for creating jobs in America,” the trade group’s president, Jay Timmons, said in a prepared statement celebrating the bill’s passage.
Among the beneficiaries are companies that have moved production offshore.
Hamilton Beach Brands Holding Co (HBB.N), for example, would pay reduced tariffs on Chinese-made toaster ovens, steam irons and other household appliances it used to make domestically.
Some domestic manufacturers have complained the bill would undercut their business by making it easier for rivals to bring in cheap foreign goods. They said the bill punished smaller firms that lack the ability to defend their interests in Washington.
The version of the bill that passed the House in January included 145 items that are made domestically, according to a Reuters analysis. [L2N1QN00P]
“There’s no reason to block opportunity U.S. manufacturers might have for rebuilding our manufacturing base,” Michael Korchmar, the head of a family-owned travel goods company in Florida, said in a phone interview earlier this month.
Korchmar earlier this year planned to hire up to 30 workers in his Naples, Florida, factory, but he put those plans on hold after being told by Reuters that the bill would lower tariffs on an insulated food bag that he planned to produce.
Korchmar said he may yet decide to expand production, because Democratic Senator Bill Nelson removed that item from the bill after Reuters wrote about it in March.
“We’ve got a good shot - we’ve lost a good bit of time and we have to re-evaluate the market,” Korchmar said.
Trump tariffs tank GM as trade war backfire grows
WED, JUL 25TH, 2018
By Nick Carey and Ben Klayman - REUTERS
DETROIT (Reuters) – General Motors Co on Wednesday lowered its full-year 2018 earnings forecast, citing higher steel and aluminum costs as a result of tariffs imposed by U.S. President Donald Trump’s administration, sending its shares down more than 5 percent in pre-market trading.
The No. 1 U.S. automaker said it would be able to partially offset higher commodity costs and the unfavorable effect of currency fluctuations in Brazil and Argentina, but they would have a net impact of around $1 billion on the company’s full-year results. Previously GM had expected those costs would total around $500 million.
GM Chief Financial officer Chuck Stevens told reporters that the automaker had put in a “solid performance” in the second quarter “despite some fairly significant headwinds that have built throughout the year.”
Most of the additional costs have been incurred in North America, he said.
“We have some work to do there,” Stevens said.
The automaker buys most of its steel from U.S. producers, who have raised prices in reaction to tariffs on imported steel imposed by the Donald Trump administration earlier this year.
GM’s U.S. sales performed well in the second quarter, with deliveries to dealers up 4.6 percent versus the same period in 2017. The automaker said its full-size pickup truck plants are still running at more than 100 percent capacity as they try to keep up with demand.
Despite the tariffs, CFO Stevens said the recent U.S. tax overhaul and low unemployment should help keep industry wide U.S. new vehicle sales at a robust level either slightly below or on par with sales in 2017.
“We’re not expecting (tariffs) to impact the U.S. industry in 2018,” he said. “What happens beyond 2018, there’s a lot of uncertainty in this space at this point in time.”
GM also said the higher costs would reduce its adjusted automotive free cash flow by around $1 billion to $4 billion versus its previous expectation of $5 billion.
GM said that it now expects to earn around $6 per share, down from its previous earnings-per-share forecast of $6.30 to $6.60.
The profit forecast change came as GM posted a better-than-expected second-quarter net profit, despite falling versus the same quarter in 2017.
The Detroit automaker reported quarterly net income of $2.39 billion, or $1.81 a share, compared with $2.43 billion, or $1.89 a share, last year. Analysts, on average, had expected earnings of $1.78 a share.
Revenue in the quarter was down slightly at $36.76 billion from $36.98 billon. Analysts had expected $36.73 billion.
In pre-market trading, GM shares were down more than 5 percent at $37.42.
The No. 1 U.S. automaker said it would be able to partially offset higher commodity costs and the unfavorable effect of currency fluctuations in Brazil and Argentina, but they would have a net impact of around $1 billion on the company’s full-year results. Previously GM had expected those costs would total around $500 million.
GM Chief Financial officer Chuck Stevens told reporters that the automaker had put in a “solid performance” in the second quarter “despite some fairly significant headwinds that have built throughout the year.”
Most of the additional costs have been incurred in North America, he said.
“We have some work to do there,” Stevens said.
The automaker buys most of its steel from U.S. producers, who have raised prices in reaction to tariffs on imported steel imposed by the Donald Trump administration earlier this year.
GM’s U.S. sales performed well in the second quarter, with deliveries to dealers up 4.6 percent versus the same period in 2017. The automaker said its full-size pickup truck plants are still running at more than 100 percent capacity as they try to keep up with demand.
Despite the tariffs, CFO Stevens said the recent U.S. tax overhaul and low unemployment should help keep industry wide U.S. new vehicle sales at a robust level either slightly below or on par with sales in 2017.
“We’re not expecting (tariffs) to impact the U.S. industry in 2018,” he said. “What happens beyond 2018, there’s a lot of uncertainty in this space at this point in time.”
GM also said the higher costs would reduce its adjusted automotive free cash flow by around $1 billion to $4 billion versus its previous expectation of $5 billion.
GM said that it now expects to earn around $6 per share, down from its previous earnings-per-share forecast of $6.30 to $6.60.
The profit forecast change came as GM posted a better-than-expected second-quarter net profit, despite falling versus the same quarter in 2017.
The Detroit automaker reported quarterly net income of $2.39 billion, or $1.81 a share, compared with $2.43 billion, or $1.89 a share, last year. Analysts, on average, had expected earnings of $1.78 a share.
Revenue in the quarter was down slightly at $36.76 billion from $36.98 billon. Analysts had expected $36.73 billion.
In pre-market trading, GM shares were down more than 5 percent at $37.42.
The Limits of Green Energy Under Capitalism
BY David Klein Truthout
PUBLISHED
July 16, 2018
Renewable energy is expanding rapidly all around the world. The energy capacity of newly installed solar projects in 2017, for instance, exceeded the combined increases from coal, gas and nuclear plants. During the past eight years alone, global investment in renewables was $2.2 trillion, and optimism has soared along with investments. “Rapidly spreading solar technology could change everything,” announced a piece in the Financial Times, which also explained that, “there is growing evidence that some fundamental changes are coming that will over time put a question mark over investments in old energy systems.”
But can renewable energy grow fast enough in the market economy to pinch off the use of fossil fuels and help fend off climate catastrophe? Unfortunately, it’s not likely. Even as the percentage of global energy generation from renewables increases, so too does global energy consumption, which means that fossil fuel emissions are also increasing.
The world’s energy-related carbon emissions rose by 1.7 percent in 2017 and energy consumption grew by 2.2 percent, the fastest rate since 2013. For the past decade, primary energy consumption increased worldwide at an average rate of 1.7 percent per year. Power generation rose last year by 2.8 percent with renewable energy providing 49 percent of that increase and most of the rest (44 percent) coming from coal. Globally, oil consumption grew by 1.8 percent, natural gas by 3 percent and coal consumption increased by 1 percent. The key point is that greenhouse gas emissions from fossil fuels are increasing even as renewable energy use is growing.
To visualize the relationship between the growing percentage of green energy and increasing total global energy production, imagine a “dynamic energy consumption pie chart.” A growing portion of the pie represents green energy sources, so that piece of the pie is getting wider, but the radius of the pie chart also increases with time to account for the increase of global energy consumption. The pie is getting bigger and bigger while the fossil fuel slice is growing longer (which is bad) but thinner (which is good). Which process wins out? As long as fossil fuel use is not decreasing, it doesn’t matter for the climate.
People often get confused when fossil fuels and renewable energy are discussed together, but the climate only cares about the former. The latter has no effect. Solar panels, wind turbines and the like neither help nor harm the climate. The only thing that matters, in terms of climate disruption, are greenhouse gas emissions.
It is not enough for the percentage of green energy to increase each year — unless it reaches 100 percent of global energy production very quickly. Even if the rate of greenhouse gas emissions decreases, but doesn’t decrease fast enough, we face disaster. What is required is that global greenhouse gas emissions decrease rapidly to zero by midcentury in order for the biosphere to stand a chance of survival. Unfortunately, even a rapidly increasing percentage of green energy production is unlikely to achieve that under capitalist market forces.
What About the Carbon Bubble?
Falling prices for renewable energy have led academics, activists and investors to warn of a “carbon bubble” of overvalued fossil fuel assets in the global economy, which could lead to a major capitalist crisis. A recent economic study, published in Nature Climate Change predicted that a sudden decrease in the value of fossil fuels — triggered by low renewable energy prices — would cause the carbon bubble to burst, and under the assumption of continuing trends, such an event will likely occur before 2035.
Economic crises notwithstanding, could the bursting of the carbon bubble at least prevent or significantly delay environmental collapse? Unfortunately, no. Lead author Jean-François Mercure warned, as reported by the Guardian, “that the transition was happening too slowly to stave off the worst effects of climate change. Although the trajectory towards a low-carbon economy would continue, to keep within [2 degrees Celsius] above pre-industrial levels — the limit set under the Paris agreement — would require much stronger government action and new policies.”
Capitalism or Survival
Capitalism requires perpetual economic growth in order to avoid economic crises such as the Great Depression. More specifically, in order to stave off mass unemployment and economic misery, capitalism requires increasing commodity production, escalating resource extraction, increasing trash and toxic dumping, and ever increasing energy production. Capitalism, by its very nature, must expand unendingly and it has already surpassed the limits of sustainable growth in the sense that global consumption now exceeds the planet’s bio-capacity to regenerate the resources consumed. According to the World Wildlife Fund, 1.6 Earths would be required to meet the demands humanity makes on nature each year. Capitalism is not only incapable of responding adequately to the environmental crisis, it is the very cause of the crisis and can only make matters worse.
As Richard Smith points out in Green Capitalism: The God that Failed, the scale of change needed to achieve a sustainable civilization is staggering. The rapid reduction of greenhouse gas emissions together with resource conservation requires that we radically reduce or close down large numbers of power plants, mines, factories, mills, processing and other industries around the world. It means drastically cutting back or closing down not only fossil fuel companies, but the industries that depend on them, including automobile, aircraft, airline, shipping, petrochemical, construction, agribusiness, lumber, pulp and paper, and wood product companies, industrial fishing operations, factory farming, junk food production, private water companies, packaging and plastic, disposable products of all sorts, and above all, the war industries. The Pentagon is the single largest institutional user of petroleum products and energy.
The loss of jobs from the de-industrialization required to save ourselves would not be just a few coal mining and oil drilling jobs but millions of jobs in the industrialized world. Mainstream environmentalists argue that the jobs versus the environment dichotomy is a false one, but they are wrong. Within a capitalist framework that is exactly the choice. What we would need to do within this framework to save the biosphere, including ourselves, would result in total economic collapse.
It is not enough just to oppose capitalism. We also need to create something better: An alternative system of human relations along the lines of eco-socialism is not only desirable, it is imperative. Included in such a vision are free health care, free education, free mass transportation, and since most jobs under capitalism are pointless or destructive, we need a drastically reduced workweek.
Polluting industries will not voluntarily shut down. To accomplish what is needed requires socializing virtually all large-scale industries. The only way to rationally reorganize the economy sustainably is to collectively and democratically plan most of the world’s industrial economies.
While all kinds of useless, wasteful and polluting industries must be eliminated, we cannot contract the entire economy. We need to expand some industries, including renewable energy, public health care, public transit, long-lasting energy efficient housing, durable mass transportation vehicles, long-lasting appliances and electronics, repair shops, public schools, public services, environmental remediation, reforestation and organic farming.
It is essential that environmental activists begin to focus on ending the economic system of capitalism itself. The survival of life on this planet depends on it.
But can renewable energy grow fast enough in the market economy to pinch off the use of fossil fuels and help fend off climate catastrophe? Unfortunately, it’s not likely. Even as the percentage of global energy generation from renewables increases, so too does global energy consumption, which means that fossil fuel emissions are also increasing.
The world’s energy-related carbon emissions rose by 1.7 percent in 2017 and energy consumption grew by 2.2 percent, the fastest rate since 2013. For the past decade, primary energy consumption increased worldwide at an average rate of 1.7 percent per year. Power generation rose last year by 2.8 percent with renewable energy providing 49 percent of that increase and most of the rest (44 percent) coming from coal. Globally, oil consumption grew by 1.8 percent, natural gas by 3 percent and coal consumption increased by 1 percent. The key point is that greenhouse gas emissions from fossil fuels are increasing even as renewable energy use is growing.
To visualize the relationship between the growing percentage of green energy and increasing total global energy production, imagine a “dynamic energy consumption pie chart.” A growing portion of the pie represents green energy sources, so that piece of the pie is getting wider, but the radius of the pie chart also increases with time to account for the increase of global energy consumption. The pie is getting bigger and bigger while the fossil fuel slice is growing longer (which is bad) but thinner (which is good). Which process wins out? As long as fossil fuel use is not decreasing, it doesn’t matter for the climate.
People often get confused when fossil fuels and renewable energy are discussed together, but the climate only cares about the former. The latter has no effect. Solar panels, wind turbines and the like neither help nor harm the climate. The only thing that matters, in terms of climate disruption, are greenhouse gas emissions.
It is not enough for the percentage of green energy to increase each year — unless it reaches 100 percent of global energy production very quickly. Even if the rate of greenhouse gas emissions decreases, but doesn’t decrease fast enough, we face disaster. What is required is that global greenhouse gas emissions decrease rapidly to zero by midcentury in order for the biosphere to stand a chance of survival. Unfortunately, even a rapidly increasing percentage of green energy production is unlikely to achieve that under capitalist market forces.
What About the Carbon Bubble?
Falling prices for renewable energy have led academics, activists and investors to warn of a “carbon bubble” of overvalued fossil fuel assets in the global economy, which could lead to a major capitalist crisis. A recent economic study, published in Nature Climate Change predicted that a sudden decrease in the value of fossil fuels — triggered by low renewable energy prices — would cause the carbon bubble to burst, and under the assumption of continuing trends, such an event will likely occur before 2035.
Economic crises notwithstanding, could the bursting of the carbon bubble at least prevent or significantly delay environmental collapse? Unfortunately, no. Lead author Jean-François Mercure warned, as reported by the Guardian, “that the transition was happening too slowly to stave off the worst effects of climate change. Although the trajectory towards a low-carbon economy would continue, to keep within [2 degrees Celsius] above pre-industrial levels — the limit set under the Paris agreement — would require much stronger government action and new policies.”
Capitalism or Survival
Capitalism requires perpetual economic growth in order to avoid economic crises such as the Great Depression. More specifically, in order to stave off mass unemployment and economic misery, capitalism requires increasing commodity production, escalating resource extraction, increasing trash and toxic dumping, and ever increasing energy production. Capitalism, by its very nature, must expand unendingly and it has already surpassed the limits of sustainable growth in the sense that global consumption now exceeds the planet’s bio-capacity to regenerate the resources consumed. According to the World Wildlife Fund, 1.6 Earths would be required to meet the demands humanity makes on nature each year. Capitalism is not only incapable of responding adequately to the environmental crisis, it is the very cause of the crisis and can only make matters worse.
As Richard Smith points out in Green Capitalism: The God that Failed, the scale of change needed to achieve a sustainable civilization is staggering. The rapid reduction of greenhouse gas emissions together with resource conservation requires that we radically reduce or close down large numbers of power plants, mines, factories, mills, processing and other industries around the world. It means drastically cutting back or closing down not only fossil fuel companies, but the industries that depend on them, including automobile, aircraft, airline, shipping, petrochemical, construction, agribusiness, lumber, pulp and paper, and wood product companies, industrial fishing operations, factory farming, junk food production, private water companies, packaging and plastic, disposable products of all sorts, and above all, the war industries. The Pentagon is the single largest institutional user of petroleum products and energy.
The loss of jobs from the de-industrialization required to save ourselves would not be just a few coal mining and oil drilling jobs but millions of jobs in the industrialized world. Mainstream environmentalists argue that the jobs versus the environment dichotomy is a false one, but they are wrong. Within a capitalist framework that is exactly the choice. What we would need to do within this framework to save the biosphere, including ourselves, would result in total economic collapse.
It is not enough just to oppose capitalism. We also need to create something better: An alternative system of human relations along the lines of eco-socialism is not only desirable, it is imperative. Included in such a vision are free health care, free education, free mass transportation, and since most jobs under capitalism are pointless or destructive, we need a drastically reduced workweek.
Polluting industries will not voluntarily shut down. To accomplish what is needed requires socializing virtually all large-scale industries. The only way to rationally reorganize the economy sustainably is to collectively and democratically plan most of the world’s industrial economies.
While all kinds of useless, wasteful and polluting industries must be eliminated, we cannot contract the entire economy. We need to expand some industries, including renewable energy, public health care, public transit, long-lasting energy efficient housing, durable mass transportation vehicles, long-lasting appliances and electronics, repair shops, public schools, public services, environmental remediation, reforestation and organic farming.
It is essential that environmental activists begin to focus on ending the economic system of capitalism itself. The survival of life on this planet depends on it.
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too stupid to know you are being robbed!!!
Cities and States Spend a Ton to Woo Big Companies. Is It Money Well Spent?
A new report says local governments doled out $9.3 billion to tech companies in recent years. These handouts may not produce jobs, but they play well with voters.
Dwyer Gunn - pacific standard
Jul 9, 2018
In September of 2017, at a ceremony held at the Gateway Technical College in Racine, Wisconsin, Governor Scott Walker (R) signed into law a bill rewarding Foxconn Technology Group a $3 billion package of economic incentives to locate a large new factory in Wisconsin. The factory, which Foxconn expects to invest $10 billion in, is expected to initially employ 3,000 workers and ultimately employ up to 13,000 workers.
The Foxconn deal, which would be the largest incentive package ever granted to a foreign company (if the full package is delivered), has proved controversial in the state. Walker, who first announced the deal alongside President Donald Trump at the White House in July of 2017 and was joined by the president at the factory's ground-breaking last month, has touted the deal as a huge economic win for a state hit hard by the decline of manufacturing in recent years. "This is about far into the future," Walker said at the ceremony. "This is about ensuring our children and our children's children will have generational opportunities. This is one of those things that's transformational."
Thanks for watching!Democrats, who hope to use the deal against Walker in this year's gubernatorial election, have decried the deal's estimated $4 billion-plus price tag as well as provisions in the deal allowing Foxconn to build in waterways and wetlands, and to bypass traditional judicial processes around environmental issues connected to the plant. Democrats have also pointed to a report from the state's non-partisan budget office projecting it would take at least 25 years for the state to see a return on investment on the incentives.
Sure, the Foxconn deal is a particularly large one, struck by a particularly controversial governor, but it's really not much of an outlier. Over the last five years, state and city governments in the United States have pledged approximately $9.3 billion in economic development incentives to technology companies alone, according to analysis produced by Good Jobs First, a non-profit that tracks such subsidies. (That figure is likely to jump dramatically once Amazon makes a decision about the location of its second headquarters—several cities have offered the company enormous incentive packages.) Meanwhile, a 2012 analysis by the New York Times concluded that state, county, and city governments dole out over $80 billion each year to companies across different industries.
Given the enormous sums of money involved in these incentive packages, it's striking how little faith economists have that these incentives actually work. In a comprehensive meta-review published in 2004 in Journal of the American Planning Association, researchers concluded that there's simply no "clear and undisputed evidence" that business incentives produce jobs and increase economic growth. The researchers went on to conclude that, instead, "there are very good reasons—theoretical, empirical, and practical—to believe that economic development incentives have little or no impact on firm location and investment decisions."
In a 2017 paper, Timothy Bartik of the W.E. Upjohn Institute for Employment, a non-partisan think tank focused on unemployment, created an exhaustive database of economic development incentives in the United States. Bartik found that business incentives have tripled since 1990. Although the rate of increase has slowed since 2000, Bartik offered a number of grim conclusions:
[I]t is still more likely that states will significantly increase rather than decrease incentives. New states have entered more vigorously into the incentive competition. Incentives are still far too broadly provided to many firms that do not pay high wages, do not provide many jobs, and are unlikely to have research spinoffs. Too many incentives excessively sacrifice the long-term tax base of state and local economies. Too many incentives are refundable and without real budget limits.
Bartik also notes that his data largely supports the existing consensus that, while incentives may affect location decisions, they are often too expensive and fail to produce the promised results.
Two recent evaluations of state business incentive programs—both by Nathan Jensen, a professor at the University of Texas–Austin—cast further doubt on economic development incentives. In the first, Jensen compared firms that received incentives through Kansas' Promoting Employment Across Kansas program through a control group of firms who received no such incentives. He found that the PEAK incentives had no effect on job creation, and that the incentives also had "little impact on the relocation or expansion decisions of firms." In the second analysis, in which Jensen evaluated the effects of economic development programs in Maryland and Virginia, he concluded that the programs "had essentially zero impact on job creation."
So, given the lack of evidence on their efficacy, why are politicians like Scott Walker so keen to throw money at corporations? Another project of Jensen's offers a clue: In an Internet survey, Jensen (together with political scientist Edmund Malesky) found that voters, especially independents, were more likely to vote for an incumbent governor who had successfully attracted a large corporate investment to the state. Governors that offered tax incentives for investment received an even bigger boost among independent voters.
The Foxconn deal, which would be the largest incentive package ever granted to a foreign company (if the full package is delivered), has proved controversial in the state. Walker, who first announced the deal alongside President Donald Trump at the White House in July of 2017 and was joined by the president at the factory's ground-breaking last month, has touted the deal as a huge economic win for a state hit hard by the decline of manufacturing in recent years. "This is about far into the future," Walker said at the ceremony. "This is about ensuring our children and our children's children will have generational opportunities. This is one of those things that's transformational."
Thanks for watching!Democrats, who hope to use the deal against Walker in this year's gubernatorial election, have decried the deal's estimated $4 billion-plus price tag as well as provisions in the deal allowing Foxconn to build in waterways and wetlands, and to bypass traditional judicial processes around environmental issues connected to the plant. Democrats have also pointed to a report from the state's non-partisan budget office projecting it would take at least 25 years for the state to see a return on investment on the incentives.
Sure, the Foxconn deal is a particularly large one, struck by a particularly controversial governor, but it's really not much of an outlier. Over the last five years, state and city governments in the United States have pledged approximately $9.3 billion in economic development incentives to technology companies alone, according to analysis produced by Good Jobs First, a non-profit that tracks such subsidies. (That figure is likely to jump dramatically once Amazon makes a decision about the location of its second headquarters—several cities have offered the company enormous incentive packages.) Meanwhile, a 2012 analysis by the New York Times concluded that state, county, and city governments dole out over $80 billion each year to companies across different industries.
Given the enormous sums of money involved in these incentive packages, it's striking how little faith economists have that these incentives actually work. In a comprehensive meta-review published in 2004 in Journal of the American Planning Association, researchers concluded that there's simply no "clear and undisputed evidence" that business incentives produce jobs and increase economic growth. The researchers went on to conclude that, instead, "there are very good reasons—theoretical, empirical, and practical—to believe that economic development incentives have little or no impact on firm location and investment decisions."
In a 2017 paper, Timothy Bartik of the W.E. Upjohn Institute for Employment, a non-partisan think tank focused on unemployment, created an exhaustive database of economic development incentives in the United States. Bartik found that business incentives have tripled since 1990. Although the rate of increase has slowed since 2000, Bartik offered a number of grim conclusions:
[I]t is still more likely that states will significantly increase rather than decrease incentives. New states have entered more vigorously into the incentive competition. Incentives are still far too broadly provided to many firms that do not pay high wages, do not provide many jobs, and are unlikely to have research spinoffs. Too many incentives excessively sacrifice the long-term tax base of state and local economies. Too many incentives are refundable and without real budget limits.
Bartik also notes that his data largely supports the existing consensus that, while incentives may affect location decisions, they are often too expensive and fail to produce the promised results.
Two recent evaluations of state business incentive programs—both by Nathan Jensen, a professor at the University of Texas–Austin—cast further doubt on economic development incentives. In the first, Jensen compared firms that received incentives through Kansas' Promoting Employment Across Kansas program through a control group of firms who received no such incentives. He found that the PEAK incentives had no effect on job creation, and that the incentives also had "little impact on the relocation or expansion decisions of firms." In the second analysis, in which Jensen evaluated the effects of economic development programs in Maryland and Virginia, he concluded that the programs "had essentially zero impact on job creation."
So, given the lack of evidence on their efficacy, why are politicians like Scott Walker so keen to throw money at corporations? Another project of Jensen's offers a clue: In an Internet survey, Jensen (together with political scientist Edmund Malesky) found that voters, especially independents, were more likely to vote for an incumbent governor who had successfully attracted a large corporate investment to the state. Governors that offered tax incentives for investment received an even bigger boost among independent voters.
left holding a bag of shit!!!
'All humanity has left the area': paying for Tesla's Gigafactory
Tesla’s battery factory brought high-paid tech jobs to Nevada – but is soaking up huge tax breaks that critics say have seriously depleted public services
Rory Carroll in Sparks, Nevada
the guardian
Tue 3 Jul 2018 06.00 EDT
When Nevada enticed Tesla to set up a gargantuan battery factory in the desert, America’s gambling capital seemed to have hit the jackpot.
The factory would have a state-of-the art 5.5m sq ft (510967 sq meter) facility – reputedly the world’s biggest building by footprint – and promised to generate tens of thousands of jobs, as well as investment worth $100bn (£76bn).
Cities around the so-called Gigafactory in northern Nevada lined up to reap the bonanza. No longer dusty, provincial versions of Las Vegas, these municipalities would become innovative makers of lithium-ion batteries for electric cars and partners in Elon Musk’s vision of a clean-energy revolution.
That was the pitch.
These days many residents in Sparks – a sunbaked, low-rise city of 100,000 people located 20 miles from the factory – express humbler dreams: food, shelter, health care.
“I’m not used to living this way,” said Katherine Pope, 69, a retired administrator who rents a small motel room and relies on food donations. “I can’t afford to move. Many times I can’t afford meat.”
Another impoverished resident, a 70-year-old unemployed transcriptionist with a thyroid condition, faces a recurring dilemma. “Food or medicine, it’s one or the other.” A rent increase may soon compel another grim choice: sleep in her battered 1997 Saturn or in a homeless shelter.
Down by the Truckee river you find others who feel cast out – families who have moved into trailer parks, which are packed to capacity, and people sleeping rough.
“A year ago I was the caretaker of an apartment building and my wife was a caregiver. Then I lost my job. We couldn’t afford to rent anywhere so now we live here,” said Kevin McCullough, 48, who like his partner, Pixie, was sunburnt from outdoor living. Home is a tent by riverbank reeds.
Such testimony conflicts with the official narrative that Sparks is booming – awash with jobs, money and newcomers. But you hear it from a largely hidden underclass which is paying a price for the boom. Some have a term for it: “Tesla’d.”
One complaint is that tax credits given to Tesla – and to a lesser extent other tech companies – deplete public services, resulting in potholed roads, overcrowded schools and insufficient affordable housing.
The other is that the tech worker influx has sent rents rocketing, tipping residents on fixed incomes, especially seniors, into penury.
That was not the pitch in 2014 when Nevada beat rival bids from California and New Mexico to land the Gigafactory. It did so with exemptions from sales-and-use, property and general business taxes for 10 to 20 years, adding up to an estimated and unprecedented $1.4bn. The previous record, to lure an Apple server farm, was $88m.
Brian Sandoval, the Republican governor, hailed the deal as transformative for a region still limping from the great recession.
Today the factory sits behind a fenced swath of desert known as the Tahoe Reno Industrial Center (TRIC), which also hosts Google, Switch and Panasonic, among others, and bills itself the world’s biggest industrial park.
Tesla’s “alien dreadnought” – Musk’s words – dominates. It is unfinished but already produces around 3,000 battery packs per week for Tesla’s Model 3 sedan. Thousands of workers and contractors have moved to Sparks and nearby communities, a boon for local hotels, landlords, builders, plumbers, electricians, taxi drivers and other service providers.
A Tesla spokesperson said the company was investing in local education, including a high school manufacturing development programme and a $37.5m plan to promote science, technology, engineering and mathematics.
Tesla receives credits based on jobs created, Ron Knecht, Nevada’s state controller, said in an interview. “They’re reaching their benchmarks significantly faster than expected.”
Current Tesla projections suggest the credits are justified even if the ultimate cost is unclear, said Knecht. “If it pans out the way it looks, it’ll certainly be good for the economy. The state may break even but we’ll never really know.”
A Republican, Knecht’s job is to protect taxpayers’ money. Figures from his office, supplied under a mandate for transparency in corporate welfare, show how much tax abatements reduced potential revenues for local authorities in fiscal year 2017. In the case of Tesla it was $68.7m.
Credits to Musk’s company will soak up most of a tax revenue excess Nevada was due to record this year.
The state compensates local government, said Knecht. Had Tesla never come there would have been nothing to tax, so the cost/benefit remains murky. “You can get numbers all over the place.”
Here’s one number that applies to Sparks: zero.
Stephen Driscoll, the city manager, said despite surging population growth and increased strain on police and fire departments and schools, his annual budget had increased from $65m to $70m in the past two years – about the level of inflation. “So I’m at net zero.”
Critics of the system say there is no doubt who ultimately pays.
“It’s the working stiffs,” said Bob Fulkerson, of the Progressive Leadership Alliance of Nevada.
Schools in Washoe county, which includes Sparks, are overcrowded and deeply in debt, so much so that voters in 2016 approved a sales tax hike to help plug the gap. Even so, fresh budget cuts could eliminate bus routes for nearly 4,000 elementary and middle school students in an effort to save $550,000.
Tesla, meanwhile, has sold $131m in tax credits to casinos thanks to transferable tax credits – the cherry on the cake used to lure Musk.
“Corporate welfare is a way of life in these parts,” said Andrew Barbano, a veteran commentator. Ordinary people bore the brunt in the form of regressive sales and gas taxes and impoverished services, he said. “Nevada is addicted to hidden indirect taxes.”
Robert Fellner, of the Nevada Policy Research Institute, said politicians had warped incentives. Rather than create a fair tax system and balanced growth they wanted to be able to point at giant factories and say “we did that”.
Jenny Brekhus, a city planner and member of Reno city council, said Nevada could not afford corporate welfare. “I don’t believe you can be a low tax, low service state and play this economic development game where you give away tax revenue.”
In Sparks the result is a stark gap between winners and losers.
Home owners have seen values soar – but not property taxes, which are capped. Plumbers, electricians and builders have bountiful job options.
“The factory is a good thing,” said Omar Alvarez, 28, a building contractor who earned $18 an hour plus generous benefits at Tesla’s factory. “Well, as long as you actually work there.”
Residents on fixed incomes, in contrast, are facing surging rents, driving some to destitution and the brink of homelessness.
Trailer parks which were half-empty two years ago are now jammed, said Alicia Siever, who manages the River’s Edge RV park. Motels and shelters have also filled.
“I get depressed. All humanity has left the area,” said Pope, who used to work in an architect’s office. Her $700 per month ground-floor motel room is a dramatic comedown from her previous apartments. “But I’m grateful this place exists.”
The unemployed transcriptionist declined to be named lest identification sabotage her last-ditch attempt to avoid eviction. Asked to name unaffordable luxuries, she replied: “Ice cream. Bacon. A movie ticket.”
A troubling question now hovers over Sparks. Is Tesla itself a winner or loser?
Having bet on the Gigafactory, the city’s fate hinges on the company’s success, said Richard Daly, business manager of Laborers’ Union Local 169. “Growth problems are better than recession problems.”
But a spate of setbacks – layoffs, achurn of executives, workplace safety complaints, “autopilot” car crashes and a suit against a whistleblower – has put pressure on the firm. “Giving so much to Tesla was risky,” said Eloy Jara, another labour leader. “If they fail it could really hurt.”
The factory would have a state-of-the art 5.5m sq ft (510967 sq meter) facility – reputedly the world’s biggest building by footprint – and promised to generate tens of thousands of jobs, as well as investment worth $100bn (£76bn).
Cities around the so-called Gigafactory in northern Nevada lined up to reap the bonanza. No longer dusty, provincial versions of Las Vegas, these municipalities would become innovative makers of lithium-ion batteries for electric cars and partners in Elon Musk’s vision of a clean-energy revolution.
That was the pitch.
These days many residents in Sparks – a sunbaked, low-rise city of 100,000 people located 20 miles from the factory – express humbler dreams: food, shelter, health care.
“I’m not used to living this way,” said Katherine Pope, 69, a retired administrator who rents a small motel room and relies on food donations. “I can’t afford to move. Many times I can’t afford meat.”
Another impoverished resident, a 70-year-old unemployed transcriptionist with a thyroid condition, faces a recurring dilemma. “Food or medicine, it’s one or the other.” A rent increase may soon compel another grim choice: sleep in her battered 1997 Saturn or in a homeless shelter.
Down by the Truckee river you find others who feel cast out – families who have moved into trailer parks, which are packed to capacity, and people sleeping rough.
“A year ago I was the caretaker of an apartment building and my wife was a caregiver. Then I lost my job. We couldn’t afford to rent anywhere so now we live here,” said Kevin McCullough, 48, who like his partner, Pixie, was sunburnt from outdoor living. Home is a tent by riverbank reeds.
Such testimony conflicts with the official narrative that Sparks is booming – awash with jobs, money and newcomers. But you hear it from a largely hidden underclass which is paying a price for the boom. Some have a term for it: “Tesla’d.”
One complaint is that tax credits given to Tesla – and to a lesser extent other tech companies – deplete public services, resulting in potholed roads, overcrowded schools and insufficient affordable housing.
The other is that the tech worker influx has sent rents rocketing, tipping residents on fixed incomes, especially seniors, into penury.
That was not the pitch in 2014 when Nevada beat rival bids from California and New Mexico to land the Gigafactory. It did so with exemptions from sales-and-use, property and general business taxes for 10 to 20 years, adding up to an estimated and unprecedented $1.4bn. The previous record, to lure an Apple server farm, was $88m.
Brian Sandoval, the Republican governor, hailed the deal as transformative for a region still limping from the great recession.
Today the factory sits behind a fenced swath of desert known as the Tahoe Reno Industrial Center (TRIC), which also hosts Google, Switch and Panasonic, among others, and bills itself the world’s biggest industrial park.
Tesla’s “alien dreadnought” – Musk’s words – dominates. It is unfinished but already produces around 3,000 battery packs per week for Tesla’s Model 3 sedan. Thousands of workers and contractors have moved to Sparks and nearby communities, a boon for local hotels, landlords, builders, plumbers, electricians, taxi drivers and other service providers.
A Tesla spokesperson said the company was investing in local education, including a high school manufacturing development programme and a $37.5m plan to promote science, technology, engineering and mathematics.
Tesla receives credits based on jobs created, Ron Knecht, Nevada’s state controller, said in an interview. “They’re reaching their benchmarks significantly faster than expected.”
Current Tesla projections suggest the credits are justified even if the ultimate cost is unclear, said Knecht. “If it pans out the way it looks, it’ll certainly be good for the economy. The state may break even but we’ll never really know.”
A Republican, Knecht’s job is to protect taxpayers’ money. Figures from his office, supplied under a mandate for transparency in corporate welfare, show how much tax abatements reduced potential revenues for local authorities in fiscal year 2017. In the case of Tesla it was $68.7m.
Credits to Musk’s company will soak up most of a tax revenue excess Nevada was due to record this year.
The state compensates local government, said Knecht. Had Tesla never come there would have been nothing to tax, so the cost/benefit remains murky. “You can get numbers all over the place.”
Here’s one number that applies to Sparks: zero.
Stephen Driscoll, the city manager, said despite surging population growth and increased strain on police and fire departments and schools, his annual budget had increased from $65m to $70m in the past two years – about the level of inflation. “So I’m at net zero.”
Critics of the system say there is no doubt who ultimately pays.
“It’s the working stiffs,” said Bob Fulkerson, of the Progressive Leadership Alliance of Nevada.
Schools in Washoe county, which includes Sparks, are overcrowded and deeply in debt, so much so that voters in 2016 approved a sales tax hike to help plug the gap. Even so, fresh budget cuts could eliminate bus routes for nearly 4,000 elementary and middle school students in an effort to save $550,000.
Tesla, meanwhile, has sold $131m in tax credits to casinos thanks to transferable tax credits – the cherry on the cake used to lure Musk.
“Corporate welfare is a way of life in these parts,” said Andrew Barbano, a veteran commentator. Ordinary people bore the brunt in the form of regressive sales and gas taxes and impoverished services, he said. “Nevada is addicted to hidden indirect taxes.”
Robert Fellner, of the Nevada Policy Research Institute, said politicians had warped incentives. Rather than create a fair tax system and balanced growth they wanted to be able to point at giant factories and say “we did that”.
Jenny Brekhus, a city planner and member of Reno city council, said Nevada could not afford corporate welfare. “I don’t believe you can be a low tax, low service state and play this economic development game where you give away tax revenue.”
In Sparks the result is a stark gap between winners and losers.
Home owners have seen values soar – but not property taxes, which are capped. Plumbers, electricians and builders have bountiful job options.
“The factory is a good thing,” said Omar Alvarez, 28, a building contractor who earned $18 an hour plus generous benefits at Tesla’s factory. “Well, as long as you actually work there.”
Residents on fixed incomes, in contrast, are facing surging rents, driving some to destitution and the brink of homelessness.
Trailer parks which were half-empty two years ago are now jammed, said Alicia Siever, who manages the River’s Edge RV park. Motels and shelters have also filled.
“I get depressed. All humanity has left the area,” said Pope, who used to work in an architect’s office. Her $700 per month ground-floor motel room is a dramatic comedown from her previous apartments. “But I’m grateful this place exists.”
The unemployed transcriptionist declined to be named lest identification sabotage her last-ditch attempt to avoid eviction. Asked to name unaffordable luxuries, she replied: “Ice cream. Bacon. A movie ticket.”
A troubling question now hovers over Sparks. Is Tesla itself a winner or loser?
Having bet on the Gigafactory, the city’s fate hinges on the company’s success, said Richard Daly, business manager of Laborers’ Union Local 169. “Growth problems are better than recession problems.”
But a spate of setbacks – layoffs, achurn of executives, workplace safety complaints, “autopilot” car crashes and a suit against a whistleblower – has put pressure on the firm. “Giving so much to Tesla was risky,” said Eloy Jara, another labour leader. “If they fail it could really hurt.”
How Monopoly Was Invented to Demonstrate the Evils of Capitalism
The game’s little-known inventor, Elizabeth Magie, would no doubt have made herself go directly to jail if she’d lived to know just how influential today’s twisted version of her game has turned out to be.
By Kate Raworth / Aeon - alternet
July 1, 2018, 5:07 AM GMT
‘Buy land – they aren’t making it any more,’ quipped Mark Twain. It’s a maxim that would certainly serve you well in a game of Monopoly, the bestselling board game that has taught generations of children to buy up property, stack it with hotels, and charge fellow players sky-high rents for the privilege of accidentally landing there.
The game’s little-known inventor, Elizabeth Magie, would no doubt have made herself go directly to jail if she’d lived to know just how influential today’s twisted version of her game has turned out to be. Why? Because it encourages its players to celebrate exactly the opposite values to those she intended to champion.
Born in 1866, Magie was an outspoken rebel against the norms and politics of her times. She was unmarried into her 40s, independent and proud of it, and made her point with a publicity stunt. Taking out a newspaper advertisement, she offered herself as a ‘young woman American slave’ for sale to the highest bidder. Her aim, she told shocked readers, was to highlight the subordinate position of women in society. ‘We are not machines,’ she said. ‘Girls have minds, desires, hopes and ambition.’
In addition to confronting gender politics, Magie decided to take on the capitalist system of property ownership – this time not through a publicity stunt but in the form of a board game. The inspiration began with a book that her father, the anti-monopolist politician James Magie, had handed to her. In the pages of Henry George’s classic, Progress and Poverty (1879), she encountered his conviction that ‘the equal right of all men to use the land is as clear as their equal right to breathe the air – it is a right proclaimed by the fact of their existence’.
Travelling around America in the 1870s, George had witnessed persistent destitution amid growing wealth, and he believed it was largely the inequity of land ownership that bound these two forces – poverty and progress – together. So instead of following Twain by encouraging his fellow citizens to buy land, he called on the state to tax it. On what grounds? Because much of land’s value comes not from what is built on the plot but from nature’s gift of water or minerals that might lie beneath its surface, or from the communally created value of its surroundings: nearby roads and railways; a thriving economy, a safe neighbourhood; good local schools and hospitals. And he argued that the tax receipts should be invested on behalf of all.
Determined to prove the merit of George’s proposal, Magie invented and in 1904 patented what she called the Landlord’s Game. Laid out on the board as a circuit (which was a novelty at the time), it was populated with streets and landmarks for sale. The key innovation of her game, however, lay in the two sets of rules that she wrote for playing it.
Under the ‘Prosperity’ set of rules, every player gained each time someone acquired a new property (designed to reflect George’s policy of taxing the value of land), and the game was won (by all!) when the player who had started out with the least money had doubled it. Under the ‘Monopolist’ set of rules, in contrast, players got ahead by acquiring properties and collecting rent from all those who were unfortunate enough to land there – and whoever managed to bankrupt the rest emerged as the sole winner (sound a little familiar?).
The purpose of the dual sets of rules, said Magie, was for players to experience a ‘practical demonstration of the present system of land grabbing with all its usual outcomes and consequences’ and hence to understand how different approaches to property ownership can lead to vastly different social outcomes. ‘It might well have been called “The Game of Life”,’ remarked Magie, ‘as it contains all the elements of success and failure in the real world, and the object is the same as the human race in general seems to have, ie, the accumulation of wealth.’
The game was soon a hit among Left-wing intellectuals, on college campuses including the Wharton School, Harvard and Columbia, and also among Quaker communities, some of which modified the rules and redrew the board with street names from Atlantic City. Among the players of this Quaker adaptation was an unemployed man called Charles Darrow, who later sold such a modified version to the games company Parker Brothers as his own.
Once the game’s true origins came to light, Parker Brothers bought up Magie’s patent, but then re-launched the board game simply as Monopoly, and provided the eager public with just one set of rules: those that celebrate the triumph of one over all. Worse, they marketed it along with the claim that the game’s inventor was Darrow, who they said had dreamed it up in the 1930s, sold it to Parker Brothers, and become a millionaire. It was a rags-to-riches fabrication that ironically exemplified Monopoly’s implicit values: chase wealth and crush your opponents if you want to come out on top.
So next time someone invites you to join a game of Monopoly, here’s a thought. As you set out piles for the Chance and Community Chest cards, establish a third pile for Land-Value Tax, to which every property owner must contribute each time they charge rent to a fellow player. How high should that land tax be? And how should the resulting tax receipts be distributed? Such questions will no doubt lead to fiery debate around the Monopoly board – but then that is exactly what Magie had always hoped for.
The game’s little-known inventor, Elizabeth Magie, would no doubt have made herself go directly to jail if she’d lived to know just how influential today’s twisted version of her game has turned out to be. Why? Because it encourages its players to celebrate exactly the opposite values to those she intended to champion.
Born in 1866, Magie was an outspoken rebel against the norms and politics of her times. She was unmarried into her 40s, independent and proud of it, and made her point with a publicity stunt. Taking out a newspaper advertisement, she offered herself as a ‘young woman American slave’ for sale to the highest bidder. Her aim, she told shocked readers, was to highlight the subordinate position of women in society. ‘We are not machines,’ she said. ‘Girls have minds, desires, hopes and ambition.’
In addition to confronting gender politics, Magie decided to take on the capitalist system of property ownership – this time not through a publicity stunt but in the form of a board game. The inspiration began with a book that her father, the anti-monopolist politician James Magie, had handed to her. In the pages of Henry George’s classic, Progress and Poverty (1879), she encountered his conviction that ‘the equal right of all men to use the land is as clear as their equal right to breathe the air – it is a right proclaimed by the fact of their existence’.
Travelling around America in the 1870s, George had witnessed persistent destitution amid growing wealth, and he believed it was largely the inequity of land ownership that bound these two forces – poverty and progress – together. So instead of following Twain by encouraging his fellow citizens to buy land, he called on the state to tax it. On what grounds? Because much of land’s value comes not from what is built on the plot but from nature’s gift of water or minerals that might lie beneath its surface, or from the communally created value of its surroundings: nearby roads and railways; a thriving economy, a safe neighbourhood; good local schools and hospitals. And he argued that the tax receipts should be invested on behalf of all.
Determined to prove the merit of George’s proposal, Magie invented and in 1904 patented what she called the Landlord’s Game. Laid out on the board as a circuit (which was a novelty at the time), it was populated with streets and landmarks for sale. The key innovation of her game, however, lay in the two sets of rules that she wrote for playing it.
Under the ‘Prosperity’ set of rules, every player gained each time someone acquired a new property (designed to reflect George’s policy of taxing the value of land), and the game was won (by all!) when the player who had started out with the least money had doubled it. Under the ‘Monopolist’ set of rules, in contrast, players got ahead by acquiring properties and collecting rent from all those who were unfortunate enough to land there – and whoever managed to bankrupt the rest emerged as the sole winner (sound a little familiar?).
The purpose of the dual sets of rules, said Magie, was for players to experience a ‘practical demonstration of the present system of land grabbing with all its usual outcomes and consequences’ and hence to understand how different approaches to property ownership can lead to vastly different social outcomes. ‘It might well have been called “The Game of Life”,’ remarked Magie, ‘as it contains all the elements of success and failure in the real world, and the object is the same as the human race in general seems to have, ie, the accumulation of wealth.’
The game was soon a hit among Left-wing intellectuals, on college campuses including the Wharton School, Harvard and Columbia, and also among Quaker communities, some of which modified the rules and redrew the board with street names from Atlantic City. Among the players of this Quaker adaptation was an unemployed man called Charles Darrow, who later sold such a modified version to the games company Parker Brothers as his own.
Once the game’s true origins came to light, Parker Brothers bought up Magie’s patent, but then re-launched the board game simply as Monopoly, and provided the eager public with just one set of rules: those that celebrate the triumph of one over all. Worse, they marketed it along with the claim that the game’s inventor was Darrow, who they said had dreamed it up in the 1930s, sold it to Parker Brothers, and become a millionaire. It was a rags-to-riches fabrication that ironically exemplified Monopoly’s implicit values: chase wealth and crush your opponents if you want to come out on top.
So next time someone invites you to join a game of Monopoly, here’s a thought. As you set out piles for the Chance and Community Chest cards, establish a third pile for Land-Value Tax, to which every property owner must contribute each time they charge rent to a fellow player. How high should that land tax be? And how should the resulting tax receipts be distributed? Such questions will no doubt lead to fiery debate around the Monopoly board – but then that is exactly what Magie had always hoped for.
The Normalization of Corruption
ROBERT KUTTNER JUNE 5, 2018
the american prspect
America’s slide into kleptocracy has bipartisan roots.
The emblem of this era is the mingling of personal corruption on the part of America’s leaders with the political corruption of American capitalism and the rise of autocracy. And of course the three trends feed on each other.
Take the case of the latest assertions by Trump’s lawyers in their memo to the Special Counsel Robert Mueller. The claim is naked in its candor: Trump is simply above the law. Anything that he does as president is legal, simply because he does it. This is Trump’s attitude generally, and it is the essence of tyranny.
Autocracy and personal corruption go hand in hand. If there are no democratic checks, the autocrat can be as corrupt as he likes. Trump’s signature in the run-up to the 2016 election, and in office, has been trading favors with Vladimir Putin—not favors that reset our diplomatic relationship with Russia and cooled tensions, but personal favors that benefited Trump financially. As an autocrat, he believes that he can avoid being held to account, and he may be right.
Trump is now repeating with China what he did with Russia: trading away national security goals for personal profit.
There is no other explanation for his overruling of the entire national security establishment in Trump’s defense of the Chinese telecom company ZTE, which was caught red-handed violating the embargo against North Korea and which represents a real espionage threat. But the Chinese simply bribed Trump with a huge loan to a Trump-sponsored project before the fact of Trump’s policy reversal, and then added a thank you by giving special lucrative trademark approval to Ivanka Trump afterwards.
Selling out your country for personal gain is an impeachable offense hidden in plain view. But Trump’s personal corruption as a dictatorial president is enabled by Republicans, who are willing to look the other way most of the time because his corruption serves their corruption.
The deeper disease is the slide of American capitalism into kleptocracy—in which very wealthy people make an alliance with the dictator, who helps them rig the rules to enable themselves to become even richer, in violation of anything like the supposed efficiency of markets that Republicans keep invoking. Crony capitalism works best when it enjoys an alliance with corrupt political leaders.
Does any serious person think that the gutting of the 2010 Dodd-Frank Act will be good for the economy? It’s a naked power grab that will create more risk for the financial system, and more immense wealth for the biggest banks who can in turn reward politicians.
It is bad enough that Republicans are so invested in the success of Trump that they invite and benefit from flagrant corruption. What’s worse, the American kleptocracy is in many respects bipartisan.
How else can we explain the fact that 16 Senate Democrats and 33 House Democrats voted to weaken the Dodd-Frank Act. It’s not as if voters in swing states are clamoring for more regulatory relief for Wall Street.
In 1989, when the Berlin Wall fell, many commentators were proclaiming that the world would now embrace the model of capitalist democracy. They didn’t reckon with the appeal of Putinism—corrupt crony capitalism linked to political dictatorship, with forms of democracy just for show.
It’s not hard to see why Putin is such a pal and role model for Trump. And here’s the worst part. Pervasive corruption invites pervasive cynicism and even political nihilism on the part of citizens—a sense that they all do it, that the system is hopelessly rigged, and that politics is a sham and a futile exercise.
That’s the essence of Putinism. That’s how Trump gets away with the total contradiction of being a corrupt billionaire who professes to speak for the people. If they all do it, we might as well have a leader who is at least a tough guy rather than a wimp.
We are not quite all the way on the path to Putin hell, but we are well down the road. Our Republic has suffered grave damage.
It might yet be saved if Mueller picks up the pace and manages to tender his presumably explosive report before he is removed; or if there is not too much outright electoral theft in November and Democrats take back the House and begin the impeachment process; or if some Republicans consider the larger stakes and are seized with an outbreak of civic conscience.
There is the further risk of what could happen when a progressive Democrat gets the presidential nomination in 2020, and vows to clean out crony capitalism for real, Roosevelt style. The entire kleptocracy, from the Koch brothers to Wall Street Democrats, will do everything to keep that candidate from destroying their game.
We may yet get our Republic back, but it will take courage, mobilization, leadership, and luck.
Take the case of the latest assertions by Trump’s lawyers in their memo to the Special Counsel Robert Mueller. The claim is naked in its candor: Trump is simply above the law. Anything that he does as president is legal, simply because he does it. This is Trump’s attitude generally, and it is the essence of tyranny.
Autocracy and personal corruption go hand in hand. If there are no democratic checks, the autocrat can be as corrupt as he likes. Trump’s signature in the run-up to the 2016 election, and in office, has been trading favors with Vladimir Putin—not favors that reset our diplomatic relationship with Russia and cooled tensions, but personal favors that benefited Trump financially. As an autocrat, he believes that he can avoid being held to account, and he may be right.
Trump is now repeating with China what he did with Russia: trading away national security goals for personal profit.
There is no other explanation for his overruling of the entire national security establishment in Trump’s defense of the Chinese telecom company ZTE, which was caught red-handed violating the embargo against North Korea and which represents a real espionage threat. But the Chinese simply bribed Trump with a huge loan to a Trump-sponsored project before the fact of Trump’s policy reversal, and then added a thank you by giving special lucrative trademark approval to Ivanka Trump afterwards.
Selling out your country for personal gain is an impeachable offense hidden in plain view. But Trump’s personal corruption as a dictatorial president is enabled by Republicans, who are willing to look the other way most of the time because his corruption serves their corruption.
The deeper disease is the slide of American capitalism into kleptocracy—in which very wealthy people make an alliance with the dictator, who helps them rig the rules to enable themselves to become even richer, in violation of anything like the supposed efficiency of markets that Republicans keep invoking. Crony capitalism works best when it enjoys an alliance with corrupt political leaders.
Does any serious person think that the gutting of the 2010 Dodd-Frank Act will be good for the economy? It’s a naked power grab that will create more risk for the financial system, and more immense wealth for the biggest banks who can in turn reward politicians.
It is bad enough that Republicans are so invested in the success of Trump that they invite and benefit from flagrant corruption. What’s worse, the American kleptocracy is in many respects bipartisan.
How else can we explain the fact that 16 Senate Democrats and 33 House Democrats voted to weaken the Dodd-Frank Act. It’s not as if voters in swing states are clamoring for more regulatory relief for Wall Street.
In 1989, when the Berlin Wall fell, many commentators were proclaiming that the world would now embrace the model of capitalist democracy. They didn’t reckon with the appeal of Putinism—corrupt crony capitalism linked to political dictatorship, with forms of democracy just for show.
It’s not hard to see why Putin is such a pal and role model for Trump. And here’s the worst part. Pervasive corruption invites pervasive cynicism and even political nihilism on the part of citizens—a sense that they all do it, that the system is hopelessly rigged, and that politics is a sham and a futile exercise.
That’s the essence of Putinism. That’s how Trump gets away with the total contradiction of being a corrupt billionaire who professes to speak for the people. If they all do it, we might as well have a leader who is at least a tough guy rather than a wimp.
We are not quite all the way on the path to Putin hell, but we are well down the road. Our Republic has suffered grave damage.
It might yet be saved if Mueller picks up the pace and manages to tender his presumably explosive report before he is removed; or if there is not too much outright electoral theft in November and Democrats take back the House and begin the impeachment process; or if some Republicans consider the larger stakes and are seized with an outbreak of civic conscience.
There is the further risk of what could happen when a progressive Democrat gets the presidential nomination in 2020, and vows to clean out crony capitalism for real, Roosevelt style. The entire kleptocracy, from the Koch brothers to Wall Street Democrats, will do everything to keep that candidate from destroying their game.
We may yet get our Republic back, but it will take courage, mobilization, leadership, and luck.
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'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.
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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.
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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.”[...]