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december 7, 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
*General Motors is proof to the world that slashing wages isn't the ticket to profitability
(excerpt below)
*GM bought back $10 billion in stock since 2015, double what job cuts will save
(ARTICLE BELOW)
*Restore Higher Tax Rates for Corporations That Can’t Contain CEO Pay
(ARTICLE BELOW)
*Give 30 years of your life to a company, no severance; drive a company into the ground, get millions
(EXCERPT BELOW)
*‘Stakeholder’ and 6 other economic terms that are often used to trick people out of their money
(ARTICLE BELOW)
*AMAZON HQ2 WILL COST TAXPAYERS AT LEAST $4.6 BILLION, MORE THAN TWICE WHAT THE COMPANY CLAIMED, NEW STUDY SHOWS(ARTICLE BELOW)
*THE NARROWNESS OF MAINSTREAM ECONOMICS IS ABOUT TO UNRAVEL
(ARTICLE BELOW)
*TAX CHEATING? IT’S NOT JUST THE TRUMPS.
(ARTICLE BELOW)
*While No One Was Looking, Trump Unleashed a Boom in the Market for Shady Financial Industry Scammers
(ARTICLE BELOW)
*THE DIALYSIS INDUSTRY IS SPENDING $111 MILLION TO ARGUE THAT REGULATING IT WOULD PUT IT OUT OF BUSINESS
(ARTICLE BELOW)
*The bad behavior of the richest: what I learned from wealth managers
(ARTICLE BELOW)
*Meet the billionaire investor who led Sears into bankruptcy
(ARTICLE BELOW)
*FORD DEMANDS MILLIONS FROM TAXPAYERS TO REHAB ICON OF DETROIT'S BLIGHT
(ARTICLE BELOW)
*The U.S. economy swoons on the lip of the global debt canyon
(ARTICLE BELOW)
*WALL STREET IS SPENDING BIG TO PROTECT ITS ABILITY TO JACK UP RENTS IN CALIFORNIA
(ARTICLE BELOW)
*Forbes 400 2018: A New Number One And A Record-Breaking Year For America's Richest People
(ARTICLE BELOW)
*FCC To Give Telecom Companies $3 Billion-A-Year For 5G Phone Rollout
(ARTICLE BELOW)
*A decade after Lehman Brothers, U.S. is still a Stucknation
(ARTICLE BELOW)
*Amazon Delivers Low-Paying Jobs and Dirty Air to California’s Poorest
(ARTICLE BELOW)
*Conjuring Up the Next Depression by chris hedges
(ARTICLE BELOW)
*Capitalism Is Not the “Market System”
(ARTICLE BELOW)
*The Normalization of Corruption
(ARTICLE BELOW)
*'Corporations Are People' Is Built on an Incredible 19th-Century Lie
(ARTICLE BELOW)
*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
america's greed - based capitalism explained!!!
General Motors is proof to the world that slashing wages isn't the ticket to profitability
German and Japanese auto manufacturers succeed despite sticking to a high-wage model.
By Marshall Auerback / Independent Media Institute - alternet
December 4, 2018, 6:54 AM GMT
...Upon closer inspection, however, the layoffs can’t simply be dismissed as an inevitable byproduct of globalization, or the impairment of free trade. There is something else going on here, a consideration that goes to the heart of GM’s flawed business model. It is tied to financialization, notably the CEO stock market-based compensation, which induces decisions that might elevate the share price in the short term, but often to the detriment of the company’s long-term success (like GE).
Along with the financialization of GM, the decision to offshore manufacturing in relatively low-wage locations hasn’t helped much. Outsourcing manufacturing in this way has, paradoxically, exacerbated GM’s problems. The sedan market (where GM is experiencing a large proportion of its competitive difficulties these days) typifies this conundrum. The lower and middle ends are dominated by Asia, which operate in a market segment where GM can never get its labor costs low enough to compete against them; the high end is dominated by Audi, Mercedes and BMW, German manufacturers that have devoted considerable capital investment so as to shore up the top-of-the-line models. Here, GM is unable to match the German brands, having chosen the soft option of offshoring its labor, avoiding extensive investment that would have otherwise allowed them to upgrade their production.
As Seymour Melman has noted in his work Dynamic Factors in Industrial Productivity, the unremitting focus on low-cost labor, which has been a key component of business models adopted by American corporations such as GM, creates disincentives toward capital investment decisions that would otherwise drive GM’s products further up the technology curve toward higher-margin products (which in turn yield higher profits and are less prone to competitive pressures from low-end car manufacturers, thereby alleviating the need to outsource manufacturing in the first place). It is quite likely that the historic paranoia about labor organizing in the U.S. is the underlying driver for this monomania.
By contrast, the stress on high-quality domestic engineering capability is something that Germany extends to other forms of high-tech manufacturing goods and services. Economists Jesus Felipe and Utsav Kumar have conducted a study illustrating that countries such as Germany have used capital investment to move up the technology curve to all sorts of higher-end products. Hence, it has a market share of 18 percent in the total world exports of the top-100 most complex products, vs. France 3.6 percent, Italy 3.1 percent, and Spain 0.9 percent.
Germany’s manufacturing success, therefore, is not a function of lower wages. Germany’s manufacturing unit labor costs have declined in a relative sense (especially relative to its Eurozone competitors) over the past decade, but in absolute terms, Germany’s manufacturers, including the auto producers, did not resort to a strategy of nominal wage squeezes or extensive offshoring to cheap labor locales such as China. As the economist Servaas Storm has argued: “It was German engineering ingenuity, not nominal wage restraint or the Hartz ‘reforms,’ which reduced its unit labor costs.” Engineering ingenuity largely came about through well-targeted capital investment and enabled German labor productivity to increase some 8 percent relative to its European and American counterparts.
As a result, Germany has become stronger and more productive in high-value-added, higher-tech manufacturing. Although some manufacturing has been outsourced to adjoining Eastern European countries, its leading companies have preserved an industrial ecosystem, which has enabled Germany to conserve more high-end jobs domestically in aggregate.
On the flip side, American manufacturers have generally taken the soft option of outsourcing and “demodularizing” production. As a result, they degraded industrial quality, increased development lead time, and increased unit costs in the process (Boeing’s 787 “Dreamliner” being a spectacular case in point). At this point, the U.S. doesn’t have what you could call a dynamic manufacturing economy. This has led to a perverse situation described last year by business journalist Jim Harger:
“Industry experts say that cadre of talented tool and die makers is growing in short supply in Michigan just as the demand is increasing.
“‘The average tool and die maker is 56 years old,’ says Baron, president and CEO of the Center for Automotive Research (CAR).
“‘We have not been back-filling. We are running out of talent as the cadence for cars is increasing and the launch rate is increasing.’
“About 75 percent of the tool and die makers in the workforce today are expected to retire in the next five to seven years. Meanwhile, it can take up to 10 years to train a master tool and die maker.”
So Detroit was left with production bottlenecks, because of the shortage of tool and die makers, which represented an important missing gap in production.
Of course, if management’s main incentive is to manage the company’s stock price, rather than the underlying business, it tends to do things like offshoring, which helps to juice the short-term quarterly profits. The share price generally follows suit. The long-term cost (which is usually seen well after the stock options have been cashed and the executive compensation has been paid out) is a production deficiency in the future, which can’t be easily replaced, as Professors Gary P. Pisano and Willy C. Shih explained in Harvard Business Review:
“As manufacturing plants closed or scaled back, many people in those occupations moved on to other things or retired. Seeing fewer job prospects down the road, young people opted for other careers. And many community and vocational schools, starved of students, scaled back their technical programs.”
As if by clockwork, GM’s share price initially greeted the news of the plant shutdowns with a 5 percent upward spike (that is, until adverse comments/threats from President Donald Trump, which muted the rise). The initial market reaction is exactly the sort of thing that further incentivizes stock-laden management to continue to formulate strategy with a view toward goosing a share price, rather than focusing energies on the underlying business operations themselves.
Following a classic pattern we have seen since the 1980s, GM’s CEO, Mary Barra, is the highest-paid auto CEO in the world, via a combination of salary and stock awards. In general, highly paid American manufacturing CEOS have been compensated for their willingness to hollow out compensation to their labor force. For the last two years, Barra has earned over $21m annually. Clearly, she has neither suffered the consequences of her company’s defective ignition switches, nor her company’s declining market share in the sedan market (the ostensible rationale for the layoffs).
The GM layoffs should not be blithely dismissed as another inevitable casualty of globalization. Nor are they a parable illustrating the dangers of increased protectionism (even though that is the narrative that GM wants you to believe). In fact, it is part of a much broader story, particularly in the U.S., where workers continue to deal with the consequences of labor casualization (i.e., flexible “alternative work arrangements”), the outsourcing of manufacturing to other countries, and the ultimate blowback to these increasingly financialized corporations, such as GM, as they continue to embrace measures that degrade their workforce, diminishing America’s viability as a source of highly skilled, good-paying jobs as a consequence.
There are other alternatives, as Germany proves. We occasionally get glimpses of the scale of this homegrown deterioration when a big layoff announcement is made. But seldom do we truly examine the underlying causes, the consequences of which continue to be masked by a hitherto ebullient stock market, which has become a wealth recycling machine for corporate CEOs, even as it provides nothing more than the aura of a Potemkin-like economic prosperity for the rest of us.
Along with the financialization of GM, the decision to offshore manufacturing in relatively low-wage locations hasn’t helped much. Outsourcing manufacturing in this way has, paradoxically, exacerbated GM’s problems. The sedan market (where GM is experiencing a large proportion of its competitive difficulties these days) typifies this conundrum. The lower and middle ends are dominated by Asia, which operate in a market segment where GM can never get its labor costs low enough to compete against them; the high end is dominated by Audi, Mercedes and BMW, German manufacturers that have devoted considerable capital investment so as to shore up the top-of-the-line models. Here, GM is unable to match the German brands, having chosen the soft option of offshoring its labor, avoiding extensive investment that would have otherwise allowed them to upgrade their production.
As Seymour Melman has noted in his work Dynamic Factors in Industrial Productivity, the unremitting focus on low-cost labor, which has been a key component of business models adopted by American corporations such as GM, creates disincentives toward capital investment decisions that would otherwise drive GM’s products further up the technology curve toward higher-margin products (which in turn yield higher profits and are less prone to competitive pressures from low-end car manufacturers, thereby alleviating the need to outsource manufacturing in the first place). It is quite likely that the historic paranoia about labor organizing in the U.S. is the underlying driver for this monomania.
By contrast, the stress on high-quality domestic engineering capability is something that Germany extends to other forms of high-tech manufacturing goods and services. Economists Jesus Felipe and Utsav Kumar have conducted a study illustrating that countries such as Germany have used capital investment to move up the technology curve to all sorts of higher-end products. Hence, it has a market share of 18 percent in the total world exports of the top-100 most complex products, vs. France 3.6 percent, Italy 3.1 percent, and Spain 0.9 percent.
Germany’s manufacturing success, therefore, is not a function of lower wages. Germany’s manufacturing unit labor costs have declined in a relative sense (especially relative to its Eurozone competitors) over the past decade, but in absolute terms, Germany’s manufacturers, including the auto producers, did not resort to a strategy of nominal wage squeezes or extensive offshoring to cheap labor locales such as China. As the economist Servaas Storm has argued: “It was German engineering ingenuity, not nominal wage restraint or the Hartz ‘reforms,’ which reduced its unit labor costs.” Engineering ingenuity largely came about through well-targeted capital investment and enabled German labor productivity to increase some 8 percent relative to its European and American counterparts.
As a result, Germany has become stronger and more productive in high-value-added, higher-tech manufacturing. Although some manufacturing has been outsourced to adjoining Eastern European countries, its leading companies have preserved an industrial ecosystem, which has enabled Germany to conserve more high-end jobs domestically in aggregate.
On the flip side, American manufacturers have generally taken the soft option of outsourcing and “demodularizing” production. As a result, they degraded industrial quality, increased development lead time, and increased unit costs in the process (Boeing’s 787 “Dreamliner” being a spectacular case in point). At this point, the U.S. doesn’t have what you could call a dynamic manufacturing economy. This has led to a perverse situation described last year by business journalist Jim Harger:
“Industry experts say that cadre of talented tool and die makers is growing in short supply in Michigan just as the demand is increasing.
“‘The average tool and die maker is 56 years old,’ says Baron, president and CEO of the Center for Automotive Research (CAR).
“‘We have not been back-filling. We are running out of talent as the cadence for cars is increasing and the launch rate is increasing.’
“About 75 percent of the tool and die makers in the workforce today are expected to retire in the next five to seven years. Meanwhile, it can take up to 10 years to train a master tool and die maker.”
So Detroit was left with production bottlenecks, because of the shortage of tool and die makers, which represented an important missing gap in production.
Of course, if management’s main incentive is to manage the company’s stock price, rather than the underlying business, it tends to do things like offshoring, which helps to juice the short-term quarterly profits. The share price generally follows suit. The long-term cost (which is usually seen well after the stock options have been cashed and the executive compensation has been paid out) is a production deficiency in the future, which can’t be easily replaced, as Professors Gary P. Pisano and Willy C. Shih explained in Harvard Business Review:
“As manufacturing plants closed or scaled back, many people in those occupations moved on to other things or retired. Seeing fewer job prospects down the road, young people opted for other careers. And many community and vocational schools, starved of students, scaled back their technical programs.”
As if by clockwork, GM’s share price initially greeted the news of the plant shutdowns with a 5 percent upward spike (that is, until adverse comments/threats from President Donald Trump, which muted the rise). The initial market reaction is exactly the sort of thing that further incentivizes stock-laden management to continue to formulate strategy with a view toward goosing a share price, rather than focusing energies on the underlying business operations themselves.
Following a classic pattern we have seen since the 1980s, GM’s CEO, Mary Barra, is the highest-paid auto CEO in the world, via a combination of salary and stock awards. In general, highly paid American manufacturing CEOS have been compensated for their willingness to hollow out compensation to their labor force. For the last two years, Barra has earned over $21m annually. Clearly, she has neither suffered the consequences of her company’s defective ignition switches, nor her company’s declining market share in the sedan market (the ostensible rationale for the layoffs).
The GM layoffs should not be blithely dismissed as another inevitable casualty of globalization. Nor are they a parable illustrating the dangers of increased protectionism (even though that is the narrative that GM wants you to believe). In fact, it is part of a much broader story, particularly in the U.S., where workers continue to deal with the consequences of labor casualization (i.e., flexible “alternative work arrangements”), the outsourcing of manufacturing to other countries, and the ultimate blowback to these increasingly financialized corporations, such as GM, as they continue to embrace measures that degrade their workforce, diminishing America’s viability as a source of highly skilled, good-paying jobs as a consequence.
There are other alternatives, as Germany proves. We occasionally get glimpses of the scale of this homegrown deterioration when a big layoff announcement is made. But seldom do we truly examine the underlying causes, the consequences of which continue to be masked by a hitherto ebullient stock market, which has become a wealth recycling machine for corporate CEOs, even as it provides nothing more than the aura of a Potemkin-like economic prosperity for the rest of us.
GM BOUGHT BACK $10 BILLION IN STOCK SINCE 2015, DOUBLE WHAT JOB CUTS WILL SAVE
By IRINA IVANOVA MONEYWATCH - cbs news
November 27, 2018, 6:25 PM
When General Motors announced it was cutting up to 14,000 jobs and idling five automotive plants, it justified the massive cuts by citing long-term savings. The cuts would free up $6 billion in cash, for a net savings of $4.5 billion in cash by 2020.
The move will "make General Motors more agile, resilient and profitable" while the economy's still revving, CEO Mary Barra told investors Monday. Wall Street seemed to believe her, with GM's stock rising nearly 5 percent and one analyst on the call congratulating her "on getting in front of the curve here."
But GM hasn't exactly been tightfisted in recent years. The company has spent $10.6 billion since 2015 buying back its own shares, according to filings with the Securities and Exchange Commission. Stock buybacks do nothing for a company's productive capacity. But because buybacks reduce the number of shares on the market and thus make a stock more valuable, they can be popular with many investors as well as senior executives who are paid largely in stock.
GM is far from the only company to spend money goosing its stock price. This year alone, corporations have announced some $955.6 billion in buybacks, according to TrimTabs Investment Research, and the figure for the whole year could exceed $1 trillion.
But GM started its stock repurchasing program back in 2015, less than six years after a bankruptcy process that cost U.S. taxpayers $11 billion. (The United Auto Workers and a number of politicians have pointed to the bailout in a vow to fightGM's planned cuts, though it's unclear politicians can do anything to change them.)
The company announced $5 billion of buybacks in March 2015, then added another $4 billion later that year. In 2017, it re-upped and announced a further $5 billion in buybacks, $1.6 billion of which have so far taken place.
GM's stock price dipped 2 percent over that time period.
"[T]hat money could have been used in different ways, including investment in older plants. But would that be a good way to use the earnings? Mary Barra thought not," said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. "She decided that the money should be taken out of the company and returned to shareholders. It's really quite a statement about where she thinks the traditional auto sector in the U.S. is headed."
Where it's headed seems to be an SUV-only road, as GM will stop producing sedans after next year. The company's inability to create a profitable small car that can compete with imports represents another missed opportunity, according to William Lazonick, professor of economics at the University of Massachusetts Lowell.
"If it was simply that 'There's global competition and we can't make cars in the U.S.,' okay." Lazonick said. "But given the extent to which money's been pouring out on things that are useless, including supporting the stock price, I don't think you can make that argument."
He cited the 2015 buybacks as "particularly egregious" because they happened when the economy was weaker and GM was returning to steady profitability. "They could have put that into the people who build their cars," he said.
A company spokesperson did not address the buyback question, but said in a statement to CBS MoneyWatch that GM was "building on the comprehensive strategy laid out in 2015" and that it would "appropriately reinvest in the business, maintain our strong investment grade balance sheet, and return all available free cash flow to our shareholders."
Where else could GM have gotten $4.5 billion? It could have dipped into $6.5 billion in overseas profits, suggested the Institute for Taxation and Economic Policy, a left-leaning research group.
Although the GOP tax law last year made such repatriation easier, Fortune 500 corporations have overwhelmingly opted since its passage to buy back their stock instead of repatriating their cash, according to public data. "This trend flies in the face of the Trump administration's promise that the corporate tax provisions — especially a tax holiday for profits stashed offshore, of which GM appears to have had as much as $6.5 billion — would spur a flood of new domestic investment," ITEP said.
The move will "make General Motors more agile, resilient and profitable" while the economy's still revving, CEO Mary Barra told investors Monday. Wall Street seemed to believe her, with GM's stock rising nearly 5 percent and one analyst on the call congratulating her "on getting in front of the curve here."
But GM hasn't exactly been tightfisted in recent years. The company has spent $10.6 billion since 2015 buying back its own shares, according to filings with the Securities and Exchange Commission. Stock buybacks do nothing for a company's productive capacity. But because buybacks reduce the number of shares on the market and thus make a stock more valuable, they can be popular with many investors as well as senior executives who are paid largely in stock.
GM is far from the only company to spend money goosing its stock price. This year alone, corporations have announced some $955.6 billion in buybacks, according to TrimTabs Investment Research, and the figure for the whole year could exceed $1 trillion.
But GM started its stock repurchasing program back in 2015, less than six years after a bankruptcy process that cost U.S. taxpayers $11 billion. (The United Auto Workers and a number of politicians have pointed to the bailout in a vow to fightGM's planned cuts, though it's unclear politicians can do anything to change them.)
The company announced $5 billion of buybacks in March 2015, then added another $4 billion later that year. In 2017, it re-upped and announced a further $5 billion in buybacks, $1.6 billion of which have so far taken place.
GM's stock price dipped 2 percent over that time period.
"[T]hat money could have been used in different ways, including investment in older plants. But would that be a good way to use the earnings? Mary Barra thought not," said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. "She decided that the money should be taken out of the company and returned to shareholders. It's really quite a statement about where she thinks the traditional auto sector in the U.S. is headed."
Where it's headed seems to be an SUV-only road, as GM will stop producing sedans after next year. The company's inability to create a profitable small car that can compete with imports represents another missed opportunity, according to William Lazonick, professor of economics at the University of Massachusetts Lowell.
"If it was simply that 'There's global competition and we can't make cars in the U.S.,' okay." Lazonick said. "But given the extent to which money's been pouring out on things that are useless, including supporting the stock price, I don't think you can make that argument."
He cited the 2015 buybacks as "particularly egregious" because they happened when the economy was weaker and GM was returning to steady profitability. "They could have put that into the people who build their cars," he said.
A company spokesperson did not address the buyback question, but said in a statement to CBS MoneyWatch that GM was "building on the comprehensive strategy laid out in 2015" and that it would "appropriately reinvest in the business, maintain our strong investment grade balance sheet, and return all available free cash flow to our shareholders."
Where else could GM have gotten $4.5 billion? It could have dipped into $6.5 billion in overseas profits, suggested the Institute for Taxation and Economic Policy, a left-leaning research group.
Although the GOP tax law last year made such repatriation easier, Fortune 500 corporations have overwhelmingly opted since its passage to buy back their stock instead of repatriating their cash, according to public data. "This trend flies in the face of the Trump administration's promise that the corporate tax provisions — especially a tax holiday for profits stashed offshore, of which GM appears to have had as much as $6.5 billion — would spur a flood of new domestic investment," ITEP said.
Restore Higher Tax Rates for Corporations That Can’t Contain CEO Pay
BY
Dean Baker, Truthout
PUBLISHED
November 26, 2018
There is an argument that carries considerable currency on the right about the need to force the poor to do things that are actually good for them. This comes up frequently in the context of work requirements for people receiving benefits like Medicaid or food stamps (the Supplemental Nutrition Assistance Program).
The claim is that people will be made better off by working, since that will give them a foot into the labor market. They can eventually move up and earn enough so they no longer need these benefits. A major flaw in this argument is that the vast majority of non-disabled people who receive these benefits are already working.
While the idea of forcing people to help themselves doesn’t make much sense for these anti-poverty programs, they could make considerable sense for the governance of major US corporations. The problem is that shareholders seem to be unable to avoid paying out tens of millions of dollars to CEOs, even when these CEOs are not especially competent.
The problem is the structure of corporate governance. The people who most immediately determine the CEO’s pay are the corporation’s board of directors. These directors have incredibly cushy jobs. They typically get paid several hundred thousand dollars a year for perhaps 150 hours of work.
Members of corporate boards largely owe their jobs to the CEOs and top management. They almost never get booted out by shareholders; the reelection rate for board members running with board support is over 99 percent.
In this context, board members have no incentive to ask questions like, “Could we get someone as good as our CEO for half the pay?” There is basically no downward pressure on CEO pay and every reason to boost pay. After all, if you were sitting on some huge pot of other people’s money, wouldn’t you want to pay your friends well?
Of course, the CEO pay comes at the expense of returns to shareholders, and these have not been very good in recent years in spite of the best efforts of Trump and the Republicans to help them with tax cuts and pro-business regulation. In the last two decades, stock returns have averaged less than 4.7 percent annually above the rate of inflation. By contrast, in the long Golden Age from 1947 to 1973, real stock returns averaged 8.2 percent.
With the bulk of stock being held by the richest people in the country, there is no reason to shed tears for stockholders, but the fact is they are being ripped off by CEOs and other top management. Given the choice, we should prefer the money ends up in the hands of shareholders rather than CEOs. After all, people below the top 1 percent do own stock in their 401(k)s, as do public and private pension funds. By contrast, every dollar in additional CEO pay is going to someone in the top 0.001 percent of the income distribution.
More important than the money going to the CEOs is the impact that their outlandish pay has on pay structures in the economy more generally. When the CEO is pocketing $20 to $30 million a year, other top executives are likely earning close to $10 million and even the third-tier managers might be topping $1 million.
The pay structure in corporate America also affects the pay scales elsewhere. It is common for the top executives at major universities and charities to be getting well over $1 million a year.
Think of how different the world would look if we went back to the 1960s and 1970s when CEOs earned 20 to 30 times as much as an ordinary worker. If a successful CEO of a large company was pocketing $2-3 million a year, instead of $20 to $30 million, the ripple effect on the pay of others near the top would leave much more money for everyone else. This gives us very good reason to worry about excessive CEO pay.
If the structure of corporate governance makes it too difficult for shareholders to collectively act to limit CEO pay, threatening them with a return to the pre-Trump 35 percent tax rate might give them enough incentive to get the job done. It has always been in the interests of shareholders to pay their CEOs as little as possible, just as they want to pay as little as possible to their other employees.
If shareholders pay a CEO $20 million more than needed to get someone to run the company, it has the same impact on the bottom line as paying $2,000 extra to 10,000 workers. No company deliberately overpays their frontline workers.
So, we can help corporate America get a grip on CEO pay. They can limit the CEO’s pay to 50 times that of a typical worker or they go back to paying the pre-Trump 35 percent tax rate. If they respond to the incentive and rein in CEO pay, then we start to get the country’s pay structure back in line. If this incentive can’t motivate shareholders to do what is in their own interest, then we get lots of tax revenue to finance a big infrastructure package or other good things.
The claim is that people will be made better off by working, since that will give them a foot into the labor market. They can eventually move up and earn enough so they no longer need these benefits. A major flaw in this argument is that the vast majority of non-disabled people who receive these benefits are already working.
While the idea of forcing people to help themselves doesn’t make much sense for these anti-poverty programs, they could make considerable sense for the governance of major US corporations. The problem is that shareholders seem to be unable to avoid paying out tens of millions of dollars to CEOs, even when these CEOs are not especially competent.
The problem is the structure of corporate governance. The people who most immediately determine the CEO’s pay are the corporation’s board of directors. These directors have incredibly cushy jobs. They typically get paid several hundred thousand dollars a year for perhaps 150 hours of work.
Members of corporate boards largely owe their jobs to the CEOs and top management. They almost never get booted out by shareholders; the reelection rate for board members running with board support is over 99 percent.
In this context, board members have no incentive to ask questions like, “Could we get someone as good as our CEO for half the pay?” There is basically no downward pressure on CEO pay and every reason to boost pay. After all, if you were sitting on some huge pot of other people’s money, wouldn’t you want to pay your friends well?
Of course, the CEO pay comes at the expense of returns to shareholders, and these have not been very good in recent years in spite of the best efforts of Trump and the Republicans to help them with tax cuts and pro-business regulation. In the last two decades, stock returns have averaged less than 4.7 percent annually above the rate of inflation. By contrast, in the long Golden Age from 1947 to 1973, real stock returns averaged 8.2 percent.
With the bulk of stock being held by the richest people in the country, there is no reason to shed tears for stockholders, but the fact is they are being ripped off by CEOs and other top management. Given the choice, we should prefer the money ends up in the hands of shareholders rather than CEOs. After all, people below the top 1 percent do own stock in their 401(k)s, as do public and private pension funds. By contrast, every dollar in additional CEO pay is going to someone in the top 0.001 percent of the income distribution.
More important than the money going to the CEOs is the impact that their outlandish pay has on pay structures in the economy more generally. When the CEO is pocketing $20 to $30 million a year, other top executives are likely earning close to $10 million and even the third-tier managers might be topping $1 million.
The pay structure in corporate America also affects the pay scales elsewhere. It is common for the top executives at major universities and charities to be getting well over $1 million a year.
Think of how different the world would look if we went back to the 1960s and 1970s when CEOs earned 20 to 30 times as much as an ordinary worker. If a successful CEO of a large company was pocketing $2-3 million a year, instead of $20 to $30 million, the ripple effect on the pay of others near the top would leave much more money for everyone else. This gives us very good reason to worry about excessive CEO pay.
If the structure of corporate governance makes it too difficult for shareholders to collectively act to limit CEO pay, threatening them with a return to the pre-Trump 35 percent tax rate might give them enough incentive to get the job done. It has always been in the interests of shareholders to pay their CEOs as little as possible, just as they want to pay as little as possible to their other employees.
If shareholders pay a CEO $20 million more than needed to get someone to run the company, it has the same impact on the bottom line as paying $2,000 extra to 10,000 workers. No company deliberately overpays their frontline workers.
So, we can help corporate America get a grip on CEO pay. They can limit the CEO’s pay to 50 times that of a typical worker or they go back to paying the pre-Trump 35 percent tax rate. If they respond to the incentive and rein in CEO pay, then we start to get the country’s pay structure back in line. If this incentive can’t motivate shareholders to do what is in their own interest, then we get lots of tax revenue to finance a big infrastructure package or other good things.
Give 30 years of your life to a company, no severance; drive a company into the ground, get millions
Mark E Andersen Community - daily kos
Sunday November 25, 2018 · 10:30 AM PST
...Sears, currently going through bankruptcy, is one of those large corporations. Gross mismanagement has driven what was once the largest American retailer, the anchor of malls across America, out of business. Gone are stalwart brands like Craftsman, sold off to Stanley Black & Decker; Lands’ End, being split off into a stand-alone company; and Kenmore, being either sold off or scrapped in a last-ditch effort to raise capital.
One would think heads would roll at the executive level for this level of incompetence. In a just world, that would be the case. But in America, it seems as if there is no justice.
Sears filed two different types of bonus plans in bankruptcy court Thursday. The first is for the top 18 "key" executives, who would collectively get as much as $2.1 million per quarter up to a maximum of $8.5 million. The bonuses would only be paid in full if Sears reaches its cash-flow targets. Sears Holdings, which includes both Sears and Kmart, has been burning through cash at a rate of about $125 million a month.
A second retention bonus plan was designed to encourage 322 other unnamed executives to stay put during Sears' reorganization. They would collectively get $16.9 million over the course of a year, which works out to an average of about $52,000 annually per executive. No executive could receive more the $150,000 in bonuses for staying with the company during the bankruptcy process.
The men and women who have worked at Sears for years are at the end of the line, begging for crumbs, and they are unlikely to get even that.
The company wants to retain as many executives as it can, but Sears is laying off employees who staffed hundreds of stores it is closing. Many hourly workers claim they will not be paid severance.
Shelia Brewer, who worked for 17 years as a full-time hourly employee at a Kmart in Rockford Illinois, said the company told her she'd get eight weeks of severance. Instead, she received a letter saying that severance payments were being halted because of the bankruptcy, and she would get only the four weeks of pay she had already received.
"It hit me hard. I was already struggling as it was," she said. She said the bonus plan makes her angry.
"They say we can't get our severance because there's no money, but they're getting bonuses? It's like a slap in the face," she said.
Sears employees who were able to retire will at least have their pensions covered by the federal government.
If Sears, once the nation’s largest retailer, declares bankruptcy, it could cause one of the biggest pension defaults in U.S. history, but the government would step in to keep checks coming to more than 90,000 retirees.
The company’s long-term pension obligations, which have been underfunded by more than $1 billion for years, would be covered by the federal Pension Benefit Guaranty Corp.
Corporate welfare at its fines: Incompetent executives get millions in bonuses, and the taxpayers have to pick up the tab. Of course, this does not even take into account the Sears employees who put in multiple years at the retailer and won’t get a dime when the inevitable happens and their store is closed. Sears will survive—and those who spent their lives keeping the lights on will, too—but the latter will endure unnecessary suffering.
One would think heads would roll at the executive level for this level of incompetence. In a just world, that would be the case. But in America, it seems as if there is no justice.
Sears filed two different types of bonus plans in bankruptcy court Thursday. The first is for the top 18 "key" executives, who would collectively get as much as $2.1 million per quarter up to a maximum of $8.5 million. The bonuses would only be paid in full if Sears reaches its cash-flow targets. Sears Holdings, which includes both Sears and Kmart, has been burning through cash at a rate of about $125 million a month.
A second retention bonus plan was designed to encourage 322 other unnamed executives to stay put during Sears' reorganization. They would collectively get $16.9 million over the course of a year, which works out to an average of about $52,000 annually per executive. No executive could receive more the $150,000 in bonuses for staying with the company during the bankruptcy process.
The men and women who have worked at Sears for years are at the end of the line, begging for crumbs, and they are unlikely to get even that.
The company wants to retain as many executives as it can, but Sears is laying off employees who staffed hundreds of stores it is closing. Many hourly workers claim they will not be paid severance.
Shelia Brewer, who worked for 17 years as a full-time hourly employee at a Kmart in Rockford Illinois, said the company told her she'd get eight weeks of severance. Instead, she received a letter saying that severance payments were being halted because of the bankruptcy, and she would get only the four weeks of pay she had already received.
"It hit me hard. I was already struggling as it was," she said. She said the bonus plan makes her angry.
"They say we can't get our severance because there's no money, but they're getting bonuses? It's like a slap in the face," she said.
Sears employees who were able to retire will at least have their pensions covered by the federal government.
If Sears, once the nation’s largest retailer, declares bankruptcy, it could cause one of the biggest pension defaults in U.S. history, but the government would step in to keep checks coming to more than 90,000 retirees.
The company’s long-term pension obligations, which have been underfunded by more than $1 billion for years, would be covered by the federal Pension Benefit Guaranty Corp.
Corporate welfare at its fines: Incompetent executives get millions in bonuses, and the taxpayers have to pick up the tab. Of course, this does not even take into account the Sears employees who put in multiple years at the retailer and won’t get a dime when the inevitable happens and their store is closed. Sears will survive—and those who spent their lives keeping the lights on will, too—but the latter will endure unnecessary suffering.
‘Stakeholder’ and 6 other economic terms that are often used to trick people out of their money
Valerie Vande Panne, Independent Media Institute - raw story
20 NOV 2018 AT 05:35 ET
There are so many plans these days to “transform” an area via a “public-private partnership” that will “restore” and “fix” the local economy and lead to an economic “recovery” for the “brave” group of “stakeholders” who’ve come together to make it happen. The business leader drumming up support is often a “good friend” of the politicians in charge. To entertain another plan, the people in power warn, will “hurt” the economy.
It’s a story that might as well be contemporary Shakespeare, except it could be written by the auto-correct text on a developer’s iPhone.
No matter the project, the end result is the corporation pays little to no tax, and gives little to nothing to the community — not even the promised jobs. It is guaranteed to extract everything from captured tax dollars to fire and police resources, also paid for with tax dollars. It will likely capture education dollars and even take away employment from locals as small businesses close, and then it leaves the taxpayer with the clean-up bill. Empty, toxic real estate and a growing lower class are left behind.
In other words, these “transformational” projects drive locals into worse-off conditions while lining the pockets of the already wealthy.
It’s a tale as old as capitalism itself, and it’s being told over and over again with different players but using the same popular words.
Here are the economic development words to watch out for, and what they really mean.
1. Public-Private Partnership
Meaning: A massive tax dollar giveaway to a private company at taxpayer expense.
Taxpayers lose money on everything from schools to fire departments. Taxpayers end up footing the bill for the private company’s land, clean-up, and more. Taxpayers receive comparatively nothing in return.
Instead, communities are healthier and more sustainable when they are more economically vibrant and diverse with co-ops, small businesses, and collectives.
2. Restore
Meaning: We’ve destroyed something irreplaceable — a neighborhood, wetlands, a forest — and see a way to make even more money on what’s been destroyed.
This happens over and over again — it’s one of the cycles of capitalism. The truth is once the neighborhood is gone and its inhabitants displaced — once the habitat that took 1,000 years to create is destroyed — it cannot be restored. You cannot restore Detroit’s vibrant African American neighborhood of Black Bottom by putting in a B.B. King supper club any more than you can restore wetlands that took thousands of years to establish and flourish. What you’re doing is making money on destruction—not restoration.
Preservation is more powerful than the destroy-restore cycle.
3. Good Friend
Meaning: A favorite phrase thrown around in the Democratic Party and political circles nationwide; when someone says they are a “good friend,” what they really mean is they are stabbing that person or group in the back.
Be wary whenever someone tells you—especially in politics or development—that someone else important is a “good friend.”
Be honest about who people are, and listen for honesty when someone is trying to sell your community a development.
4. Stakeholders
Meaning: The modern-day equivalent of a dog-and-pony show, “stakeholders” is regularly used as a catch-all phrase by those who want to appear inclusive and cover their own asses.
The chosen “stakeholders” are often those with strong social media followings and the local LGBTQIA/POC community members likely to be the most friendly to the development plan. They are often offered a seat at the table because they are often those who are least likely to rock the boat. Pictures will be taken, Instagram posts made, tweets sent—inclusion looks like it feels so good.
Such stakeholder meetings are often exclusionary of those most marginalized, disenfranchised, and impacted by development plans.
5. Brave
Meaning: This one can be used for a “stakeholder” folding for the developer, or for a developer going into a depressed community.
It’s also used for a long list of virtue signaling. Brave used to be a word reserved for firemen running into burning buildings to save children and pets; self-sacrificing soldiers saving their brothers-in-arms and helpless civilians; non-violent protesters standing strong in the face of weapons, violence, and hate.
Bravery is not a self-righteous action — and definitely not meant for those selling out their community to a developer, or for a developer taking tax dollars to develop a community.
6. Fix
Meaning: Something is broken beyond repair — for example, the vast majority of public school systems. But there is a new way to make money on the broken-beyond-repair things by “fixing” them: For-profit charter schools and intensive testing, done by private corporations with state or local school system contracts paid for with tax dollars — all of which tend to break the system even more.
Developing new and locally tailored solutions to a broken system is possible — but it can mean leaving behind the broken system entirely.
7. Hurt
“We can’t do that; it’ll hurt the economy,” warns almost every politician when faced with an economically sound solution to ecological crises our society and planet are facing.
Meaning:What they mean is, it’ll hurt their own investments, their own power, and their own bottom line.
The fact is, few things hurt the economy and our environment more than the public-private partnerships, their schemes and scams, and development deals that let events like the Flint Water Crisis continue.
When someone says, “We can’t do that; it’ll hurt the economy,” ask yourself whose pocketbook it will really hurt, and chances are it’s not yours — it’s the people in power.
As George Carlin used to say, “America’s leading industry is still the manufacture, distribution, packaging and marketing of bullshit. High-quality bullshit; world-class, designer bullshit, to be sure.” These words of decades ago are still used, and they are still bullshit, just like these seven phrases are today.
It’s a story that might as well be contemporary Shakespeare, except it could be written by the auto-correct text on a developer’s iPhone.
No matter the project, the end result is the corporation pays little to no tax, and gives little to nothing to the community — not even the promised jobs. It is guaranteed to extract everything from captured tax dollars to fire and police resources, also paid for with tax dollars. It will likely capture education dollars and even take away employment from locals as small businesses close, and then it leaves the taxpayer with the clean-up bill. Empty, toxic real estate and a growing lower class are left behind.
In other words, these “transformational” projects drive locals into worse-off conditions while lining the pockets of the already wealthy.
It’s a tale as old as capitalism itself, and it’s being told over and over again with different players but using the same popular words.
Here are the economic development words to watch out for, and what they really mean.
1. Public-Private Partnership
Meaning: A massive tax dollar giveaway to a private company at taxpayer expense.
Taxpayers lose money on everything from schools to fire departments. Taxpayers end up footing the bill for the private company’s land, clean-up, and more. Taxpayers receive comparatively nothing in return.
Instead, communities are healthier and more sustainable when they are more economically vibrant and diverse with co-ops, small businesses, and collectives.
2. Restore
Meaning: We’ve destroyed something irreplaceable — a neighborhood, wetlands, a forest — and see a way to make even more money on what’s been destroyed.
This happens over and over again — it’s one of the cycles of capitalism. The truth is once the neighborhood is gone and its inhabitants displaced — once the habitat that took 1,000 years to create is destroyed — it cannot be restored. You cannot restore Detroit’s vibrant African American neighborhood of Black Bottom by putting in a B.B. King supper club any more than you can restore wetlands that took thousands of years to establish and flourish. What you’re doing is making money on destruction—not restoration.
Preservation is more powerful than the destroy-restore cycle.
3. Good Friend
Meaning: A favorite phrase thrown around in the Democratic Party and political circles nationwide; when someone says they are a “good friend,” what they really mean is they are stabbing that person or group in the back.
Be wary whenever someone tells you—especially in politics or development—that someone else important is a “good friend.”
Be honest about who people are, and listen for honesty when someone is trying to sell your community a development.
4. Stakeholders
Meaning: The modern-day equivalent of a dog-and-pony show, “stakeholders” is regularly used as a catch-all phrase by those who want to appear inclusive and cover their own asses.
The chosen “stakeholders” are often those with strong social media followings and the local LGBTQIA/POC community members likely to be the most friendly to the development plan. They are often offered a seat at the table because they are often those who are least likely to rock the boat. Pictures will be taken, Instagram posts made, tweets sent—inclusion looks like it feels so good.
Such stakeholder meetings are often exclusionary of those most marginalized, disenfranchised, and impacted by development plans.
5. Brave
Meaning: This one can be used for a “stakeholder” folding for the developer, or for a developer going into a depressed community.
It’s also used for a long list of virtue signaling. Brave used to be a word reserved for firemen running into burning buildings to save children and pets; self-sacrificing soldiers saving their brothers-in-arms and helpless civilians; non-violent protesters standing strong in the face of weapons, violence, and hate.
Bravery is not a self-righteous action — and definitely not meant for those selling out their community to a developer, or for a developer taking tax dollars to develop a community.
6. Fix
Meaning: Something is broken beyond repair — for example, the vast majority of public school systems. But there is a new way to make money on the broken-beyond-repair things by “fixing” them: For-profit charter schools and intensive testing, done by private corporations with state or local school system contracts paid for with tax dollars — all of which tend to break the system even more.
Developing new and locally tailored solutions to a broken system is possible — but it can mean leaving behind the broken system entirely.
7. Hurt
“We can’t do that; it’ll hurt the economy,” warns almost every politician when faced with an economically sound solution to ecological crises our society and planet are facing.
Meaning:What they mean is, it’ll hurt their own investments, their own power, and their own bottom line.
The fact is, few things hurt the economy and our environment more than the public-private partnerships, their schemes and scams, and development deals that let events like the Flint Water Crisis continue.
When someone says, “We can’t do that; it’ll hurt the economy,” ask yourself whose pocketbook it will really hurt, and chances are it’s not yours — it’s the people in power.
As George Carlin used to say, “America’s leading industry is still the manufacture, distribution, packaging and marketing of bullshit. High-quality bullshit; world-class, designer bullshit, to be sure.” These words of decades ago are still used, and they are still bullshit, just like these seven phrases are today.
bilking the taxpayers!!!
AMAZON HQ2 WILL COST TAXPAYERS AT LEAST $4.6 BILLION, MORE THAN TWICE WHAT THE COMPANY CLAIMED, NEW STUDY SHOWS
David Dayen, Rachel M. Cohen - the intercept
November 15 2018, 11:36 a.m.
AMAZON’S ANNOUNCEMENT THIS week that it will open its new headquarters in New York City and northern Virginia came with the mind-boggling revelation that the corporate giant will rake in $2.1 billion in local government subsidies. But an analysis by the nation’s leading tracker of corporate subsidies finds that the government handouts will actually amount to at least $4.6 billion.
But even that figure, which accounts for state and local perks, doesn’t take into account a gift that Amazon will also enjoy from the federal government, a testament to the old adage that in Washington, bad ideas never die.
The Amazon location in Long Island City, in the New York City borough of Queens, is situated in a federal opportunity zone, a Jack Kemp-era concept resurrected in the 2017 tax law that, in theory, is supposed to bring money into poverty-stricken areas. The northern Virginia site, in the Arlington neighborhood of Crystal City (which developers and local officials have rebranded as “National Landing”), is not directly in an opportunity zone but is virtually surrounded by other geographic areas that are.
Under the tax overhaul signed by President Donald Trump last year, investors in opportunity zones can defer payments of capital gains taxes until 2026, and if they hold them for seven years, they can exclude 15 percent of the gains from taxation. If investors carry the opportunity zone investment for 10 years, they eliminate taxes on future appreciation entirely. Investment managers have been salivating at the chance to take advantage of opportunity zones. Special funds have been built to cater to people holding unrealized capital gains — such as Amazon employees with large holdings of company stock.
Not only could Amazon benefit from the opportunity zone directly in Long Island City, but Virginia employees with unrealized capital gains will have an escape valve next door to an Amazon campus. “People who happen to be sitting around with long-term capital gains may now have vehicles for hiding them,” said Greg LeRoy of Good Jobs First, a nonprofit that scrutinizes economic development incentive deals between cities and companies, and has analyzed the Amazon deal.
Amazon did not respond to a request for comment on the opportunity zone or the Good Jobs First estimate of the subsidies it could receive.
Supporters claim opportunity zones spur renewal and revitalization in impoverished areas. It’s a decades-old bipartisan fantasy that sits uncomfortably at odds with the demonstrated results. Researchers who have studied opportunity zones find that these tax schemes rarely ever help cities, and often financially cripple them.
“At best, they divert investment from one part of the city from another, resulting in no net gain for the city as a whole,” wrote Timothy Weaver, an urban policy and politics professor at the University of Albany, last year. “At worst, they result in tax-giveaways to firms that would have been operating anyway, thereby generating a net loss to city revenues.”
Still, Republicans and Democrats are loathe to give up on what they continually tell themselves can be a win-win for everyone, if we just try really hard. And now a major beneficiary of this federal largesse happens to be one of the world’s richest companies, led by the world’s richest man.
ACCORDING TO Good Jobs First’s calculations, Amazon will get $4.6 billion in state and local subsidies for its new headquarters — and that’s not counting the opportunity zone benefit.
Amazon’s press release cited two New York state incentives, a $1.2 billion grant over the next decade from the Excelsior Program and a $325 million, 10-year grant from Empire State Development. But Amazon did not quantify proceeds from two other city incentives, the Industrial & Commercial Abatement Program, or ICAP, and the Relocation and Employment Assistance Program, or REAP.
ICAP gives a partial tax abatement for 25 years, and based on the expected $3.6 billion campus in Long Island City, Good Jobs First estimates that value at $386 million. REAP, a per-employee tax credit of $3,000 per year for 12 years, comes out to $897 million if Amazon meets its projection of hiring 25,000 employees.
Those estimates, combined with what Amazon already cited for the Long Island City location, brings the total to $2.808 billion. That results in a cost per job of $112,000, far more than the $48,000 per job Amazon claimed they would get in the Long Island City deal.
LeRoy, of Good Jobs First, noted that ICAP and REAP are available to most businesses relocating into New York, but a single entity’s ability to combine all their benefits distorts the purpose of attracting economic development. “I don’t think the original sponsors ever envisioned individual transactions costing 10 figures,” he said. “There’s a strong argument for capping programs on a per-deal basis.”
LeRoy added that this is not a full accounting of the benefits out of New York. Amazon will benefit from a payment in lieu of taxes, or PILOT, in which a portion of the company’s property taxes will flow directly into enhancements for the project area. Plus, there’s the federal opportunity zone.
That Long Island City is a designated opportunity zone Amazon might exploit is especially mind-boggling given that the fast-gentrifying area has had no trouble attracting new investment, has a 10 percent poverty rate (half that of New York City), and has a median income of $130,000 per year.
While the overwhelming majority of opportunity zones are defined by having high poverty rates, about 200 of the 8,700 Treasury Department-approved census tracts are like Long Island City, economically prosperous but adjacent to poverty. This includes neighborhoods in well-off cities like Los Angeles, San Jose, Seattle, and Portland. Treasury Secretary Steven Mnuchin said last month that he expects the opportunity zones to attract $100 billion in investments.
AMAZON’S ESTIMATE FOR Virginia — $573 million in cash grants — also leaves out a huge benefit for Amazon. “They’re planning a big Virginia Tech campus in Alexandria, adjacent to the site,” LeRoy said. “It’s a public university, the money is coming from taxpayers.” In a press release, Virginia Tech puts the cost of the campus at $1 billion and added that Amazon “credited the Innovation Campus in Alexandria as a key component in its decision to locate in Northern Virginia.”
Good Jobs First added that a redevelopment subsidy known as tax increment financing for on-site infrastructure and green space in the area could also benefit Amazon at the northern Virginia site. There was no cost estimate provided for this, though the Amazon press release mentions $195 million in commonwealth-funded infrastructure projects in the neighborhood, and another $28 million in funding from the city of Arlington.
The total amount of subsidies in northern Virginia, according to Good Jobs First, is at least $1.8 billion, almost as much as Amazon said it would be reaping in government subsidies overall.
Previously, Amazon has reaped $1.6 billion in state and local subsidies for its warehouses and data centers elsewhere across the country. On the same day as the New York and Virginia announcements, Amazon also announced a new “Operations Center of Excellence” in Nashville, Tennessee, a 5,000-worker facility for which the city gave Amazon $102 million in subsidies. Nashville was one of the top 20 finalists for the HQ2 auction, and parts of the city are also opportunity zones.
The cash handouts also do not take into account regulatory leniency and accelerated permitting that characterizes the Amazon projects. “There is a strain of thought that says if you give a company prompt variances, because time is money, companies would value that more than property tax abatement,” said LeRoy. In this case, the cities are offering both!”
The deals do not appear to include guard rails for what is expected to be rapid gentrification in the locations. Condo sellers in Crystal City took note of overnight price hikes of as much as $20,000 the day after the announcement. As gentrification likely pushes out residents in the opportunity zones surrounding the northern Virginia site, Amazon employees who buy real estate could not only find a place to live, but also avoid unrealized capital gains taxes.
Progressive politicians like Rep.-elect Alexandria Ocasio-Cortez, D-N.Y., and conservative commentators have joined forces to question the deal. Community organizations held a rally in New York on Wednesday, urging a re-channeling of the taxpayer subsidies. Following Amazon’s announcement, Ron Kim, a Queens assembly member, introduced new legislation to redirect taxpayer funds designated for corporate subsidies to canceling or buying student debt. Virginia delegate Lee Carter, a democratic socialist, also criticized the deal for its exorbitant tax giveaways and the lack of transparency under which the terms were negotiated, calling it “comic book villain stuff.”
Carter will have the opportunity to weigh in on the deal. According to the contract language, the grant payments to Amazon are subject to appropriations by the Virginia General Assembly, though the governor is obligated to put the payments in the draft budget request.
But even that figure, which accounts for state and local perks, doesn’t take into account a gift that Amazon will also enjoy from the federal government, a testament to the old adage that in Washington, bad ideas never die.
The Amazon location in Long Island City, in the New York City borough of Queens, is situated in a federal opportunity zone, a Jack Kemp-era concept resurrected in the 2017 tax law that, in theory, is supposed to bring money into poverty-stricken areas. The northern Virginia site, in the Arlington neighborhood of Crystal City (which developers and local officials have rebranded as “National Landing”), is not directly in an opportunity zone but is virtually surrounded by other geographic areas that are.
Under the tax overhaul signed by President Donald Trump last year, investors in opportunity zones can defer payments of capital gains taxes until 2026, and if they hold them for seven years, they can exclude 15 percent of the gains from taxation. If investors carry the opportunity zone investment for 10 years, they eliminate taxes on future appreciation entirely. Investment managers have been salivating at the chance to take advantage of opportunity zones. Special funds have been built to cater to people holding unrealized capital gains — such as Amazon employees with large holdings of company stock.
Not only could Amazon benefit from the opportunity zone directly in Long Island City, but Virginia employees with unrealized capital gains will have an escape valve next door to an Amazon campus. “People who happen to be sitting around with long-term capital gains may now have vehicles for hiding them,” said Greg LeRoy of Good Jobs First, a nonprofit that scrutinizes economic development incentive deals between cities and companies, and has analyzed the Amazon deal.
Amazon did not respond to a request for comment on the opportunity zone or the Good Jobs First estimate of the subsidies it could receive.
Supporters claim opportunity zones spur renewal and revitalization in impoverished areas. It’s a decades-old bipartisan fantasy that sits uncomfortably at odds with the demonstrated results. Researchers who have studied opportunity zones find that these tax schemes rarely ever help cities, and often financially cripple them.
“At best, they divert investment from one part of the city from another, resulting in no net gain for the city as a whole,” wrote Timothy Weaver, an urban policy and politics professor at the University of Albany, last year. “At worst, they result in tax-giveaways to firms that would have been operating anyway, thereby generating a net loss to city revenues.”
Still, Republicans and Democrats are loathe to give up on what they continually tell themselves can be a win-win for everyone, if we just try really hard. And now a major beneficiary of this federal largesse happens to be one of the world’s richest companies, led by the world’s richest man.
ACCORDING TO Good Jobs First’s calculations, Amazon will get $4.6 billion in state and local subsidies for its new headquarters — and that’s not counting the opportunity zone benefit.
Amazon’s press release cited two New York state incentives, a $1.2 billion grant over the next decade from the Excelsior Program and a $325 million, 10-year grant from Empire State Development. But Amazon did not quantify proceeds from two other city incentives, the Industrial & Commercial Abatement Program, or ICAP, and the Relocation and Employment Assistance Program, or REAP.
ICAP gives a partial tax abatement for 25 years, and based on the expected $3.6 billion campus in Long Island City, Good Jobs First estimates that value at $386 million. REAP, a per-employee tax credit of $3,000 per year for 12 years, comes out to $897 million if Amazon meets its projection of hiring 25,000 employees.
Those estimates, combined with what Amazon already cited for the Long Island City location, brings the total to $2.808 billion. That results in a cost per job of $112,000, far more than the $48,000 per job Amazon claimed they would get in the Long Island City deal.
LeRoy, of Good Jobs First, noted that ICAP and REAP are available to most businesses relocating into New York, but a single entity’s ability to combine all their benefits distorts the purpose of attracting economic development. “I don’t think the original sponsors ever envisioned individual transactions costing 10 figures,” he said. “There’s a strong argument for capping programs on a per-deal basis.”
LeRoy added that this is not a full accounting of the benefits out of New York. Amazon will benefit from a payment in lieu of taxes, or PILOT, in which a portion of the company’s property taxes will flow directly into enhancements for the project area. Plus, there’s the federal opportunity zone.
That Long Island City is a designated opportunity zone Amazon might exploit is especially mind-boggling given that the fast-gentrifying area has had no trouble attracting new investment, has a 10 percent poverty rate (half that of New York City), and has a median income of $130,000 per year.
While the overwhelming majority of opportunity zones are defined by having high poverty rates, about 200 of the 8,700 Treasury Department-approved census tracts are like Long Island City, economically prosperous but adjacent to poverty. This includes neighborhoods in well-off cities like Los Angeles, San Jose, Seattle, and Portland. Treasury Secretary Steven Mnuchin said last month that he expects the opportunity zones to attract $100 billion in investments.
AMAZON’S ESTIMATE FOR Virginia — $573 million in cash grants — also leaves out a huge benefit for Amazon. “They’re planning a big Virginia Tech campus in Alexandria, adjacent to the site,” LeRoy said. “It’s a public university, the money is coming from taxpayers.” In a press release, Virginia Tech puts the cost of the campus at $1 billion and added that Amazon “credited the Innovation Campus in Alexandria as a key component in its decision to locate in Northern Virginia.”
Good Jobs First added that a redevelopment subsidy known as tax increment financing for on-site infrastructure and green space in the area could also benefit Amazon at the northern Virginia site. There was no cost estimate provided for this, though the Amazon press release mentions $195 million in commonwealth-funded infrastructure projects in the neighborhood, and another $28 million in funding from the city of Arlington.
The total amount of subsidies in northern Virginia, according to Good Jobs First, is at least $1.8 billion, almost as much as Amazon said it would be reaping in government subsidies overall.
Previously, Amazon has reaped $1.6 billion in state and local subsidies for its warehouses and data centers elsewhere across the country. On the same day as the New York and Virginia announcements, Amazon also announced a new “Operations Center of Excellence” in Nashville, Tennessee, a 5,000-worker facility for which the city gave Amazon $102 million in subsidies. Nashville was one of the top 20 finalists for the HQ2 auction, and parts of the city are also opportunity zones.
The cash handouts also do not take into account regulatory leniency and accelerated permitting that characterizes the Amazon projects. “There is a strain of thought that says if you give a company prompt variances, because time is money, companies would value that more than property tax abatement,” said LeRoy. In this case, the cities are offering both!”
The deals do not appear to include guard rails for what is expected to be rapid gentrification in the locations. Condo sellers in Crystal City took note of overnight price hikes of as much as $20,000 the day after the announcement. As gentrification likely pushes out residents in the opportunity zones surrounding the northern Virginia site, Amazon employees who buy real estate could not only find a place to live, but also avoid unrealized capital gains taxes.
Progressive politicians like Rep.-elect Alexandria Ocasio-Cortez, D-N.Y., and conservative commentators have joined forces to question the deal. Community organizations held a rally in New York on Wednesday, urging a re-channeling of the taxpayer subsidies. Following Amazon’s announcement, Ron Kim, a Queens assembly member, introduced new legislation to redirect taxpayer funds designated for corporate subsidies to canceling or buying student debt. Virginia delegate Lee Carter, a democratic socialist, also criticized the deal for its exorbitant tax giveaways and the lack of transparency under which the terms were negotiated, calling it “comic book villain stuff.”
Carter will have the opportunity to weigh in on the deal. According to the contract language, the grant payments to Amazon are subject to appropriations by the Virginia General Assembly, though the governor is obligated to put the payments in the draft budget request.
The Narrowness of Mainstream Economics Is About to Unravel
BY
Richard D. Wolff, Truthout
PUBLISHED
November 13, 2018
Recent extreme volatility and sharp drops in US stock markets underscore the instability of capitalism yet again. As many commentators now note, another economic downturn looms. We know that all the reforms and regulations imposed in the wake of the Great Depression of the 1930s failed to prevent both smaller downturns between 1941 and 2008 and then another big crash in 2008. Capitalism’s instability has, for centuries, resisted all efforts to overcome it with or without government interventions. Yet mainstream economics mostly evades an honest confrontation with the social costs of such economic instability. Worse, it evades a direct debate with the Marxian critique that links those costs to an argument that system change would be the best and most “efficient” solution.
In economics courses these days, most US professors praise the “free market.” They insist that its outcomes (prices, incomes, interest rates, and so on) flow from self-interested individuals bargaining freely over their economic interactions (buying, selling, borrowing, lending, working, and so on). Market outcomes, they teach, are uniquely stable, efficient and, indeed, optimal in some overarching social sense (or at least in Vilfredo Pareto’s sense). The economy works well if we let markets work their magic, according to this ideology.
Good teachers explain that many assumptions are required — about social conditions that need to be in place — for free markets to have these wonderful outcomes. But the vast majority of students walk away from their economic courses with little more than free-market ideology. They walk away believing that the market works badly when governments interfere by influencing prices, incomes, interest rates and so on.
Free-market ideology took a big hit in the 1930s. That was because the years before the 1929 crash had seen that ideology in full bloom taking credit for the “Roaring Twenties.” The horrendous Great Depression that followed for over a decade after 1929 saw blame replace adulation. Private, unregulated capitalism was seen as the problem for which government intervention was the necessary solution. A new economic paradigm pioneered by John Maynard Keynes displaced the free-market ideology from the 1930s to the 1970s. (My graduate professor of macroeconomics, James Tobin, was an enthusiastic Keynesian. He peppered his lectures with hard jabs at free-market “orthodoxy” and its doctrinaire proponent, Milton Friedman.)
The whole second half of the 20th century in economics was an endless rehashing of the free-market ideology (or “neoclassical” economics) versus Keynesian economics (or the necessity of government intervention ideology). Both sides in these debates often became acrimonious about the other. Often proponents of one side would block appointments of professors from the other side, where and when they could.
Yet both camps also agreed on several basic points. First, each side said that its formulations were important to serving and saving capitalism. The neoclassicals denounced the Keynesians for justifying an interventionist state that would inevitably slide into socialism. The Keynesians mocked that criticism, pointing out that following free-market ideology would cause more Great Depression-style downturns driving the mass of people to turn against capitalism itself. Second, both sides insisted that the debate between them was the major debate of the science of economics. Third, both sides agreed that Marxian economics was simply wrong, irrelevant to “modern economics” and therefore that Marxian professors could and should be denied college and university teaching positions. Their agreements accommodated the Cold War politics of the time. Together, the two sides deprived two generations of Americans of any sustained schooling in any basic critique of capitalism. The teachers, journalists and politicians taught by those two generations had no grasp of the Marxist critiques of capitalism (themselves evolving across the 20th century), no ability to consider or apply their insights to economic analysis or policy. Across these two generations, Marxist theory was shaken by and reacted profoundly to the USSR’s economic rise to 1975 and then decline and dissolution in 1989, the Soviet-China split and Mao’s importance, the rapid post-1990 economic rise of China, and the rise of Euro-communism in western Europe, among other major influences. Basic concepts of Marxian analysis – class and class struggle, values and prices, and so on – were subject to criticism and debates eventuating in new concepts applied to problems of economic development, post-capitalist enterprise organization, the role of democracy in socialist economies, and so forth.
Events since the 2008 crash have impacted formal economics education in the US, but so far only slightly. The simplest reason for the lag is that economics professors are provided with tenure at a fairly young age. Most then settle into long-term faculty positions that accrue power over curriculum and hiring decisions. The crash shifted some neoclassicals to Keynesian positions and strengthened both the relatively weak Keynesian and Marxian academic communities. But as a whole, the profession has so far held on to its predominantly neoclassical dispositions. It continues to do so in the face of the Trump government’s large interventions in the economy with immense tax cuts, budget deficits, tariff impositions, trade wars and so on.
The situation is starkly different in the mass media, informal education and the world of social media. In these spheres, capitalism is now far more widely criticized and rejected than at any other time in the past half-century. Advocates for socialism have likewise returned. The Occupy Wall Street movement in 2011, then Bernie Sanders’s campaign in 2016, and now the fast-growing number of explicitly socialist candidates in US elections embody a surge of economic thought sharply different from the neoclassical economics mainstream holding on in academia. Yet, that mainstream is already having increasing difficulties holding students’ attention, let alone loyalty. It is, after all, the political establishment in economics: the entity that did not see the 2008 crash coming and now proceeds as if it never happened and as if it didn’t yield a “lost decade” for millions.
In the 1960s a similar disjuncture occurred. Then the Keynesians were dominant within many economics departments across the country. Their students were caught up in civil rights activism, Students for a Democratic Society, and related movements that opposed the War in Vietnam, took seriously Michael Harrington’s exposé of the “other” America of the poor and marginalized, and launched modern feminism. For them, Keynesian economics was old and bland, concerned merely with unemployment when the burning issues concerned what kinds of jobs, powers, relationships and lives a new generation could expect or achieve. Young economics students in significant numbers lost patience with the old Keynesians and their narrowly (Cold War) limited social concerns and critiques. Those students formed study groups and the Union for Radical Political Economics (as an alternative to the staid, old American Economic Association). Many found their way to Marx and Marxism, defying the Cold War prohibitions accepted and enforced by the liberal Keynesians. (Professor Tobin warned me personally not to jeopardize my career by pursuing “this Marxian stuff.”)
In recent years, students have undertaken a so-far limited set of actions against the neoclassical orthodoxy in their schools. Harvard students, for example, protested Professor Gregory Mankiw’s introductory economics course for its grossly one-sided presentation of the field. As US capitalism’s extreme inequality deepens, it provokes more challenges. So, too, does the profession’s subordination to a government that mocks the free-trade orthodoxy spun by the neoclassicals and proudly pursues the protectionism neoclassicals taught us to reject. The shrinkage of public supports for higher education also undermines what little independence public universities had ideologically. Public colleges and schools now depend on grants from and contracts with business, and on donations from wealthy alumni in multiple ways that support the neoclassical mainstream and reject all alternative perspectives. Scandals recur around the Koch brothers’ strings-attached “gifts” to academic economics departments.
The decisions by many excellent economics students in the 1960s and 1970s to break from the neoclassical orthodoxy occurred without a mass disaffection from capitalism. And that was a very profound problem. The distance of the critical students from average people and especially urban, liberal workers proved to be a serious obstacle to sustaining, let alone deepening, the students’ criticisms. It also blocked possibilities of a student-worker alliance that might have grown into a powerful left political force.
The situation is quite different this time. Economics students have been provoked not only by the economic reality around them but also by a mass movement of people outside academia. That movement finds the traditional Democratic Party woefully inadequate as a vehicle for the changes its members see as necessary. In its gathering around Bernie Sanders and others, it is recognizing that its size makes it already a political-power-in-the-making. There is, in short, an ally for students breaking away from neoclassical orthodoxy to approach and work with. As a result, there are perhaps greater possibilities for left political breakthroughs now than there were in the 1960s.
Within the broad Marxian tradition, some strands offer both analyses and policies that differ sharply from anything offered by either neoclassical or Keynesian economics. To take perhaps the clearest example, many Marxists focus on the undemocratic position of capitalists within enterprises (individual owners and corporate boards of directors). Their decisions on whether and how to invest net revenues determine the shape of the macroeconomy for all. A minority focused on enterprise profits as “the bottom line” makes decisions impacting the jobs, incomes, debts, etc. of a majority to which it is not democratically accountable. This minority’s expectations, desires and “animal spirits” (as Keynes put it) causes instability, in the Marxian view. The policy suggestion emerging from that view focuses on a program to “democratize the enterprise” as a solution to instability. Replacing hierarchical undemocratic capitalist enterprises with democratically organized worker cooperatives – where each enterprise member has one vote in deciding key matters, such as investment decisions – is a way forward that neither neoclassical nor Keynesian economists have yet allowed to be debated in public and academic forums. We will all be better off when the current narrowness of economics is opened up to include more basic proposals for change adequate to the depth and scope of capitalism’s current problems.
In economics courses these days, most US professors praise the “free market.” They insist that its outcomes (prices, incomes, interest rates, and so on) flow from self-interested individuals bargaining freely over their economic interactions (buying, selling, borrowing, lending, working, and so on). Market outcomes, they teach, are uniquely stable, efficient and, indeed, optimal in some overarching social sense (or at least in Vilfredo Pareto’s sense). The economy works well if we let markets work their magic, according to this ideology.
Good teachers explain that many assumptions are required — about social conditions that need to be in place — for free markets to have these wonderful outcomes. But the vast majority of students walk away from their economic courses with little more than free-market ideology. They walk away believing that the market works badly when governments interfere by influencing prices, incomes, interest rates and so on.
Free-market ideology took a big hit in the 1930s. That was because the years before the 1929 crash had seen that ideology in full bloom taking credit for the “Roaring Twenties.” The horrendous Great Depression that followed for over a decade after 1929 saw blame replace adulation. Private, unregulated capitalism was seen as the problem for which government intervention was the necessary solution. A new economic paradigm pioneered by John Maynard Keynes displaced the free-market ideology from the 1930s to the 1970s. (My graduate professor of macroeconomics, James Tobin, was an enthusiastic Keynesian. He peppered his lectures with hard jabs at free-market “orthodoxy” and its doctrinaire proponent, Milton Friedman.)
The whole second half of the 20th century in economics was an endless rehashing of the free-market ideology (or “neoclassical” economics) versus Keynesian economics (or the necessity of government intervention ideology). Both sides in these debates often became acrimonious about the other. Often proponents of one side would block appointments of professors from the other side, where and when they could.
Yet both camps also agreed on several basic points. First, each side said that its formulations were important to serving and saving capitalism. The neoclassicals denounced the Keynesians for justifying an interventionist state that would inevitably slide into socialism. The Keynesians mocked that criticism, pointing out that following free-market ideology would cause more Great Depression-style downturns driving the mass of people to turn against capitalism itself. Second, both sides insisted that the debate between them was the major debate of the science of economics. Third, both sides agreed that Marxian economics was simply wrong, irrelevant to “modern economics” and therefore that Marxian professors could and should be denied college and university teaching positions. Their agreements accommodated the Cold War politics of the time. Together, the two sides deprived two generations of Americans of any sustained schooling in any basic critique of capitalism. The teachers, journalists and politicians taught by those two generations had no grasp of the Marxist critiques of capitalism (themselves evolving across the 20th century), no ability to consider or apply their insights to economic analysis or policy. Across these two generations, Marxist theory was shaken by and reacted profoundly to the USSR’s economic rise to 1975 and then decline and dissolution in 1989, the Soviet-China split and Mao’s importance, the rapid post-1990 economic rise of China, and the rise of Euro-communism in western Europe, among other major influences. Basic concepts of Marxian analysis – class and class struggle, values and prices, and so on – were subject to criticism and debates eventuating in new concepts applied to problems of economic development, post-capitalist enterprise organization, the role of democracy in socialist economies, and so forth.
Events since the 2008 crash have impacted formal economics education in the US, but so far only slightly. The simplest reason for the lag is that economics professors are provided with tenure at a fairly young age. Most then settle into long-term faculty positions that accrue power over curriculum and hiring decisions. The crash shifted some neoclassicals to Keynesian positions and strengthened both the relatively weak Keynesian and Marxian academic communities. But as a whole, the profession has so far held on to its predominantly neoclassical dispositions. It continues to do so in the face of the Trump government’s large interventions in the economy with immense tax cuts, budget deficits, tariff impositions, trade wars and so on.
The situation is starkly different in the mass media, informal education and the world of social media. In these spheres, capitalism is now far more widely criticized and rejected than at any other time in the past half-century. Advocates for socialism have likewise returned. The Occupy Wall Street movement in 2011, then Bernie Sanders’s campaign in 2016, and now the fast-growing number of explicitly socialist candidates in US elections embody a surge of economic thought sharply different from the neoclassical economics mainstream holding on in academia. Yet, that mainstream is already having increasing difficulties holding students’ attention, let alone loyalty. It is, after all, the political establishment in economics: the entity that did not see the 2008 crash coming and now proceeds as if it never happened and as if it didn’t yield a “lost decade” for millions.
In the 1960s a similar disjuncture occurred. Then the Keynesians were dominant within many economics departments across the country. Their students were caught up in civil rights activism, Students for a Democratic Society, and related movements that opposed the War in Vietnam, took seriously Michael Harrington’s exposé of the “other” America of the poor and marginalized, and launched modern feminism. For them, Keynesian economics was old and bland, concerned merely with unemployment when the burning issues concerned what kinds of jobs, powers, relationships and lives a new generation could expect or achieve. Young economics students in significant numbers lost patience with the old Keynesians and their narrowly (Cold War) limited social concerns and critiques. Those students formed study groups and the Union for Radical Political Economics (as an alternative to the staid, old American Economic Association). Many found their way to Marx and Marxism, defying the Cold War prohibitions accepted and enforced by the liberal Keynesians. (Professor Tobin warned me personally not to jeopardize my career by pursuing “this Marxian stuff.”)
In recent years, students have undertaken a so-far limited set of actions against the neoclassical orthodoxy in their schools. Harvard students, for example, protested Professor Gregory Mankiw’s introductory economics course for its grossly one-sided presentation of the field. As US capitalism’s extreme inequality deepens, it provokes more challenges. So, too, does the profession’s subordination to a government that mocks the free-trade orthodoxy spun by the neoclassicals and proudly pursues the protectionism neoclassicals taught us to reject. The shrinkage of public supports for higher education also undermines what little independence public universities had ideologically. Public colleges and schools now depend on grants from and contracts with business, and on donations from wealthy alumni in multiple ways that support the neoclassical mainstream and reject all alternative perspectives. Scandals recur around the Koch brothers’ strings-attached “gifts” to academic economics departments.
The decisions by many excellent economics students in the 1960s and 1970s to break from the neoclassical orthodoxy occurred without a mass disaffection from capitalism. And that was a very profound problem. The distance of the critical students from average people and especially urban, liberal workers proved to be a serious obstacle to sustaining, let alone deepening, the students’ criticisms. It also blocked possibilities of a student-worker alliance that might have grown into a powerful left political force.
The situation is quite different this time. Economics students have been provoked not only by the economic reality around them but also by a mass movement of people outside academia. That movement finds the traditional Democratic Party woefully inadequate as a vehicle for the changes its members see as necessary. In its gathering around Bernie Sanders and others, it is recognizing that its size makes it already a political-power-in-the-making. There is, in short, an ally for students breaking away from neoclassical orthodoxy to approach and work with. As a result, there are perhaps greater possibilities for left political breakthroughs now than there were in the 1960s.
Within the broad Marxian tradition, some strands offer both analyses and policies that differ sharply from anything offered by either neoclassical or Keynesian economics. To take perhaps the clearest example, many Marxists focus on the undemocratic position of capitalists within enterprises (individual owners and corporate boards of directors). Their decisions on whether and how to invest net revenues determine the shape of the macroeconomy for all. A minority focused on enterprise profits as “the bottom line” makes decisions impacting the jobs, incomes, debts, etc. of a majority to which it is not democratically accountable. This minority’s expectations, desires and “animal spirits” (as Keynes put it) causes instability, in the Marxian view. The policy suggestion emerging from that view focuses on a program to “democratize the enterprise” as a solution to instability. Replacing hierarchical undemocratic capitalist enterprises with democratically organized worker cooperatives – where each enterprise member has one vote in deciding key matters, such as investment decisions – is a way forward that neither neoclassical nor Keynesian economists have yet allowed to be debated in public and academic forums. We will all be better off when the current narrowness of economics is opened up to include more basic proposals for change adequate to the depth and scope of capitalism’s current problems.
Tax Cheating? It’s Not Just The Trumps.
Like All Businessmen and Real Estate Tycoons, They Get Tax Breaks That You Can Only Dream About
By David Cay Johnston, DCReport Editor-in-Chief
In radio shows and talks from London to Boston to Richmond, Ind., people keep asking me how the Trump family got away with stealing a half billion dollars, in today’s money, from our government, as The New York Times reported last month.
One big part of the answer is that Congress showers real estate investors with tax benefits. It also makes auditing many types of real estate transactions incredibly tedious and time-consuming. Combine that with years of budget cuts and what we get is an IRS—the federal Tax Police Department—that is well suited to pursuing the financial equivalent of tricycle thefts, but not larceny on a billionaire scale.
This may change. If we get a House or Senate under control of the Democrats we can expect thorough, expert investigations into Donald Trump’s recent personal, gift and business tax returns.
Whether that turns into real tax reform, especially when it comes to landlords who cheat, will depend on whether the citizenry demands it. In turn, that will depend on Congressional investigators. How clearly, powerfully and repetitively will they make the point that our tax system, by design, helps cheaters like the Trumps?
Separate and Unequal Taxation
The story of how the Trumps got away with what The Times called “outright fraud” begins with understanding that America has two systems of individual income taxation, separate and unequal.
One system relies on independent verification. It covers all workers, pensioners and, in the last decade thanks in part to my work, stock market investors. The other system is based on trust. Congress does not trust workers, but it assumes that people who run businesses are honest, so there is no need to independently verify the income they report.
One system is reasonably well funded. The other is starved for funds and staff to enforce the tax laws. Guess which system the Trumps fall under.
Long before Trump became president our Congress created a tax system that makes tax cheating by real estate families a breeze. By slashing the IRS staff—down a third in the last 25 years while the population grew by a quarter—the deck is stacked even more in favor of the Trumps.
The harsh reality is that Congress does not trust workers. For decades it has required that employers withhold taxes before workers get their paychecks. The taxes, along with a detailed report of how much each worker earned, go straight to the Treasury.
There is little cheating under that efficient and effective system, which is mostly automated. Indeed, 99% of income taxes due on wages are collected and turned over, the Government Accountability Office, an investigative arm of Congress, reported last year.
But when it comes to the traditional Republican base of small business owners the rate of reliable income reporting plummets, the GAO found.
Landlords, farmers and sole proprietors and some others tell the IRS how much they made. For them, there is little to no third party verification.
Instead of 99% accurate reporting, the accuracy rate for these lucky duckies is just 37%.
That doesn’t mean that only 37% of income is reported, only that just 37% of reports are accurate. The majority of these people report income, just not all of it.
Within this system where cheating predominates, there is a black hole of income that it is especially hard to detect. That hole is real estate, especially closely held real estate partnership income.
Avoiding Detection
Under rules set by Congress the real estate family that cheats together is unlikely to get caught, as Jerry Curnutt, the retired IRS partnerships specialist, figured out two decades ago and I have reported on again, and again and again and again.
Our government takes little interest in the kind of cheating the Trumps and other real estate families engage in. But it takes deep interest in the possibility of tax cheating by low-wage workers.
And if they are caught, landlords can often settle for pennies on the dollar by hiring aggressive lawyers who threaten to tie up the dwindling IRS staff in court for years.
The Trumps sometimes relied on the notorious Roy Cohn, the attack-dog lawyer for Sen. Joe McCarthy before Cohn became a consigliere for the Genovese and Gambino crime families and for Donald Trump.
It also helps the Trumps and other real estate families that they often report negative incomes. Under rules set by Congress, if you own a lot of real estate you can legally report you made less than nothing for income tax purposes while living a lavish lifestyle.
Consider an IRS auditor who finds that a real estate family reported, say, $10 million of negative income on which no tax is due but really had only $1 million of negative income. Either way, no tax is due immediately. That means the IRS auditor has no incentive to pursue that unwarranted $9 million of negative income, as some auditors have told me in vivid detail.
The cheating real estate family, on the other hand, gets to carry that bogus $9 million forward until a year when they can use it to offset actual income—so it has real value to them.
Cheating High and Low
Our government takes little interest in the kind of cheating the Trumps and other real estate families engage in. In contrast to this, it takes an extraordinarily deep interest in the possibility of tax cheating by workers, especially low-wage workers.
To illustrate this let’s review an audit released Oct. 9 by J. Russell George, the Treasury Inspector General for Tax Administration or TIGTA. Congress created the position after 1997 and 1998 hearings on alleged IRS abuses of taxpayers. The hearings were shams, the testimony nonsense, as The Wall Street Journal, local newspapers, Tax Notes magazine and my reporting in The New York Times all showed at the time.
TIGTA’s latest audit examines taxes on cash tips paid to food servers, who under a federal law signed by President Clinton can be paid just $2.13 an hour, far less than the minimum wage of $7.25 an hour.
Tips are often paid in cash and often go unreported for tax purposes.
According to TIGTA, “the IRS estimates that 10% ($23 billion) of the estimated 2006 individual income tax underreporting Tax Gap ($235 billion) is due to unreported tip income by employees.”
The amount of unreported tip income is bupkis. It’s about one-third of one percent of all wage and tip income. How much tax money are we going to collect from workers who make such little money?
On the other hand, the Inspector General pays hardly any attention to high-end tax cheating. He’s never scrutinized IRS policing of hedge funds.
While George, a former Republican operative, ignores the tax habits of the rich, he has an extraordinary obsession with the working poor. I searched the TIGTA website for audits and reports on the Earned Income Tax Credit, a kind of negative income tax for low-wage workers, and got this astonishing result:12,600 hits. Few of those are audits, to be sure. But no one even blanched at TIGTA when I asked about the huge number of citations about a benefit for the working poor.
TIGTA officials declined to comment on the record.
What about the lack of audits related to hedge funds? While there are no audit reports, they do get all of two passing mentions at the TIGTA website.
And what of landlords, like the Trumps used to be when they were cheating the government? Just 11 mentions, not one of which appears to be about tax cheating and how to reduce it.
One big part of the answer is that Congress showers real estate investors with tax benefits. It also makes auditing many types of real estate transactions incredibly tedious and time-consuming. Combine that with years of budget cuts and what we get is an IRS—the federal Tax Police Department—that is well suited to pursuing the financial equivalent of tricycle thefts, but not larceny on a billionaire scale.
This may change. If we get a House or Senate under control of the Democrats we can expect thorough, expert investigations into Donald Trump’s recent personal, gift and business tax returns.
Whether that turns into real tax reform, especially when it comes to landlords who cheat, will depend on whether the citizenry demands it. In turn, that will depend on Congressional investigators. How clearly, powerfully and repetitively will they make the point that our tax system, by design, helps cheaters like the Trumps?
Separate and Unequal Taxation
The story of how the Trumps got away with what The Times called “outright fraud” begins with understanding that America has two systems of individual income taxation, separate and unequal.
One system relies on independent verification. It covers all workers, pensioners and, in the last decade thanks in part to my work, stock market investors. The other system is based on trust. Congress does not trust workers, but it assumes that people who run businesses are honest, so there is no need to independently verify the income they report.
One system is reasonably well funded. The other is starved for funds and staff to enforce the tax laws. Guess which system the Trumps fall under.
Long before Trump became president our Congress created a tax system that makes tax cheating by real estate families a breeze. By slashing the IRS staff—down a third in the last 25 years while the population grew by a quarter—the deck is stacked even more in favor of the Trumps.
The harsh reality is that Congress does not trust workers. For decades it has required that employers withhold taxes before workers get their paychecks. The taxes, along with a detailed report of how much each worker earned, go straight to the Treasury.
There is little cheating under that efficient and effective system, which is mostly automated. Indeed, 99% of income taxes due on wages are collected and turned over, the Government Accountability Office, an investigative arm of Congress, reported last year.
But when it comes to the traditional Republican base of small business owners the rate of reliable income reporting plummets, the GAO found.
Landlords, farmers and sole proprietors and some others tell the IRS how much they made. For them, there is little to no third party verification.
Instead of 99% accurate reporting, the accuracy rate for these lucky duckies is just 37%.
That doesn’t mean that only 37% of income is reported, only that just 37% of reports are accurate. The majority of these people report income, just not all of it.
Within this system where cheating predominates, there is a black hole of income that it is especially hard to detect. That hole is real estate, especially closely held real estate partnership income.
Avoiding Detection
Under rules set by Congress the real estate family that cheats together is unlikely to get caught, as Jerry Curnutt, the retired IRS partnerships specialist, figured out two decades ago and I have reported on again, and again and again and again.
Our government takes little interest in the kind of cheating the Trumps and other real estate families engage in. But it takes deep interest in the possibility of tax cheating by low-wage workers.
And if they are caught, landlords can often settle for pennies on the dollar by hiring aggressive lawyers who threaten to tie up the dwindling IRS staff in court for years.
The Trumps sometimes relied on the notorious Roy Cohn, the attack-dog lawyer for Sen. Joe McCarthy before Cohn became a consigliere for the Genovese and Gambino crime families and for Donald Trump.
It also helps the Trumps and other real estate families that they often report negative incomes. Under rules set by Congress, if you own a lot of real estate you can legally report you made less than nothing for income tax purposes while living a lavish lifestyle.
Consider an IRS auditor who finds that a real estate family reported, say, $10 million of negative income on which no tax is due but really had only $1 million of negative income. Either way, no tax is due immediately. That means the IRS auditor has no incentive to pursue that unwarranted $9 million of negative income, as some auditors have told me in vivid detail.
The cheating real estate family, on the other hand, gets to carry that bogus $9 million forward until a year when they can use it to offset actual income—so it has real value to them.
Cheating High and Low
Our government takes little interest in the kind of cheating the Trumps and other real estate families engage in. In contrast to this, it takes an extraordinarily deep interest in the possibility of tax cheating by workers, especially low-wage workers.
To illustrate this let’s review an audit released Oct. 9 by J. Russell George, the Treasury Inspector General for Tax Administration or TIGTA. Congress created the position after 1997 and 1998 hearings on alleged IRS abuses of taxpayers. The hearings were shams, the testimony nonsense, as The Wall Street Journal, local newspapers, Tax Notes magazine and my reporting in The New York Times all showed at the time.
TIGTA’s latest audit examines taxes on cash tips paid to food servers, who under a federal law signed by President Clinton can be paid just $2.13 an hour, far less than the minimum wage of $7.25 an hour.
Tips are often paid in cash and often go unreported for tax purposes.
According to TIGTA, “the IRS estimates that 10% ($23 billion) of the estimated 2006 individual income tax underreporting Tax Gap ($235 billion) is due to unreported tip income by employees.”
The amount of unreported tip income is bupkis. It’s about one-third of one percent of all wage and tip income. How much tax money are we going to collect from workers who make such little money?
On the other hand, the Inspector General pays hardly any attention to high-end tax cheating. He’s never scrutinized IRS policing of hedge funds.
While George, a former Republican operative, ignores the tax habits of the rich, he has an extraordinary obsession with the working poor. I searched the TIGTA website for audits and reports on the Earned Income Tax Credit, a kind of negative income tax for low-wage workers, and got this astonishing result:12,600 hits. Few of those are audits, to be sure. But no one even blanched at TIGTA when I asked about the huge number of citations about a benefit for the working poor.
TIGTA officials declined to comment on the record.
What about the lack of audits related to hedge funds? While there are no audit reports, they do get all of two passing mentions at the TIGTA website.
And what of landlords, like the Trumps used to be when they were cheating the government? Just 11 mentions, not one of which appears to be about tax cheating and how to reduce it.
While No One Was Looking, Trump Unleashed a Boom in the Market for Shady Financial Industry Scammers
The fiduciary rule was a major win for President Obama and consumers — then Trump came along.
By Cody Fenwick / AlterNet
October 29, 2018, 3:22 PM GMT
While the nation pays attention to some of the most obviously outrageous things President Donald Trump does — his grotesque behavior, the Muslim ban, the policy of family separations, the neglect of Puerto Rico — some of his most pernicious actions pass by without much discussion.
One of those actions was the rolling back of the Department of Labor's fiduciary rule under Secretary of Alex Acosta. The rule had been initiated under President Barack Obama, but the Trump administration put a stop to it.
Essentially, the rule was designed to require anyone providing financial advising services to be a fiduciary, someone who works in their clients' interests. Without this rule in place, advisers have more leeway to upsell clients on certain financial services that might earn the adviser a hefty commission — even if it's not what would be best for the client.
As a new report in the Wall Street Journal revealed, under Trump, the market for these types of sketchy services is roaring back.
One way to tell is the strong surge in annuity sales, a financial instrument designed to provide payouts for elderly people at the cost of a huge lump sum. While this can be appealing for some seniors, the products often come with hidden fees — not to mention ample payouts for financial advisers who make the sales.
"The boom shows how Washington’s push to roll back financial regulations is giving new life to products that industry watchdogs say aren’t always good for investors," wrote reporters Ben Eisen and Lisa Beilfuss. "The annuities resurrection stems from the demise of the Labor Department’s fiduciary rule, an Obama-era proposal that would have required brokers who oversee retirement savings to act in their clients’ best interests."
“The door has opened for bad brokers to have more free rein with these things,” attorney Michael Lynch told the Journal.
Many people in the market for smart investment opportunities may find themselves buying products that they don't fully understand. And they may mistakenly believe that the financial adviser has their best interests in mind even if, in reality, the adviser is essentially working for someone else.
"The fiduciary rule wouldn’t have prevented all unscrupulous sales practices," the reporters note. "But it could have forced brokers to be more transparent about their commissions and constrained them from putting customers in high-fee annuities if similar low-fee products were available."
Trump campaigned as if he would govern in opposition to these types of practices, "draining the swamp" and fighting against financial titans who exploit the average American. Instead — as was always the predictable outcome — he has ruled as a plutocrat dishing out favors to his friends in the moneyed classes.
One of those actions was the rolling back of the Department of Labor's fiduciary rule under Secretary of Alex Acosta. The rule had been initiated under President Barack Obama, but the Trump administration put a stop to it.
Essentially, the rule was designed to require anyone providing financial advising services to be a fiduciary, someone who works in their clients' interests. Without this rule in place, advisers have more leeway to upsell clients on certain financial services that might earn the adviser a hefty commission — even if it's not what would be best for the client.
As a new report in the Wall Street Journal revealed, under Trump, the market for these types of sketchy services is roaring back.
One way to tell is the strong surge in annuity sales, a financial instrument designed to provide payouts for elderly people at the cost of a huge lump sum. While this can be appealing for some seniors, the products often come with hidden fees — not to mention ample payouts for financial advisers who make the sales.
"The boom shows how Washington’s push to roll back financial regulations is giving new life to products that industry watchdogs say aren’t always good for investors," wrote reporters Ben Eisen and Lisa Beilfuss. "The annuities resurrection stems from the demise of the Labor Department’s fiduciary rule, an Obama-era proposal that would have required brokers who oversee retirement savings to act in their clients’ best interests."
“The door has opened for bad brokers to have more free rein with these things,” attorney Michael Lynch told the Journal.
Many people in the market for smart investment opportunities may find themselves buying products that they don't fully understand. And they may mistakenly believe that the financial adviser has their best interests in mind even if, in reality, the adviser is essentially working for someone else.
"The fiduciary rule wouldn’t have prevented all unscrupulous sales practices," the reporters note. "But it could have forced brokers to be more transparent about their commissions and constrained them from putting customers in high-fee annuities if similar low-fee products were available."
Trump campaigned as if he would govern in opposition to these types of practices, "draining the swamp" and fighting against financial titans who exploit the average American. Instead — as was always the predictable outcome — he has ruled as a plutocrat dishing out favors to his friends in the moneyed classes.
maximizing profit by overcharging patients!!!
THE DIALYSIS INDUSTRY IS SPENDING $111 MILLION TO ARGUE THAT REGULATING IT WOULD PUT IT OUT OF BUSINESS
David Dayen - the intercept
October 31 2018, 5:00 a.m.
THERE’S A NEW winner for the coveted title of most expensive ballot initiative campaign in American history. And it’s a race that’s been waged completely under the national radar.
In California, the dialysis industry has spent a record $111.4 million to oppose Proposition 8, which would cap what outpatient clinics can charge patients. Of that sum, $101 million comes from just two for-profit companies, Fresenius and DaVita, which serve around three-quarters of all dialysis patients in California and roughly the same portion nationwide.
The industry’s aggressive spending undercuts its core message in the campaign, that capping profits would lead to mass closures of dialysis clinics, threatening access to treatment. It’s easier to pull off such a plea of poverty when you don’t have $111 million available for television ads, mailers, and other campaign spending.
“These clinics are routinely understaffed, leaving patients at risk,” claimed Yes on 8 spokesperson Sean Wherley. The Yes on 8 campaign believes that the measure would not only rein in dialysis costs (which can run as high as $88,000 a year), but would also force the industry to improve staffing and hygiene at the facilities. “All of a sudden their profits are on the line and they cough up $111 million,” added Wherley, referring to Fresenius and DaVita.
The No on 8 campaign denied that it is attempting to buy an election. Spokesperson Kathy Fairbanks noted that California is an expensive state to campaign in. The sum thrown in by the dialysis industry “goes to show how disastrous Prop 8 would be for patients and clinic viability in California,” Fairbanks said. “Providers are taking Prop 8 very seriously because it would shutter clinics and jeopardize their patients’ lives.”
The incredible funding haul hit the record last week when Fresenius dropped another $5.44 million, according to filings from California’s secretary of state office. That eclipsed the previous nationwide record of $110 million set by the opposition to 2016’s Proposition 61, which would have limited the price of prescription drugs purchased by the state of California to the totals paid by the Department of Veterans Affairs. The orgy of funding was enough to defeat Prop 61 by 6.4 points.
This year, Prop 8’s opponents are following the same strategy, blanketing the airwaves with ads from doctors and patients warning of limited access to lifesaving kidney treatments if the measure passes. The Yes side, for its part, has raised $38 million in support of the ballot initiative. Most of that money has come from the Service Employees International Union, which put the measure on the ballot as part of a corporate campaign to organize dialysis facilities.
The only statewide poll for Prop 8, from SurveyUSA on October 10, showed support for the initiative leading 47-34. SurveyUSA called the race a toss-up, as propositions tend to lose steam closer to Election Day, especially facing of a wall of opposition money. The Yes on 8 campaign says its internal polling shows a statistical tie.
If anything, the campaign reveals the lucrative nature of dialysis and the oligopoly getting rich off it.
A 1972 law commits the U.S. government to pay for all dialysis treatments — essentially a filtering of a patient’s blood when their kidneys cannot perform the function — through Medicare, regardless of age. However, for patients with private insurance, the insurer covers the treatments for the first 30 months. This is a giant cash cow for Fresenius and DaVita, which charge several orders of magnitude more to commercial insurance companies than they do Medicare. All industry profits come from payments from private insurers.
Fresenius and DaVita have 3,900 clinics nationwide, serving about 70 percent of America’s half-million dialysis patients. Around 80,000 of those patients and 588 clinics are in California. The two companies earned $4 billion last year in profits from dialysis operations.
Critics in California and nationally have raised concerns about unsanitary environments and a general assembly-line rush to get as many patients on dialysis machines as possible. Last year, the California Department of Public Health cited dialysis clinics for 1,417 deficienciesduring inspections.
Prop 8 would restrict payments to commercial insurance providers for dialysis to 15 percent above the cost of care. Any excess profits would have to be refunded, either to patients or the insurance companies that paid for the treatment. The proposal is similar to the “medical loss ratio” in the Affordable Care Act, which limits insurance company profits in a similar fashion.
Proponents believe that the initiative would improve the performance of dialysis clinics. “They can refund to patients, or they can send money back into care, by hiring staff or exterminators to keep out roaches,” said Wherley, the Yes on 8 spokesperson. If these investments lead to more efficient usage of dialysis clinics, it would increase revenues for the industry, adding the 15 percent paid to insurance providers to higher profits.
The industry claims that the caps would bankrupt its clinics in California. Because treatments covered by private insurance would be capped, and Medicare margins are tiny, the companies say the caps would have a more drastic impact. An industry-funded study claimed that 83 percent of state clinics would lose money. SEIU has questioned the calculations, which claim that certain administrative and managerial costs cannot be factored into the cap.
By contrast, two of the state’s leading insurance providers, Kaiser Permanente and Anthem Blue Cross, told a Los Angeles City Employees’ Retirement System board meeting that capping profits would not impact members’ “access to dialysis treatment, though Anthem noted it could lead to operational and pricing changes by chronic dialysis clinics.” In a statement from the Yes campaign, dialysis patient Lorraine Lewis said that Kaiser and Anthem’s comments disprove the industry’s argument: “The entire basis of the dialysis industry’s vote ‘no’ campaign is nothing more than groundless fear-mongering.” (The two insurance companies have not taken a position on the ballot initiative.)
No on 8 spokesperson Fairbanks dismissed the remarks from the insurance companies, saying that they referred only to city employees in Los Angeles, which as a government payer wouldn’t be affected by Prop 8. She added that insurance companies have not supported Prop 8, despite the prospect of lower dialysis charges. Fairbanks claimed that this is because clinic closures would shift dialysis treatments to hospitals. “That’s going to be far more expensive than it is today. That’s the reason insurers aren’t backing Prop 8,” she said.
Even without adjudicating this debate, the notion that Prop 8 would leave Fresenius and DaVita destitute when they have $111 million to spend on opposing it leaves critics cold. “It makes you wonder what are the prerogatives of the industry,” said Wherley. “When someone comes out that hard and heavy, is it really about the patients?”
Other corporations are dumping cash into California ballot measures this year. As The Intercept has reported, Blackstone and a number of corporate landlords have spent $77.5 million to block Prop 10, which would lift a statewide ban on rent control laws. And the ambulance company American Medical Response has put $30 million into supporting Prop 11, which would allow the company to continue forcing workers to be on call during breaks, despite a state Supreme Court ruling striking down the practice. Passage would help AMR avoid liability for its break practices, which could lead to it paying tens of millions of dollars in back wages to EMT workers.
Companies have even started spending for 2020 in California. Triton, a bail bond company owned by private equity firm Endeavor Capital, has spent $800,000 to qualify a 2020 ballot measure to overturn a state law passed this year that would effectively end the money bail system, leaving pretrial releasing decisions up to the courts.
In California, the dialysis industry has spent a record $111.4 million to oppose Proposition 8, which would cap what outpatient clinics can charge patients. Of that sum, $101 million comes from just two for-profit companies, Fresenius and DaVita, which serve around three-quarters of all dialysis patients in California and roughly the same portion nationwide.
The industry’s aggressive spending undercuts its core message in the campaign, that capping profits would lead to mass closures of dialysis clinics, threatening access to treatment. It’s easier to pull off such a plea of poverty when you don’t have $111 million available for television ads, mailers, and other campaign spending.
“These clinics are routinely understaffed, leaving patients at risk,” claimed Yes on 8 spokesperson Sean Wherley. The Yes on 8 campaign believes that the measure would not only rein in dialysis costs (which can run as high as $88,000 a year), but would also force the industry to improve staffing and hygiene at the facilities. “All of a sudden their profits are on the line and they cough up $111 million,” added Wherley, referring to Fresenius and DaVita.
The No on 8 campaign denied that it is attempting to buy an election. Spokesperson Kathy Fairbanks noted that California is an expensive state to campaign in. The sum thrown in by the dialysis industry “goes to show how disastrous Prop 8 would be for patients and clinic viability in California,” Fairbanks said. “Providers are taking Prop 8 very seriously because it would shutter clinics and jeopardize their patients’ lives.”
The incredible funding haul hit the record last week when Fresenius dropped another $5.44 million, according to filings from California’s secretary of state office. That eclipsed the previous nationwide record of $110 million set by the opposition to 2016’s Proposition 61, which would have limited the price of prescription drugs purchased by the state of California to the totals paid by the Department of Veterans Affairs. The orgy of funding was enough to defeat Prop 61 by 6.4 points.
This year, Prop 8’s opponents are following the same strategy, blanketing the airwaves with ads from doctors and patients warning of limited access to lifesaving kidney treatments if the measure passes. The Yes side, for its part, has raised $38 million in support of the ballot initiative. Most of that money has come from the Service Employees International Union, which put the measure on the ballot as part of a corporate campaign to organize dialysis facilities.
The only statewide poll for Prop 8, from SurveyUSA on October 10, showed support for the initiative leading 47-34. SurveyUSA called the race a toss-up, as propositions tend to lose steam closer to Election Day, especially facing of a wall of opposition money. The Yes on 8 campaign says its internal polling shows a statistical tie.
If anything, the campaign reveals the lucrative nature of dialysis and the oligopoly getting rich off it.
A 1972 law commits the U.S. government to pay for all dialysis treatments — essentially a filtering of a patient’s blood when their kidneys cannot perform the function — through Medicare, regardless of age. However, for patients with private insurance, the insurer covers the treatments for the first 30 months. This is a giant cash cow for Fresenius and DaVita, which charge several orders of magnitude more to commercial insurance companies than they do Medicare. All industry profits come from payments from private insurers.
Fresenius and DaVita have 3,900 clinics nationwide, serving about 70 percent of America’s half-million dialysis patients. Around 80,000 of those patients and 588 clinics are in California. The two companies earned $4 billion last year in profits from dialysis operations.
Critics in California and nationally have raised concerns about unsanitary environments and a general assembly-line rush to get as many patients on dialysis machines as possible. Last year, the California Department of Public Health cited dialysis clinics for 1,417 deficienciesduring inspections.
Prop 8 would restrict payments to commercial insurance providers for dialysis to 15 percent above the cost of care. Any excess profits would have to be refunded, either to patients or the insurance companies that paid for the treatment. The proposal is similar to the “medical loss ratio” in the Affordable Care Act, which limits insurance company profits in a similar fashion.
Proponents believe that the initiative would improve the performance of dialysis clinics. “They can refund to patients, or they can send money back into care, by hiring staff or exterminators to keep out roaches,” said Wherley, the Yes on 8 spokesperson. If these investments lead to more efficient usage of dialysis clinics, it would increase revenues for the industry, adding the 15 percent paid to insurance providers to higher profits.
The industry claims that the caps would bankrupt its clinics in California. Because treatments covered by private insurance would be capped, and Medicare margins are tiny, the companies say the caps would have a more drastic impact. An industry-funded study claimed that 83 percent of state clinics would lose money. SEIU has questioned the calculations, which claim that certain administrative and managerial costs cannot be factored into the cap.
By contrast, two of the state’s leading insurance providers, Kaiser Permanente and Anthem Blue Cross, told a Los Angeles City Employees’ Retirement System board meeting that capping profits would not impact members’ “access to dialysis treatment, though Anthem noted it could lead to operational and pricing changes by chronic dialysis clinics.” In a statement from the Yes campaign, dialysis patient Lorraine Lewis said that Kaiser and Anthem’s comments disprove the industry’s argument: “The entire basis of the dialysis industry’s vote ‘no’ campaign is nothing more than groundless fear-mongering.” (The two insurance companies have not taken a position on the ballot initiative.)
No on 8 spokesperson Fairbanks dismissed the remarks from the insurance companies, saying that they referred only to city employees in Los Angeles, which as a government payer wouldn’t be affected by Prop 8. She added that insurance companies have not supported Prop 8, despite the prospect of lower dialysis charges. Fairbanks claimed that this is because clinic closures would shift dialysis treatments to hospitals. “That’s going to be far more expensive than it is today. That’s the reason insurers aren’t backing Prop 8,” she said.
Even without adjudicating this debate, the notion that Prop 8 would leave Fresenius and DaVita destitute when they have $111 million to spend on opposing it leaves critics cold. “It makes you wonder what are the prerogatives of the industry,” said Wherley. “When someone comes out that hard and heavy, is it really about the patients?”
Other corporations are dumping cash into California ballot measures this year. As The Intercept has reported, Blackstone and a number of corporate landlords have spent $77.5 million to block Prop 10, which would lift a statewide ban on rent control laws. And the ambulance company American Medical Response has put $30 million into supporting Prop 11, which would allow the company to continue forcing workers to be on call during breaks, despite a state Supreme Court ruling striking down the practice. Passage would help AMR avoid liability for its break practices, which could lead to it paying tens of millions of dollars in back wages to EMT workers.
Companies have even started spending for 2020 in California. Triton, a bail bond company owned by private equity firm Endeavor Capital, has spent $800,000 to qualify a 2020 ballot measure to overturn a state law passed this year that would effectively end the money bail system, leaving pretrial releasing decisions up to the courts.
The bad behavior of the richest: what I learned from wealth managers
The habits of the wealthiest mirror the supposed ‘pathologies’ of the poor. But while those in poverty are called lazy, the rich are dubbed bon vivants
Brooke Harrington
the guardian
Fri 19 Oct 2018 02.00 EDT
We don’t hear much about laziness, drug addiction or promiscuity among the wealthiest members of society because most billionaires go to great lengths to seek privacy. Illustration: Sonny Ross
If nearly a decade interviewing the wealth managers for the 1% taught me anything, it is that the ultra-rich and the ultra-poor have a lot more in common than stereotypes might lead you to believe.
In conversation, wealth managers kept coming back to the flamboyant vices of their clients. It was quite unexpected, in the course of discussing tax avoidance, to hear professional service providers say things like:
“I’ve told my colleagues: ‘If I ever become like some of our clients, shoot me.’ Because they are really immoral people – too much time on their hands, and all the money means they have no limits. I was actually told by one client not to bring my wife on a trip to Monaco unless I wanted to see her get hit on by 10 guys. The local sport, he said, was picking up other men’s wives.”
The clients of this Geneva-based wealth manager also “believe that they are descended from the pharaohs, and that they were destined to inherit the earth”.
If a poor person voiced such beliefs, he or she might well be institutionalized; for those who work with the wealthy, however, such “eccentricities” are all in a day’s work. Indeed, an underappreciated irony of accelerating economic inequality has been the way it has exposed behaviors among the ultra-rich that mirror the supposed “pathologies” of the ultra-poor.
In fact, one of the London-based wealth managers I interviewed said that a willingness to accept with equanimity behavior that would be considered outrageous in others was an informal job requirement. Clients, he said, specifically chose wealth managers not just on technical competence, but on their ability to remain unscandalized by the private lives of the ultra-rich: “They [the clients] have to pick someone they want to know everything about them: about Mother’s lesbian affairs, Brother’s drug addiction, the spurned lovers bursting into the room.” Many of these clients are not employed and live off family largesse, but no one calls them lazy.
As Lane and Harburg put it in the libretto of the musical Finian’s Rainbow:
When a rich man doesn’t want to work
He’s a bon vivant, yes, he’s a bon vivant
But when a poor man doesn’t want to work
He’s a loafer, he’s a lounger
He’s a lazy good for nothing, he’s a jerk
When the wealthy are revealed to be drug addicts, philanderers, or work-shy, the response is – at most – a frisson of tabloid-level curiosity, followed by a collective shrug.
Behaviors indulged in the rich are not just condemned in the poor, but used as a justification to punish them, denying them access to resources that keep them alive, such as healthcare and food assistance. Discussion of poverty has become almost impossible without moral outrage directed at lazy “welfare queens”, “crackheads” and other drug addicts, and the “promiscuous poor” (a phrase that has cropped up again and again in discussions of public benefits over more than a century).
These disparate perceptions aren’t just evidence of hypocrisy; they are literally a matter of life and death. In the US, the widespread belief that the poor are simply lazy has led many states to impose work requirements on aid recipients –even those who have been medically classified as disabled. Limiting aid programs in this way has been shown to shorten recipients’ lives: rather than the intended consequence of pushing recipients into paid employment, the restrictions have simply left them without access to medical care or a sufficient food supply. Thus, in one of the richest counties in America, a boy living in poverty died of a toothache; there were no protests, and nothing changed.
Meanwhile, the “billionaire” in the White House starts his days at 11am – the rest of the morning is coyly termed “executive time” – and is known for his frequent holidays. “Nice work if you can get it,” quipped an opinion piece in the Washington Post.
We don’t hear much about laziness, drug addiction or promiscuity among the wealthiest members of society because – unlike Trump – most billionaires are not public figures and go to great lengths to seek privacy. Thus the motto of one London-based wealth management firm: “I want to be invisible.” This company, like many other service providers to the ultra-rich, specializes in preserving secrecy for clients. The wealthy people I studied not only had wealth managers but often dedicated staff members who killed negative stories about them in the media and kept their names off the Forbes “rich list”.
Many even present themselves as homeless – for tax purposes – despite owning multiple residences. For the ultra-rich, having no fixed residence provides major legal and financial advantages; this is exemplified by the case of the wealthy businessman who acquired eight different nationalities in order to avoid taxes on his fortune, and by the UK native I interviewed in his Dubai apartment building:
“I am not tax resident anywhere. The tax man says ‘show me a utility bill’, and the only utility bill I can present is for the house I own in Thailand, and it’s in a language that the European authorities aren’t familiar with. With all the mobility going on in the world, international marriages, governments can’t keep up with people.”
Meanwhile, the poor can end up being “resident nowhere” because no one will allow them to stay in one place for very long; as the sociologist Cristobal Young has shown, the majority of migrants are poor people. In addition, the poor are routinely evicted from housing on the slightest pretext, frequently driving them into homeless shelters – which are in turn forced to move when local homeowners engage in nimby (not in my back yard) protests. Even the design of public spaces is increasingly organized to deny the poor a place to alight, however temporarily.
It is as if the right to move around, to take up space, and to direct your own life as you see fit have become luxury goods, available to those who can pay instead of being human rights. For the rich, deviance from social norms is nearly consequence-free, to the point where outright criminality is tolerated: witness the collective shrug that greeted revelations of massive intergenerational tax fraud in the Trump family.
For the poor, however, even the most minor deviance from others’ expectations – like buying ice cream or soft drinks with food stamps – results in stigmatization, limits on their autonomy, and deprivation of basic human needs. This makes life far more nasty, brutish and short for those on the lowest rungs of the socio-economic ladder, creating a chasm of more than 20 years in life expectancy between rich and poor. This appears to some as a fully justified consequence of “personal responsibility” – the poor deserve to die because of their moral failings.
So while the behavior of the ultra-rich gets an ever-widening scope of social leeway, the lives of the poor are foreshortened in every sense. Once upon a time, they were urged to eat cake; now the cake earns them a public scolding.
In conversation, wealth managers kept coming back to the flamboyant vices of their clients. It was quite unexpected, in the course of discussing tax avoidance, to hear professional service providers say things like:
“I’ve told my colleagues: ‘If I ever become like some of our clients, shoot me.’ Because they are really immoral people – too much time on their hands, and all the money means they have no limits. I was actually told by one client not to bring my wife on a trip to Monaco unless I wanted to see her get hit on by 10 guys. The local sport, he said, was picking up other men’s wives.”
The clients of this Geneva-based wealth manager also “believe that they are descended from the pharaohs, and that they were destined to inherit the earth”.
If a poor person voiced such beliefs, he or she might well be institutionalized; for those who work with the wealthy, however, such “eccentricities” are all in a day’s work. Indeed, an underappreciated irony of accelerating economic inequality has been the way it has exposed behaviors among the ultra-rich that mirror the supposed “pathologies” of the ultra-poor.
In fact, one of the London-based wealth managers I interviewed said that a willingness to accept with equanimity behavior that would be considered outrageous in others was an informal job requirement. Clients, he said, specifically chose wealth managers not just on technical competence, but on their ability to remain unscandalized by the private lives of the ultra-rich: “They [the clients] have to pick someone they want to know everything about them: about Mother’s lesbian affairs, Brother’s drug addiction, the spurned lovers bursting into the room.” Many of these clients are not employed and live off family largesse, but no one calls them lazy.
As Lane and Harburg put it in the libretto of the musical Finian’s Rainbow:
When a rich man doesn’t want to work
He’s a bon vivant, yes, he’s a bon vivant
But when a poor man doesn’t want to work
He’s a loafer, he’s a lounger
He’s a lazy good for nothing, he’s a jerk
When the wealthy are revealed to be drug addicts, philanderers, or work-shy, the response is – at most – a frisson of tabloid-level curiosity, followed by a collective shrug.
Behaviors indulged in the rich are not just condemned in the poor, but used as a justification to punish them, denying them access to resources that keep them alive, such as healthcare and food assistance. Discussion of poverty has become almost impossible without moral outrage directed at lazy “welfare queens”, “crackheads” and other drug addicts, and the “promiscuous poor” (a phrase that has cropped up again and again in discussions of public benefits over more than a century).
These disparate perceptions aren’t just evidence of hypocrisy; they are literally a matter of life and death. In the US, the widespread belief that the poor are simply lazy has led many states to impose work requirements on aid recipients –even those who have been medically classified as disabled. Limiting aid programs in this way has been shown to shorten recipients’ lives: rather than the intended consequence of pushing recipients into paid employment, the restrictions have simply left them without access to medical care or a sufficient food supply. Thus, in one of the richest counties in America, a boy living in poverty died of a toothache; there were no protests, and nothing changed.
Meanwhile, the “billionaire” in the White House starts his days at 11am – the rest of the morning is coyly termed “executive time” – and is known for his frequent holidays. “Nice work if you can get it,” quipped an opinion piece in the Washington Post.
We don’t hear much about laziness, drug addiction or promiscuity among the wealthiest members of society because – unlike Trump – most billionaires are not public figures and go to great lengths to seek privacy. Thus the motto of one London-based wealth management firm: “I want to be invisible.” This company, like many other service providers to the ultra-rich, specializes in preserving secrecy for clients. The wealthy people I studied not only had wealth managers but often dedicated staff members who killed negative stories about them in the media and kept their names off the Forbes “rich list”.
Many even present themselves as homeless – for tax purposes – despite owning multiple residences. For the ultra-rich, having no fixed residence provides major legal and financial advantages; this is exemplified by the case of the wealthy businessman who acquired eight different nationalities in order to avoid taxes on his fortune, and by the UK native I interviewed in his Dubai apartment building:
“I am not tax resident anywhere. The tax man says ‘show me a utility bill’, and the only utility bill I can present is for the house I own in Thailand, and it’s in a language that the European authorities aren’t familiar with. With all the mobility going on in the world, international marriages, governments can’t keep up with people.”
Meanwhile, the poor can end up being “resident nowhere” because no one will allow them to stay in one place for very long; as the sociologist Cristobal Young has shown, the majority of migrants are poor people. In addition, the poor are routinely evicted from housing on the slightest pretext, frequently driving them into homeless shelters – which are in turn forced to move when local homeowners engage in nimby (not in my back yard) protests. Even the design of public spaces is increasingly organized to deny the poor a place to alight, however temporarily.
It is as if the right to move around, to take up space, and to direct your own life as you see fit have become luxury goods, available to those who can pay instead of being human rights. For the rich, deviance from social norms is nearly consequence-free, to the point where outright criminality is tolerated: witness the collective shrug that greeted revelations of massive intergenerational tax fraud in the Trump family.
For the poor, however, even the most minor deviance from others’ expectations – like buying ice cream or soft drinks with food stamps – results in stigmatization, limits on their autonomy, and deprivation of basic human needs. This makes life far more nasty, brutish and short for those on the lowest rungs of the socio-economic ladder, creating a chasm of more than 20 years in life expectancy between rich and poor. This appears to some as a fully justified consequence of “personal responsibility” – the poor deserve to die because of their moral failings.
So while the behavior of the ultra-rich gets an ever-widening scope of social leeway, the lives of the poor are foreshortened in every sense. Once upon a time, they were urged to eat cake; now the cake earns them a public scolding.
Meet the billionaire investor who led Sears into bankruptcy
By AIMEE PICCHI, MONEYWATCH -bcbs
October 15, 2018, 2:32 PM
More than a decade ago, hedge fund manager Eddie Lampert touted his merger of Kmart and Sears by saying it would lay the groundwork for a grand revival of the struggling retailers. Sears, an iconic department store chain launched in the late 19th century, employed more than 200,000 workers, operated almost 900 stores and generated annual revenue of $31 billion.
Jump forward to 2018, and Lampert's plans have led Sears not to a turnaround, but straight into bankruptcy court. The store's headcount has been slashed to 90,000, less than half of what it was when Lampert bought Sears in 2004 and combined it with Kmart. Sears's annual revenue has dwindled to $16.7 billion after store closures and shopper defections to rivals such as Target and Walmart. The company has also spun off or sold some its major brands, including Land's End and Craftsman.
Lampert, founder and CEO of private hedge fund ESL Investments, will step down as CEO after leading the company into bankruptcy.
"Today is a day that will live in retail infamy," said Neil Saunders, the managing director of GlobalData Retail, in a research note. "That a storied retailer, once at the pinnacle of the industry, should collapse in such a shabby state of disarray is both terrible and scandalous in equal measure."
Lampert didn't respond to a request for comment. In a statement sent to CBS News, he said he believes Sears "has a future."
"We intend to work closely and collaboratively with other stakeholders to restructure the company's balance sheet using the Chapter 11 framework as quickly and efficiently as possible," the statement said. "ESL invested time and money in Sears because we believe the company has a future."
Like Toys "R" Us' collapse in 2017, Sears's waning fortunes are the result of a number of factors, including both financial and managerial mistakes. Perhaps most egregious, Saunders said, was its leadership's "failure to understand retail and evolve Sears in a way that would have given the chain a fair chance of survival."
Goldman Sachs graduate
Lampert, 56, built his billion-dollar fortune through savvy investments in companies such as AutoZone. His love of investing was sparked by his grandmother, who was a fan of the investment television show "Wall Street Week," according to Bloomberg Businessweek.
After attending Yale, Lampert worked at Goldman Sachs in the 1980s, then started his own investment fund, which he named ESL, after his initials. Investors included moguls such as Dell Computer founder Michael Dell and media mogul David Geffen. In his early years, his fund generated average returns of 25 percent per year, according to The Wall Street Journal.
Despite his preference for staying under the radar, Lampert's success also attracted the attention of criminals. In 2003, Lampert was kidnapped as he left his hedge fund's Connecticut office. Four kidnappers blindfolded and handcuffed him, keeping him for 28 hours in a motel room until he persuaded them that he would pay them $5 million if they released him. Lampert walked half a mile to a police station, and his abductors were later arrested and convicted.
Kmart and Sears: $11 billion mergerBecause of his investments in Liz Claiborne and other companies, Lampert wasn't a stranger to retail when he entered the investment that would lead to him to acquire Sears. In 2002, he snapped up Kmart debt as the discount retailer entered Chapter 11 bankruptcy protection.
Around the same time, ESL was buying shares in Sears, paving the way for Lampert to engineer the merger of the two retailers. In 2004, Kmart announced it would buy Sears for $11 billion, with the idea that the two troubled retailers could somehow fix each other's problems.
"Kmart's combination with Sears makes its retail business stronger," he told New York Magazine in 2004. "We'll be able to allocate the cash that business generates to the highest returns we can find—renovating stores, acquiring other businesses."
Instead, the problems kept mounting.
Inspired by Ayn Rand
Despite Lampert's plans, Sears continued to struggle. Some critics pointed to self-inflicted wounds, such as his reported habit of giving the go-ahead to projects but shutting them down if they didn't quickly show returns.
Lampert, a devotee of the novelist Ayn Rand, reportedly made division heads compete for resources and money, believing that the competition would ignite innovation and sales. Instead, according to Bloomberg, the result was managerial infighting.
At the store level, shoppers weren't happy, either. Sears failed to upgrade stores and keep shelves stocked with enticing merchandise, leading to customer defections.
That led to a vicious cycle of declining revenue and mounting losses as once-loyal customers snubbed Sears, leading to more cutbacks. By 2016, the store that was once America's favorite retailer was so disliked by women shoppers that they said they preferred to shop at Goodwill. The company's debts ballooned, leading to a credit crunch and its decision to file for bankruptcy.
Hundreds of Sears locations will remain after it closes 142 stores, but winning back consumers won't be easy, Saunders said. "In our view, too much rot has set in at Sears to make it viable business," he said. "The brand is now tarnished, just as the economics of its model are firmly stacked against its future success."
Jump forward to 2018, and Lampert's plans have led Sears not to a turnaround, but straight into bankruptcy court. The store's headcount has been slashed to 90,000, less than half of what it was when Lampert bought Sears in 2004 and combined it with Kmart. Sears's annual revenue has dwindled to $16.7 billion after store closures and shopper defections to rivals such as Target and Walmart. The company has also spun off or sold some its major brands, including Land's End and Craftsman.
Lampert, founder and CEO of private hedge fund ESL Investments, will step down as CEO after leading the company into bankruptcy.
"Today is a day that will live in retail infamy," said Neil Saunders, the managing director of GlobalData Retail, in a research note. "That a storied retailer, once at the pinnacle of the industry, should collapse in such a shabby state of disarray is both terrible and scandalous in equal measure."
Lampert didn't respond to a request for comment. In a statement sent to CBS News, he said he believes Sears "has a future."
"We intend to work closely and collaboratively with other stakeholders to restructure the company's balance sheet using the Chapter 11 framework as quickly and efficiently as possible," the statement said. "ESL invested time and money in Sears because we believe the company has a future."
Like Toys "R" Us' collapse in 2017, Sears's waning fortunes are the result of a number of factors, including both financial and managerial mistakes. Perhaps most egregious, Saunders said, was its leadership's "failure to understand retail and evolve Sears in a way that would have given the chain a fair chance of survival."
Goldman Sachs graduate
Lampert, 56, built his billion-dollar fortune through savvy investments in companies such as AutoZone. His love of investing was sparked by his grandmother, who was a fan of the investment television show "Wall Street Week," according to Bloomberg Businessweek.
After attending Yale, Lampert worked at Goldman Sachs in the 1980s, then started his own investment fund, which he named ESL, after his initials. Investors included moguls such as Dell Computer founder Michael Dell and media mogul David Geffen. In his early years, his fund generated average returns of 25 percent per year, according to The Wall Street Journal.
Despite his preference for staying under the radar, Lampert's success also attracted the attention of criminals. In 2003, Lampert was kidnapped as he left his hedge fund's Connecticut office. Four kidnappers blindfolded and handcuffed him, keeping him for 28 hours in a motel room until he persuaded them that he would pay them $5 million if they released him. Lampert walked half a mile to a police station, and his abductors were later arrested and convicted.
Kmart and Sears: $11 billion mergerBecause of his investments in Liz Claiborne and other companies, Lampert wasn't a stranger to retail when he entered the investment that would lead to him to acquire Sears. In 2002, he snapped up Kmart debt as the discount retailer entered Chapter 11 bankruptcy protection.
Around the same time, ESL was buying shares in Sears, paving the way for Lampert to engineer the merger of the two retailers. In 2004, Kmart announced it would buy Sears for $11 billion, with the idea that the two troubled retailers could somehow fix each other's problems.
"Kmart's combination with Sears makes its retail business stronger," he told New York Magazine in 2004. "We'll be able to allocate the cash that business generates to the highest returns we can find—renovating stores, acquiring other businesses."
Instead, the problems kept mounting.
Inspired by Ayn Rand
Despite Lampert's plans, Sears continued to struggle. Some critics pointed to self-inflicted wounds, such as his reported habit of giving the go-ahead to projects but shutting them down if they didn't quickly show returns.
Lampert, a devotee of the novelist Ayn Rand, reportedly made division heads compete for resources and money, believing that the competition would ignite innovation and sales. Instead, according to Bloomberg, the result was managerial infighting.
At the store level, shoppers weren't happy, either. Sears failed to upgrade stores and keep shelves stocked with enticing merchandise, leading to customer defections.
That led to a vicious cycle of declining revenue and mounting losses as once-loyal customers snubbed Sears, leading to more cutbacks. By 2016, the store that was once America's favorite retailer was so disliked by women shoppers that they said they preferred to shop at Goodwill. The company's debts ballooned, leading to a credit crunch and its decision to file for bankruptcy.
Hundreds of Sears locations will remain after it closes 142 stores, but winning back consumers won't be easy, Saunders said. "In our view, too much rot has set in at Sears to make it viable business," he said. "The brand is now tarnished, just as the economics of its model are firmly stacked against its future success."
Still Feeling Peckish
always feeing peckish
another corporate ripoff in a city run by idiots!!!
Ford demands millions from taxpayers to rehab icon of Detroit's blight
Automaker’s plans come at a $740m price, of which taxpayers would cover $239m, and insists public assistance is necessary
Tom Perkins in Detroit
the guardian
Mon 15 Oct 2018 03.00 EDT
For three decades, the 18-story, beaux arts Michigan Central Station sat vacant on downtown Detroit’s edge, a hulking, decaying symbol of the economic struggles in the city around it. Today, as greater downtown rebounds, it’s one of the last vestiges of an era the city is trying to put behind it.
But that’s likely to change. In May, Dearborn-based automaker Fordannounced plans to spend $740m on a new 1.2 million-square-foot autonomous vehicle campus of which a rehab of the 105-year-old train station is the centerpiece. One problem: it wants taxpayers to cover $239m of the $740m price tag.
The public would do so with a package of tax incentives pulling money from the city, state, county, and local schools. On Tuesday, the Detroit City Council will consider $103m in incentives that would come from the city, and, ahead of the vote, Ford is insisting the project isn’t financially feasible without public assistance.
However, there’s debate over whether a city that emerged from bankruptcy just three years ago and only has $169m in its unassigned fund balance should approve a lucrative tax deal for a multinational corporation with nearly $17bn on hand. Council president pro tem Mary Sheffield called parts of the package “excessive”, while a range of residents and community groups are vocally opposed.
“In a perfect world, we wouldn’t have these incentives at all, but that’s not our political reality in Detroit,” said Linda Ward of Equitable Detroit, a group pushing for a stronger community benefits agreement for the deal. She called the $10m community benefits agreement Ford is offering “meager”.
Meanwhile, the right-leaning Mackinac Center pointed to studies that show tax incentives often don’t result in the desired economic impact, partly because they divert funding from other city services.
“In this case, that could mean fire and police equipment not purchased or repaired; school books unbought; or even broad-based tax relief for all businesses, not just one,” said Michael LaFaive, the Mackinac Center’s fiscal policy director. “Government ultimately has nothing to give anyone it doesn’t take from someone else.”
Though approval of the deal won’t immediately divert school funds, there’s still concern over the optics of giving Ford school money when the financially struggling Detroit Public Schools Community District can’t afford to address elevated lead levels in its buildings’ water.
In making the case for public assistance, Ford is highlighting the project’s scope. The 500,000-square-foot station would hold offices, condos in its top two floors, and retail and restaurants on the ground floor. It’s targeting a 2022 completion at which time the campus may hold 5,000 employees, most of whom will relocate from Ford’s Dearborn headquarters or its suppliers. In other words, these are largely not new positions, and there are no clawbacks built into the deal if the jobs don’t materialize.
The city and Ford are also touting an estimated $370m net benefit to Detroit over the incentives’ 34-year life.
“The benefits to the city in the form of jobs and income tax revenue are immediate and far outweigh the cost of a property tax incentive,” said Arthur Jemison, the city’s chief of infrastructure and services. Critics, however, have noted these claims are based off city and Ford projections – not those of an independent body – and are full of vague assumptions.
Beyond the benefit claims, there’s symbolism in the city’s and company’s narratives intersecting in the train station’s revival, which makes for excellent PR – Detroit’s charting its comeback, and so is Ford, in a sense, as it embarks on a massive reorganization.
“It’s not just a building,” Ford Executive Chairman Bill Ford Jr. told The Detroit News in June, it’s “about all the connections to Detroit, to the suburbs, and the vision around developing the next generation of transportation.”
Without the taxpayers’ help, that vision might disappear, the company claims, while regularly raising the idea of demolition as an alternative.
“The building has been shot for three decades and there’s been significant damage over all those years, so the cost to renovate a structure like that is so significant that it would be cost prohibitive [without public assistance],” Ford spokesperson Christina Twelftree told the The Guardian. “The cost to demolish is far less.”
She also denied there’s much opposition to the incentives, but aside from Equitable Detroit and the Mackinac Center, liberal Detroit Free Press columnist Nancy Kaffer wrote in a September column that officials pushing for such incentive packages are “more concerned with scoring high-profile wins than making sustainable progress toward a healthy city and state”, and urged Detroit “to call Ford’s bluff”.
Indeed, Detroit regularly hands out subsidies to wealthy developers, including $250m – with school money – for Quicken Loans’ founder Dan Gilbert. That was part of a larger state package worth $618m.
At a city council committee meeting last week, council member Raquel Castañeda López voiced concerns about housing affordability for current residents, the project’s environmental impact, and the need for additional community benefits, several of which Ford declined to commit to addressing.
Equitable Detroit’s Ward says they’re also focusing on securing a stronger community benefits agreement, and will ask city council to demand more benefits prior to approving the deal.
“The reality is [city council is] going to give them the abatement. Given that reality, we’re asking ‘What is it that Detroiters should reasonably expect in return?’” Ward said.
She and Equitable Detroit’s Amina Kirk said the Neighborhood Advisory Council that ultimately approved the deal’s community benefits agreement discussed a package worth between $39m and $75m, which they say is in line with similar agreements in other cities.
They charge that Ford didn’t negotiate when it counter-offered a deal worth $10m, and further questioned the entire process, along with the philosophy driving the conversation over corporate welfare in Detroit.
“There’s a narrative of scarcity that says we have to be grateful for whatever we’re offered because we’re Detroit … and we shouldn’t have standards and requirements of corporations because we need development at all costs,” Kirk said. “That’s a stream of propaganda from developers, and it’s a race to the bottom.”
But that’s likely to change. In May, Dearborn-based automaker Fordannounced plans to spend $740m on a new 1.2 million-square-foot autonomous vehicle campus of which a rehab of the 105-year-old train station is the centerpiece. One problem: it wants taxpayers to cover $239m of the $740m price tag.
The public would do so with a package of tax incentives pulling money from the city, state, county, and local schools. On Tuesday, the Detroit City Council will consider $103m in incentives that would come from the city, and, ahead of the vote, Ford is insisting the project isn’t financially feasible without public assistance.
However, there’s debate over whether a city that emerged from bankruptcy just three years ago and only has $169m in its unassigned fund balance should approve a lucrative tax deal for a multinational corporation with nearly $17bn on hand. Council president pro tem Mary Sheffield called parts of the package “excessive”, while a range of residents and community groups are vocally opposed.
“In a perfect world, we wouldn’t have these incentives at all, but that’s not our political reality in Detroit,” said Linda Ward of Equitable Detroit, a group pushing for a stronger community benefits agreement for the deal. She called the $10m community benefits agreement Ford is offering “meager”.
Meanwhile, the right-leaning Mackinac Center pointed to studies that show tax incentives often don’t result in the desired economic impact, partly because they divert funding from other city services.
“In this case, that could mean fire and police equipment not purchased or repaired; school books unbought; or even broad-based tax relief for all businesses, not just one,” said Michael LaFaive, the Mackinac Center’s fiscal policy director. “Government ultimately has nothing to give anyone it doesn’t take from someone else.”
Though approval of the deal won’t immediately divert school funds, there’s still concern over the optics of giving Ford school money when the financially struggling Detroit Public Schools Community District can’t afford to address elevated lead levels in its buildings’ water.
In making the case for public assistance, Ford is highlighting the project’s scope. The 500,000-square-foot station would hold offices, condos in its top two floors, and retail and restaurants on the ground floor. It’s targeting a 2022 completion at which time the campus may hold 5,000 employees, most of whom will relocate from Ford’s Dearborn headquarters or its suppliers. In other words, these are largely not new positions, and there are no clawbacks built into the deal if the jobs don’t materialize.
The city and Ford are also touting an estimated $370m net benefit to Detroit over the incentives’ 34-year life.
“The benefits to the city in the form of jobs and income tax revenue are immediate and far outweigh the cost of a property tax incentive,” said Arthur Jemison, the city’s chief of infrastructure and services. Critics, however, have noted these claims are based off city and Ford projections – not those of an independent body – and are full of vague assumptions.
Beyond the benefit claims, there’s symbolism in the city’s and company’s narratives intersecting in the train station’s revival, which makes for excellent PR – Detroit’s charting its comeback, and so is Ford, in a sense, as it embarks on a massive reorganization.
“It’s not just a building,” Ford Executive Chairman Bill Ford Jr. told The Detroit News in June, it’s “about all the connections to Detroit, to the suburbs, and the vision around developing the next generation of transportation.”
Without the taxpayers’ help, that vision might disappear, the company claims, while regularly raising the idea of demolition as an alternative.
“The building has been shot for three decades and there’s been significant damage over all those years, so the cost to renovate a structure like that is so significant that it would be cost prohibitive [without public assistance],” Ford spokesperson Christina Twelftree told the The Guardian. “The cost to demolish is far less.”
She also denied there’s much opposition to the incentives, but aside from Equitable Detroit and the Mackinac Center, liberal Detroit Free Press columnist Nancy Kaffer wrote in a September column that officials pushing for such incentive packages are “more concerned with scoring high-profile wins than making sustainable progress toward a healthy city and state”, and urged Detroit “to call Ford’s bluff”.
Indeed, Detroit regularly hands out subsidies to wealthy developers, including $250m – with school money – for Quicken Loans’ founder Dan Gilbert. That was part of a larger state package worth $618m.
At a city council committee meeting last week, council member Raquel Castañeda López voiced concerns about housing affordability for current residents, the project’s environmental impact, and the need for additional community benefits, several of which Ford declined to commit to addressing.
Equitable Detroit’s Ward says they’re also focusing on securing a stronger community benefits agreement, and will ask city council to demand more benefits prior to approving the deal.
“The reality is [city council is] going to give them the abatement. Given that reality, we’re asking ‘What is it that Detroiters should reasonably expect in return?’” Ward said.
She and Equitable Detroit’s Amina Kirk said the Neighborhood Advisory Council that ultimately approved the deal’s community benefits agreement discussed a package worth between $39m and $75m, which they say is in line with similar agreements in other cities.
They charge that Ford didn’t negotiate when it counter-offered a deal worth $10m, and further questioned the entire process, along with the philosophy driving the conversation over corporate welfare in Detroit.
“There’s a narrative of scarcity that says we have to be grateful for whatever we’re offered because we’re Detroit … and we shouldn’t have standards and requirements of corporations because we need development at all costs,” Kirk said. “That’s a stream of propaganda from developers, and it’s a race to the bottom.”
The U.S. economy swoons on the lip of the global debt canyon
Pomises, rickety scaffolds and sleight of hand won’t bolster the global economy, only real growth will
BOB HENNELLY - salon
OCTOBER 14, 2018 12:00PM (UTC)
Fear and greed were on display this week with the global sell-off of stocks. To get a sense of just how much wealth was destroyed in the panic consider that Amazon CEO Jeff Bezos , who also owns the Washington Post, lost $9.08 billion on just Wednesday, bringing his wealth down to $145 billion.
So, what spooked the markets?
A sell-off in the bond market that was sparked by the growing realization among investors that there is likely to be an economic slowdown as a consequence of the Federal Reserve raising interest rates after almost a decade of keeping them artificially low to ease the U.S. out of the Great Recession.
This so called “quantitative easing” is when a central bank, like the Federal Reserve, buys government securities to keep interest rates artificially low, while increasing the money supply and in the process floods financial institutions with liquidity to spark increased lending.
This “quantitative easing” strategy was also used by the Bank of England and the European Central Bank.
Of course, the other side of the transaction of lending is borrowing. In the process of all of this “easing” the developed and emerging markets took on massive amounts of debt which all seemed to be predicated on either low interest rates forever, or the creation of real economic growth that could then pay down the debt.
Sufficient economic growth didn’t happen. So, that debt is still hanging out there and it has been growing.
Back in October of 2016, the International Monetary Fund sounded the alarm that the planet’s governments had to confront a record $152 trillion pile of debt before it sparked a financial and economic meltdown.
Without prompt attention the IMF warned of “a repeat of the damaging events that began with the collapse of the US subprime housing bubble almost a decade ago,” the Guardian reported.
Using as a benchmark its half-yearly fiscal monitoring of 113 countries the IMF reported “that debt was currently 225 percent of global GDP, with the private sector responsible for two-thirds of the total.”
“A crucial message from the fiscal monitor is that when private debt is on an unsustainable path it is important to intervene early on in the process to make sure financial crises and recessions can be prevented,” Vitor Gaspar, the director of the IMF’s fiscal affairs department, told the Guardian. “Gaspar said debt was unevenly spread and concentrated in the advanced countries of the west and some of the big emerging market economies such as China.”
Scroll forward to July of 2018 and the Institute of International Finance reported that global debt had hit $247 trillion by the first quarter of 2018, a new record. That’s $95 trillion higher than the old record just two years earlier.
Are you sensing a similarity here between our grotesque failure to come to terms with climate change, which the United Nations now warns we have a dozen years to reverse, and our inability to come to terms with the debt blob? It’s like that perennial pledge to lose weight.
Here at home, corporate debt is blinking red on the macroeconomic dashboard. Last month USA Today reported that a decade after the “financial crisis, the seeds are being sown for the next potential meltdown.”
“This time, the tinder isn’t subprime mortgages but a mountain of risky corporate debt that looks eerily similar,” the paper reported, noting that there was a record $4.3 trillion in lower-quality corporate loans and high-yield bonds, up from $2.4 trillion in 2010. “I view this as the most severe threat to the economy and financial system,” Mark Zandi, chief economist of Moody’s Analytics told USA Today.
Meanwhile, on Main Street American households are on track to take on $4 trillion in consumer debt by the end of this year according to CNBC.
“Americans owe more than 26 percent of their annual income to this debt,” CNBC reported. “That’s up from 22 percent in 2010. It’s also higher than debt levels during the mid-2000s when credit availability soared.”
And no recitation of obscene debt levels would be complete without including the handiwork of the Trump/Ryan/McConnell wrecking crew with their $1.5 trillion tax cut heavily weighted to the wealthiest individuals and largest multinational corporations.
They shrunk the amount of revenue coming into the government and shifted that flow to their already wealthy donors, leaving a mountain of public debt behind.
“The Congressional Budget Office still projects debt rising very quickly, with particularly fast growth in the amount America spends on its debt interest payments,” reports the Washington Post. “Interest costs are expected to approximately double as a share of the economy over the next decade and even overtake the cost of funding Social Security — the biggest expenditure in the Federal budget by 2048.”
The tax cut was billed as a way to encourage U.S. multinationals to repatriate the close to $2 trillion in cash they had “stranded” overseas. But as former Labor Secretary Robert Reich wrote in the American Prospect, instead of investing in pay raises for workers and new equipment they gave their CEOs bonuses and bought back their own stock.
“Now that the new corporate tax cut is pumping up profits, buybacks are on track to hit a record $800 billion this year,” wrote Reich. “For years, corporations have spent most of their profits on buying back their own shares of stock, instead of increasing the wages of their employees, whose hard work creates these profits.”
The former Clinton Labor Secretary notes that up until 1982 stock buybacks were illegal.
He continued, “Stock buybacks are artificial efforts to interfere in the so-called “free market” to prop up stock prices. Because they create an artificial demand, they force stock prices above their natural level. With fewer shares in circulation, each remaining share is worth more.”
By Friday, the markets were back, whistling past the multiple fault lines that last week’s stock market swoon brought into base relief.
Traditionally, in our binary demented world of global high finance we divide investors into two distinct species, the bears, ever pessimistic that always bank on a downturn, and the bulls, who are insanely optimistic and expect the new market high is always just around the corner.
I submit that last week’s drop was the work of a pack of investors I dub the Wile E. Coyotes, who for years were running in pursuit of profits until they realized there was no earth under their feet and then ran out of momentum, looked down into a bottomless canyon of debt and just lost their mojo.
Gravity trumps markets every time. That deep debt canyon is still there just waiting.
So, what spooked the markets?
A sell-off in the bond market that was sparked by the growing realization among investors that there is likely to be an economic slowdown as a consequence of the Federal Reserve raising interest rates after almost a decade of keeping them artificially low to ease the U.S. out of the Great Recession.
This so called “quantitative easing” is when a central bank, like the Federal Reserve, buys government securities to keep interest rates artificially low, while increasing the money supply and in the process floods financial institutions with liquidity to spark increased lending.
This “quantitative easing” strategy was also used by the Bank of England and the European Central Bank.
Of course, the other side of the transaction of lending is borrowing. In the process of all of this “easing” the developed and emerging markets took on massive amounts of debt which all seemed to be predicated on either low interest rates forever, or the creation of real economic growth that could then pay down the debt.
Sufficient economic growth didn’t happen. So, that debt is still hanging out there and it has been growing.
Back in October of 2016, the International Monetary Fund sounded the alarm that the planet’s governments had to confront a record $152 trillion pile of debt before it sparked a financial and economic meltdown.
Without prompt attention the IMF warned of “a repeat of the damaging events that began with the collapse of the US subprime housing bubble almost a decade ago,” the Guardian reported.
Using as a benchmark its half-yearly fiscal monitoring of 113 countries the IMF reported “that debt was currently 225 percent of global GDP, with the private sector responsible for two-thirds of the total.”
“A crucial message from the fiscal monitor is that when private debt is on an unsustainable path it is important to intervene early on in the process to make sure financial crises and recessions can be prevented,” Vitor Gaspar, the director of the IMF’s fiscal affairs department, told the Guardian. “Gaspar said debt was unevenly spread and concentrated in the advanced countries of the west and some of the big emerging market economies such as China.”
Scroll forward to July of 2018 and the Institute of International Finance reported that global debt had hit $247 trillion by the first quarter of 2018, a new record. That’s $95 trillion higher than the old record just two years earlier.
Are you sensing a similarity here between our grotesque failure to come to terms with climate change, which the United Nations now warns we have a dozen years to reverse, and our inability to come to terms with the debt blob? It’s like that perennial pledge to lose weight.
Here at home, corporate debt is blinking red on the macroeconomic dashboard. Last month USA Today reported that a decade after the “financial crisis, the seeds are being sown for the next potential meltdown.”
“This time, the tinder isn’t subprime mortgages but a mountain of risky corporate debt that looks eerily similar,” the paper reported, noting that there was a record $4.3 trillion in lower-quality corporate loans and high-yield bonds, up from $2.4 trillion in 2010. “I view this as the most severe threat to the economy and financial system,” Mark Zandi, chief economist of Moody’s Analytics told USA Today.
Meanwhile, on Main Street American households are on track to take on $4 trillion in consumer debt by the end of this year according to CNBC.
“Americans owe more than 26 percent of their annual income to this debt,” CNBC reported. “That’s up from 22 percent in 2010. It’s also higher than debt levels during the mid-2000s when credit availability soared.”
And no recitation of obscene debt levels would be complete without including the handiwork of the Trump/Ryan/McConnell wrecking crew with their $1.5 trillion tax cut heavily weighted to the wealthiest individuals and largest multinational corporations.
They shrunk the amount of revenue coming into the government and shifted that flow to their already wealthy donors, leaving a mountain of public debt behind.
“The Congressional Budget Office still projects debt rising very quickly, with particularly fast growth in the amount America spends on its debt interest payments,” reports the Washington Post. “Interest costs are expected to approximately double as a share of the economy over the next decade and even overtake the cost of funding Social Security — the biggest expenditure in the Federal budget by 2048.”
The tax cut was billed as a way to encourage U.S. multinationals to repatriate the close to $2 trillion in cash they had “stranded” overseas. But as former Labor Secretary Robert Reich wrote in the American Prospect, instead of investing in pay raises for workers and new equipment they gave their CEOs bonuses and bought back their own stock.
“Now that the new corporate tax cut is pumping up profits, buybacks are on track to hit a record $800 billion this year,” wrote Reich. “For years, corporations have spent most of their profits on buying back their own shares of stock, instead of increasing the wages of their employees, whose hard work creates these profits.”
The former Clinton Labor Secretary notes that up until 1982 stock buybacks were illegal.
He continued, “Stock buybacks are artificial efforts to interfere in the so-called “free market” to prop up stock prices. Because they create an artificial demand, they force stock prices above their natural level. With fewer shares in circulation, each remaining share is worth more.”
By Friday, the markets were back, whistling past the multiple fault lines that last week’s stock market swoon brought into base relief.
Traditionally, in our binary demented world of global high finance we divide investors into two distinct species, the bears, ever pessimistic that always bank on a downturn, and the bulls, who are insanely optimistic and expect the new market high is always just around the corner.
I submit that last week’s drop was the work of a pack of investors I dub the Wile E. Coyotes, who for years were running in pursuit of profits until they realized there was no earth under their feet and then ran out of momentum, looked down into a bottomless canyon of debt and just lost their mojo.
Gravity trumps markets every time. That deep debt canyon is still there just waiting.
WALL STREET IS SPENDING BIG TO PROTECT ITS ABILITY TO JACK UP RENTS IN CALIFORNIA
David Dayen - the inteercept
October 12 2018, 9:17 a.m.
FOR SOME ON Wall Street, the financial crash of 2008 represented a once-in-a-lifetime opportunity. Homeowners who’d been walloped by the very crisis Wall Street had created were struggling to pay their mortgages, so financiers swooped in and bought up foreclosed homes, knowing the assets would eventually rise in price again.
But with so many people foreclosed on and out of work, selling the homes was difficult, so Wall Street hit on a different approach: renting them out. Now, the biggest practitioner of this gambit is spending heavily to make sure it stays lucrative.
Blackstone Group, a private equity giant that is also now the world’s largest real estate management firm, has pumped in $6,859,747 so far to battle a ballot measure in California that would allow cities to re-establish rent control laws, including on single-family homes. That figure constitutes $1 out of every $7 supporting the “No on Prop 10″ campaign and is part of a $45.5 million assault, mostly from corporate landlords and property developers, on the right of cities to determine their own rental laws.
Currently, cities in California are banned from pursuing rent control for apartments built after 1995 and for all single-family home rentals, of which there are 2 million in the state. Blackstone has a portfolio of over 12,700 single-family rentals in California, and if it helps defeat Prop 10, the firm can continue to jack up rents to an unlimited degree.
“If rent control on these properties really made housing more expensive, Wall Street landlords would love it, but Prop 10 specifically targets them by repealing the loophole that they rely on to extract profit from working-class people,” said Arielle Sallai, a member of the Los Angeles chapter of the Democratic Socialists of America, one of hundreds of groups trying to pass the initiative amid opposition from the likes of Blackstone.
To put the nearly $7 million investment into perspective, Blackstone CEO Stephen Schwarzman earned $786 million by himself in 2017. Though Wall Streeters have begun to swing their donations toward Democrats in 2018, Schwarzman has put millions into Republican campaigns and was a key adviser to President Donald Trump, chairing his CEO policy counciluntil it was disbanded after the 2017 white supremacist rally in Charlottesville, Virginia.
Schwarzman’s company has bet big on real estate: It currently possesses $119 billion in assets, and a new fund is expected to generate another $18 billion in capital for more purchases. Blackstone has spent around $10 billion for its single-family home portfolio, “in a classic case of disaster capitalism,” according to Steve Ducey of DSA’s Los Angeles chapter.
Blackstone’s donations to fight rent control have come in waves. There are two primary accounts for the “No on Prop 10″ campaign: Californians for Responsible Housing and No on Prop 10 – A Flawed Initiative. Blackstone began with a $250,000 donation to Californians for Responsible Housing on May 2, before the measure even qualified for the November ballot. On July 9, Invitation Homes — Blackstone’s residential property management subsidiary and, after a merger with Starwood Waypoint Homes, the industry leader in single-family rentals — gave $642,200 to the opposition effort.
On August 31, Blackstone dropped $325,499 into the Californians for Responsible Housing account and $2,999,998 into the Flawed Initiative account. Invitation Homes gave another $642,050 to Californians for Responsible Housing on October 3, and Blackstone closed out the contributions — for now — with $2 million to Flawed Initiative on October 5.
In all, Blackstone has donated $5,575,497 in its own name and $1,284,250 via Invitation Homes, for a total of $6,859,747, according to figures from the California secretary of state’s office. That comes to 15.09 percent of the “No” campaign’s total receipts in those two main accounts, and more than half of the $13.3 million that the “Yes on Prop 10″ campaign has been able to raise in its two separate accounts.
This map of single-family rental properties in Southern California explains why Blackstone is making such an investment to block rent control. They have spent around $540 per California property on the “No on Prop 10″ effort — a piddling amount to maintain the right to increase monthly rents by unlimited amounts.
“This is just another case of capitalism not only failing to provide shelter, a basic human need, but profiting off human suffering on a massive scale,” said Ducey. “With their donations to the ‘No on 10′ campaign, they are using tenants’ own money against them to ensure they can continue to gouge struggling families at will.”
Former tenants of Invitation Homes properties have complained for yearsabout substandard conditions in the properties, like black mold, raw sewage, and swarms of giant spiders. Because the company targets and saturates specific neighborhoods, it can keep homes in bad condition and steadily increase rents, with tenants lacking alternative rentals.
“While we are operating as if this is a pre-foreclosure rental market, the Wall Street landlords found EVERY loophole in our system — a system that previously had laws in place that kept the power in check between landlords and tenants,” said Dana Chisholm, a former Invitation Homes renter in La Mirada, California.
Chisholm, a Trump-supporting conservative, says her Invitation Homes rental had rats and roaches, an air conditioning unit that was too small to cool the house, and a pool that leaked water, with the water bill paid by the tenant. “There are NO REMEDIES to fight your landlord because the landlord has more money than god!” Chisholm said. “So they can out wait you, out frustrate you, out threaten you with homelessness and ruined credit and an eviction on your record and sit pretty driving their Teslas living in one of their mansions.”
She has organized to help other Invitation Homes tenants and initiated a class-action lawsuit against Invitation Homes for “stacking” fees. The suit alleges that the company charges $95 if the rent is one minute late, and maintains an online payment portal that frequently goes offline, leading to those late payments and triggering more penalties and fees. The lawsuit is one of several around the country accusing Invitation Homes of imposing excessive fees, carrying out illegal evictions, and being slow to make repairs.
In a statement, an Invitation Homes spokesperson said they are “proud to provide quality, affordable housing choices for our residents in California and around the country.” The spokesperson referred to $2 billion in upfront renovations on the properties, adding, “Those investments play an important role in stabilizing local housing markets and supporting economic growth and job creation in California communities.” They also cited high renewal rates and self-generated resident survey scores of 4.3 out of five stars.
PROP 10 WOULD repeal the Costa-Hawkins Act, a 1995 state law that blocked cities and counties from establishing new rent control laws. Costa-Hawkins also incentivizes evictions, allowing landlords to raise rents to market rates when units become vacant, even if that unit was previously rent-controlled. Critics contend that the law has contributed to a housing crisis in California. In every metropolitan area in the state, between 30 and 60 percent of the population cannot afford local rents.
If Prop 10 passes, rent control would not automatically be instituted; instead, cities would merely have the opportunity to pass their own local ordinances. State law requires that landlords get a “fair rate of return” on their properties, which Prop 10 would not affect.
The opposition to Prop 10, which includes Blackstone and numerous other property managers, admits that there’s a state housing crisis, but argues that rent control would exacerbate it by halting needed construction and leading to conversions to owner-occupied units, taking rental housing off the market. For example, the Invitation Homes spokesperson said, “We agree with the economists and housing policy experts who have stated that the solution to affordable housing is not rent control but more housing. … [R]ent control dampens new housing starts and investment in existing housing.”
Supporters believe rent control can be part of a toolbox to prevent rents from soaring. They cite studies showing that construction rates in rent-controlled cities mirror rates in cities without rent control. Cities could also exempt new units from rent control in order to incentivize building.
Meanwhile, reports indicate that landlords in several California cities are threatening their own tenants by giving 60-day eviction notices and instituting rent increases. Some tenants have been told that these measures would only be canceled if Prop 10 fails. “Landlords are using their position of leverage in providing housing to sway the tenant vote,” said a spokesperson for Tenants Together, a renters’ rights organization.
Despite the affordable housing crisis, public polling shows Prop 10 trailingby double digits. In California, initiative campaigns typically fail when the opposition has significant financial support. That’s good news for Blackstone, which looks to get a huge return on its nearly $7 million investment.
The $45 million from the “No on Prop 10″ campaign is not the most expensive opposition campaign to an initiative on this year’s ballot, incredibly enough. Two outpatient dialysis companies, DaVita and Fresenius, have donated $90 million as part of a $99.3 million campaign to defeat Proposition 8, which would put a cap on their profits.
Though Invitation Homes provided a statement, Blackstone did not return requests for comment. Blackstone’s Schwarzman may have been preoccupied with preparing for an investor conference in Riyadh, Saudi Arabia — days after the alleged state-sponsored murder of journalist Jamal Khashoggi, a critic of the Saudi regime — held at the same Ritz-Carlton Hotel where Crown Prince Mohammed bin Salman jailed dozens of rivals for weeks last year in a bid to consolidate power.
But with so many people foreclosed on and out of work, selling the homes was difficult, so Wall Street hit on a different approach: renting them out. Now, the biggest practitioner of this gambit is spending heavily to make sure it stays lucrative.
Blackstone Group, a private equity giant that is also now the world’s largest real estate management firm, has pumped in $6,859,747 so far to battle a ballot measure in California that would allow cities to re-establish rent control laws, including on single-family homes. That figure constitutes $1 out of every $7 supporting the “No on Prop 10″ campaign and is part of a $45.5 million assault, mostly from corporate landlords and property developers, on the right of cities to determine their own rental laws.
Currently, cities in California are banned from pursuing rent control for apartments built after 1995 and for all single-family home rentals, of which there are 2 million in the state. Blackstone has a portfolio of over 12,700 single-family rentals in California, and if it helps defeat Prop 10, the firm can continue to jack up rents to an unlimited degree.
“If rent control on these properties really made housing more expensive, Wall Street landlords would love it, but Prop 10 specifically targets them by repealing the loophole that they rely on to extract profit from working-class people,” said Arielle Sallai, a member of the Los Angeles chapter of the Democratic Socialists of America, one of hundreds of groups trying to pass the initiative amid opposition from the likes of Blackstone.
To put the nearly $7 million investment into perspective, Blackstone CEO Stephen Schwarzman earned $786 million by himself in 2017. Though Wall Streeters have begun to swing their donations toward Democrats in 2018, Schwarzman has put millions into Republican campaigns and was a key adviser to President Donald Trump, chairing his CEO policy counciluntil it was disbanded after the 2017 white supremacist rally in Charlottesville, Virginia.
Schwarzman’s company has bet big on real estate: It currently possesses $119 billion in assets, and a new fund is expected to generate another $18 billion in capital for more purchases. Blackstone has spent around $10 billion for its single-family home portfolio, “in a classic case of disaster capitalism,” according to Steve Ducey of DSA’s Los Angeles chapter.
Blackstone’s donations to fight rent control have come in waves. There are two primary accounts for the “No on Prop 10″ campaign: Californians for Responsible Housing and No on Prop 10 – A Flawed Initiative. Blackstone began with a $250,000 donation to Californians for Responsible Housing on May 2, before the measure even qualified for the November ballot. On July 9, Invitation Homes — Blackstone’s residential property management subsidiary and, after a merger with Starwood Waypoint Homes, the industry leader in single-family rentals — gave $642,200 to the opposition effort.
On August 31, Blackstone dropped $325,499 into the Californians for Responsible Housing account and $2,999,998 into the Flawed Initiative account. Invitation Homes gave another $642,050 to Californians for Responsible Housing on October 3, and Blackstone closed out the contributions — for now — with $2 million to Flawed Initiative on October 5.
In all, Blackstone has donated $5,575,497 in its own name and $1,284,250 via Invitation Homes, for a total of $6,859,747, according to figures from the California secretary of state’s office. That comes to 15.09 percent of the “No” campaign’s total receipts in those two main accounts, and more than half of the $13.3 million that the “Yes on Prop 10″ campaign has been able to raise in its two separate accounts.
This map of single-family rental properties in Southern California explains why Blackstone is making such an investment to block rent control. They have spent around $540 per California property on the “No on Prop 10″ effort — a piddling amount to maintain the right to increase monthly rents by unlimited amounts.
“This is just another case of capitalism not only failing to provide shelter, a basic human need, but profiting off human suffering on a massive scale,” said Ducey. “With their donations to the ‘No on 10′ campaign, they are using tenants’ own money against them to ensure they can continue to gouge struggling families at will.”
Former tenants of Invitation Homes properties have complained for yearsabout substandard conditions in the properties, like black mold, raw sewage, and swarms of giant spiders. Because the company targets and saturates specific neighborhoods, it can keep homes in bad condition and steadily increase rents, with tenants lacking alternative rentals.
“While we are operating as if this is a pre-foreclosure rental market, the Wall Street landlords found EVERY loophole in our system — a system that previously had laws in place that kept the power in check between landlords and tenants,” said Dana Chisholm, a former Invitation Homes renter in La Mirada, California.
Chisholm, a Trump-supporting conservative, says her Invitation Homes rental had rats and roaches, an air conditioning unit that was too small to cool the house, and a pool that leaked water, with the water bill paid by the tenant. “There are NO REMEDIES to fight your landlord because the landlord has more money than god!” Chisholm said. “So they can out wait you, out frustrate you, out threaten you with homelessness and ruined credit and an eviction on your record and sit pretty driving their Teslas living in one of their mansions.”
She has organized to help other Invitation Homes tenants and initiated a class-action lawsuit against Invitation Homes for “stacking” fees. The suit alleges that the company charges $95 if the rent is one minute late, and maintains an online payment portal that frequently goes offline, leading to those late payments and triggering more penalties and fees. The lawsuit is one of several around the country accusing Invitation Homes of imposing excessive fees, carrying out illegal evictions, and being slow to make repairs.
In a statement, an Invitation Homes spokesperson said they are “proud to provide quality, affordable housing choices for our residents in California and around the country.” The spokesperson referred to $2 billion in upfront renovations on the properties, adding, “Those investments play an important role in stabilizing local housing markets and supporting economic growth and job creation in California communities.” They also cited high renewal rates and self-generated resident survey scores of 4.3 out of five stars.
PROP 10 WOULD repeal the Costa-Hawkins Act, a 1995 state law that blocked cities and counties from establishing new rent control laws. Costa-Hawkins also incentivizes evictions, allowing landlords to raise rents to market rates when units become vacant, even if that unit was previously rent-controlled. Critics contend that the law has contributed to a housing crisis in California. In every metropolitan area in the state, between 30 and 60 percent of the population cannot afford local rents.
If Prop 10 passes, rent control would not automatically be instituted; instead, cities would merely have the opportunity to pass their own local ordinances. State law requires that landlords get a “fair rate of return” on their properties, which Prop 10 would not affect.
The opposition to Prop 10, which includes Blackstone and numerous other property managers, admits that there’s a state housing crisis, but argues that rent control would exacerbate it by halting needed construction and leading to conversions to owner-occupied units, taking rental housing off the market. For example, the Invitation Homes spokesperson said, “We agree with the economists and housing policy experts who have stated that the solution to affordable housing is not rent control but more housing. … [R]ent control dampens new housing starts and investment in existing housing.”
Supporters believe rent control can be part of a toolbox to prevent rents from soaring. They cite studies showing that construction rates in rent-controlled cities mirror rates in cities without rent control. Cities could also exempt new units from rent control in order to incentivize building.
Meanwhile, reports indicate that landlords in several California cities are threatening their own tenants by giving 60-day eviction notices and instituting rent increases. Some tenants have been told that these measures would only be canceled if Prop 10 fails. “Landlords are using their position of leverage in providing housing to sway the tenant vote,” said a spokesperson for Tenants Together, a renters’ rights organization.
Despite the affordable housing crisis, public polling shows Prop 10 trailingby double digits. In California, initiative campaigns typically fail when the opposition has significant financial support. That’s good news for Blackstone, which looks to get a huge return on its nearly $7 million investment.
The $45 million from the “No on Prop 10″ campaign is not the most expensive opposition campaign to an initiative on this year’s ballot, incredibly enough. Two outpatient dialysis companies, DaVita and Fresenius, have donated $90 million as part of a $99.3 million campaign to defeat Proposition 8, which would put a cap on their profits.
Though Invitation Homes provided a statement, Blackstone did not return requests for comment. Blackstone’s Schwarzman may have been preoccupied with preparing for an investor conference in Riyadh, Saudi Arabia — days after the alleged state-sponsored murder of journalist Jamal Khashoggi, a critic of the Saudi regime — held at the same Ritz-Carlton Hotel where Crown Prince Mohammed bin Salman jailed dozens of rivals for weeks last year in a bid to consolidate power.
did they make theirs like trump???
Forbes 400 2018: A New Number One And A Record-Breaking Year For America's Richest People
Kerry A. Dolan - Forbes
Oct 3, 2018, 06:40am
Buoyed in part by a strong stock market, the 400 wealthiest Americans delivered yet another record-breaking year. The minimum net worth needed to join this elite club climbed to $2.1 billion, $100 million more than last year and the highest to date. The group’s total net worth rose to $2.9 trillion, a record high and 7% more than in 2017. The average net worth of a list member: $7.2 billion, up from $6.7 billion last year. That average is boosted by those at the very top of the list: half of the total wealth is held by the 45 richest people in the country.
For the first time since 1994, there is a new No. 1: Amazon.com founder and CEO Jeff Bezos, who broke Bill Gates’ 24 year run at the top. Bezos is also the first person to appear in the ranks with a fortune of more than $100 billion --he clocked in at $160 billion. Bezos was also the biggest gainer on this year’s list: his fortune rose $78.5 billion since last year, thanks to the more than 100% runup in the price of Amazon stock, the biggest one year gain since we’ve been tracking fortunes. Gates, now ranked No. 2, trails Bezos by a notable $63 billion. The top 10 richest on the list are together worth nearly $730 billion, up from $610 billion in 2017. At these lofty heights, more than a third of the nation’s billionaires, a record 204, weren't wealthy enough to crack the club.
The biggest gainer in percentage terms is Jack Dorsey, the CEO of Twitter and payments firm Square. His fortune jumped a staggering 186% from last year to $6.3 billion, propelled primarily by a runup in Square’s stock price.
The biggest loser versus last year’s list was George Soros, whose net worth fell to $8.3 billion this year from $23 billion. The reason: in late 2017, Forbes learned that Soros had shifted $18 billion of his fortune to his charitable Open Society Foundations. (Forbes does not count assets in charitable foundations as part of someone’s net worth.)
For the first time since 1994, there is a new No. 1: Amazon.com founder and CEO Jeff Bezos, who broke Bill Gates’ 24 year run at the top. Bezos is also the first person to appear in the ranks with a fortune of more than $100 billion --he clocked in at $160 billion. Bezos was also the biggest gainer on this year’s list: his fortune rose $78.5 billion since last year, thanks to the more than 100% runup in the price of Amazon stock, the biggest one year gain since we’ve been tracking fortunes. Gates, now ranked No. 2, trails Bezos by a notable $63 billion. The top 10 richest on the list are together worth nearly $730 billion, up from $610 billion in 2017. At these lofty heights, more than a third of the nation’s billionaires, a record 204, weren't wealthy enough to crack the club.
The biggest gainer in percentage terms is Jack Dorsey, the CEO of Twitter and payments firm Square. His fortune jumped a staggering 186% from last year to $6.3 billion, propelled primarily by a runup in Square’s stock price.
The biggest loser versus last year’s list was George Soros, whose net worth fell to $8.3 billion this year from $23 billion. The reason: in late 2017, Forbes learned that Soros had shifted $18 billion of his fortune to his charitable Open Society Foundations. (Forbes does not count assets in charitable foundations as part of someone’s net worth.)
bendover, you are being fucked!!!
FCC To Give Telecom Companies $3 Billion-A-Year For 5G Phone Rollout
And You’re Paying for It; Corporate Welfare Plan Cuts by 90% What Local Governments Can Charge for Access to Utility Poles
By David Cay Johnston, DCReport Editor-in-Chief
September 25, 2018
The Trump administration, which proposed tripling housing costs for low-income renters, is slashing by 90% or more the utility pole rents paid to local governments by Verizon, AT&T and other cell phone providers. The rent cut for these corporations is worth about $3 billion annually, the National League of Cities estimates.
Utility pole rents will be capped at $270 per pole each year by new Federal Communications Commission rules.
Rents per utility pole are typically $2,400 a year, nine times the FCC cap, said Tony Batalla, IT manager for the city of San Leandro, Calif., a city of 89,000 people across the bay from San Francisco. “These are negotiated rates the companies agreed to,” he noted.
The FCC also imposed a 30-day deadline on every municipality in America to comply, even though the law in many states legally impossible for many cities to change their municipal codes in less than 45 days because of rules requiring public hearings before a new ordinance can be adopted.
“This may become a full employment act for lawyers,” said Angelina Panettieri, principal associate for information, technology and communications for the National League of Cities. The new rules may also prompt many cities with tight budgets to just roll over and give the cellular telephone companies whatever they demand rather than spend taxpayer funds on litigation.
Charging any rent will require extensive and expensive documentation by local governments under the new FCC rule, which was published Sept. 14 and takes effect Oct. 15.
Under the new rules, other hardships will be imposed on municipal governments that negotiate like-kind service arrangements. For example in return for using existing municipal conduits cities may negotiate more service in poor neighborhoods, where profits are smaller because fewer people buy add-ons to their cell phone services such as data, texts and voicemail.
Many cities negotiate utility pole rents with discounts as more poles are rented in order to encourage better service in poor neighborhoods, narrowing the digital access divide.
For example, some of the many hundreds of strands making up a single fiber optic cable may be dedicated to municipal use, which holds down taxpayer costs and avoids duplication.
“Those in-kind arrangements are threatened under the FCC rules,” Batalla said. “In fact, [our] understanding is like-kind swaps are off the table.”
In contrast to this $3 billion annual Trump administration favor for Verizon, AT&T, Sprint and T-Mobile, consider its proposed rent increases for the poorest of the poor.
Legislation backed by the Trump administration would raise rents paid by four million disabled, elderly and impoverished households with federal rental assistance. The $800 per year average rent hike would increase their burdens by $3.2 billion, about the same amount as the cell companies stand to save.
A single mother with only $250 a month of cash income would see her monthly housing cost triple to $150 a month, leaving her with just $100 in cash for expenses like clothing, and diapers, I’ll show in the paperback edition of my book It’s Even Worse Than You Think: What the Trump Administration Is Doing to America.
Subsidizing rents for poor people creates “perverse incentives” that discourage self-sufficiency, Ben Carson, the wealthy pediatric neurosurgeon who is secretary of Housing and Urban Development, said in June. The rent proposal “is our attempt to give poor people a way out of poverty,” Carson told Fox News. The plan is now on the back burner, but it could move forward at any time.
Slashing rents for profit-making companies at the expense of local taxpayers is clearly perverse. But with Ajit Pai, a former Verizon lawyer, chairing the FCC, the agency has all but abandoned any pretense of balancing the interests of customers and telecom companies. The FCC is often cited in economics and regulatory academic papers as an example of what is known as “regulatory capture” in which the agency serves the companies under its aegis rather than regulating them in the public interest. Pai has taken this pro-industry bias to a much higher plane.
Significantly, the $270 annual rent cap is a form of rate-making, in which the FCC and state utility boards set the rates that companies charge customers. The FCC has for years been moving away from rate regulation until Trump. The current administration has moved to subtle side door rate regulations like the far below market utility pole rent cap.
Mayor Pauline Russo Cutter of San Leandro said that before the FCC rule the city used rents to provide one-gigabyte internet service to the public schools, much faster than most homeowners have.
Why, she asked the FCC in a letter, is it reversing course on rate regulation?
The answer is in the coming next wave of mobile communications devices called 5G. It is about 20 times faster than the fastest existing 4G LTE wireless technology. For many people, 5G may be suitable as a substitute for coaxial cable or fiber optic to the home and many small businesses. The first 5G devices and services are expected in 2019.
But the new 5G standard comes with a catch. It requires that many more towers, called minitowers because they can be mounted on utility poles. These minitowers will be spaced as little as 300 feet apart.
Many more minitowers would have brought more revenue to local governments, which until the new rule negotiated utility pole rental rates with the cell phone providers. Many cities, like San Jose, in the heart of Silicon Valley, use revenue from these negotiated rental rates to enhance service in poor neighborhoods. That reduces the digital access divide between prosperous neighborhoods and those where the wireless companies have little interest in investing because profits will be meager.
But the FCC’s tight timeline appears to be a calculated plan by Trump’s FCC appointees to make cities roll over and do what Verizon, AT&T, T-Mobile and Sprint want or face huge legal bills for not complying with the new rules.
It’s the latest example of how Trump promised voters he would be the champion of the “forgotten man,” but who forget that promise as soon as he took the oath of office and instead is using his office to help big business. By interfering with negotiated agreements between cities and cell companies, the Trump administration is contradicting longstanding Republican arguments that government power should move away from Washington and toward states and local governments. It is also contradicting Trump’s inaugural address promise: “We are transferring power from Washington, D.C. and giving it back to you, the American People.”
Utility pole rents will be capped at $270 per pole each year by new Federal Communications Commission rules.
Rents per utility pole are typically $2,400 a year, nine times the FCC cap, said Tony Batalla, IT manager for the city of San Leandro, Calif., a city of 89,000 people across the bay from San Francisco. “These are negotiated rates the companies agreed to,” he noted.
The FCC also imposed a 30-day deadline on every municipality in America to comply, even though the law in many states legally impossible for many cities to change their municipal codes in less than 45 days because of rules requiring public hearings before a new ordinance can be adopted.
“This may become a full employment act for lawyers,” said Angelina Panettieri, principal associate for information, technology and communications for the National League of Cities. The new rules may also prompt many cities with tight budgets to just roll over and give the cellular telephone companies whatever they demand rather than spend taxpayer funds on litigation.
Charging any rent will require extensive and expensive documentation by local governments under the new FCC rule, which was published Sept. 14 and takes effect Oct. 15.
Under the new rules, other hardships will be imposed on municipal governments that negotiate like-kind service arrangements. For example in return for using existing municipal conduits cities may negotiate more service in poor neighborhoods, where profits are smaller because fewer people buy add-ons to their cell phone services such as data, texts and voicemail.
Many cities negotiate utility pole rents with discounts as more poles are rented in order to encourage better service in poor neighborhoods, narrowing the digital access divide.
For example, some of the many hundreds of strands making up a single fiber optic cable may be dedicated to municipal use, which holds down taxpayer costs and avoids duplication.
“Those in-kind arrangements are threatened under the FCC rules,” Batalla said. “In fact, [our] understanding is like-kind swaps are off the table.”
In contrast to this $3 billion annual Trump administration favor for Verizon, AT&T, Sprint and T-Mobile, consider its proposed rent increases for the poorest of the poor.
Legislation backed by the Trump administration would raise rents paid by four million disabled, elderly and impoverished households with federal rental assistance. The $800 per year average rent hike would increase their burdens by $3.2 billion, about the same amount as the cell companies stand to save.
A single mother with only $250 a month of cash income would see her monthly housing cost triple to $150 a month, leaving her with just $100 in cash for expenses like clothing, and diapers, I’ll show in the paperback edition of my book It’s Even Worse Than You Think: What the Trump Administration Is Doing to America.
Subsidizing rents for poor people creates “perverse incentives” that discourage self-sufficiency, Ben Carson, the wealthy pediatric neurosurgeon who is secretary of Housing and Urban Development, said in June. The rent proposal “is our attempt to give poor people a way out of poverty,” Carson told Fox News. The plan is now on the back burner, but it could move forward at any time.
Slashing rents for profit-making companies at the expense of local taxpayers is clearly perverse. But with Ajit Pai, a former Verizon lawyer, chairing the FCC, the agency has all but abandoned any pretense of balancing the interests of customers and telecom companies. The FCC is often cited in economics and regulatory academic papers as an example of what is known as “regulatory capture” in which the agency serves the companies under its aegis rather than regulating them in the public interest. Pai has taken this pro-industry bias to a much higher plane.
Significantly, the $270 annual rent cap is a form of rate-making, in which the FCC and state utility boards set the rates that companies charge customers. The FCC has for years been moving away from rate regulation until Trump. The current administration has moved to subtle side door rate regulations like the far below market utility pole rent cap.
Mayor Pauline Russo Cutter of San Leandro said that before the FCC rule the city used rents to provide one-gigabyte internet service to the public schools, much faster than most homeowners have.
Why, she asked the FCC in a letter, is it reversing course on rate regulation?
The answer is in the coming next wave of mobile communications devices called 5G. It is about 20 times faster than the fastest existing 4G LTE wireless technology. For many people, 5G may be suitable as a substitute for coaxial cable or fiber optic to the home and many small businesses. The first 5G devices and services are expected in 2019.
But the new 5G standard comes with a catch. It requires that many more towers, called minitowers because they can be mounted on utility poles. These minitowers will be spaced as little as 300 feet apart.
Many more minitowers would have brought more revenue to local governments, which until the new rule negotiated utility pole rental rates with the cell phone providers. Many cities, like San Jose, in the heart of Silicon Valley, use revenue from these negotiated rental rates to enhance service in poor neighborhoods. That reduces the digital access divide between prosperous neighborhoods and those where the wireless companies have little interest in investing because profits will be meager.
But the FCC’s tight timeline appears to be a calculated plan by Trump’s FCC appointees to make cities roll over and do what Verizon, AT&T, T-Mobile and Sprint want or face huge legal bills for not complying with the new rules.
It’s the latest example of how Trump promised voters he would be the champion of the “forgotten man,” but who forget that promise as soon as he took the oath of office and instead is using his office to help big business. By interfering with negotiated agreements between cities and cell companies, the Trump administration is contradicting longstanding Republican arguments that government power should move away from Washington and toward states and local governments. It is also contradicting Trump’s inaugural address promise: “We are transferring power from Washington, D.C. and giving it back to you, the American People.”
A decade after Lehman Brothers, U.S. is still a Stucknation
Wall Street’s pretax profits totaled $13.7 billion in the first half of 2018, 11 percent higher than last year
BOB HENNELLY - salon
SEPTEMBER 23, 2018 12:00PM (UTC)
Well, surprise, surprise. A President elected on the pledge to help the working class has once again opted instead to preside over an even faster acceleration of wealth concentration at the very top of America’s pyramid scheme economy.
They all talk a great game, but once they take up residence at 1600 Pennsylvania Avenue they take care of the people this country is owned by.
On this there is a bipartisan through line that started in the 1970s when average working class Americans saw their purchasing power start to slide, even as their productivity sky rocketed and the wealth generated by that labor was increasingly pocketed by the folks at the top.
This month marked the tenth anniversary of the spectacular collapse of Lehman Brothers and by every measure it would appear that the banksters that heisted $20 trillion in American family wealth are living larger than ever.
According to the New York State Comptroller Wall Street’s pretax profits totaled $13.7 billion in the first half of 2018, 11 percent higher than last year. Last year, pretax profits spiked 42 percent to $24.5 billion, which was up dramatically from the not too shabby 21 percent jump in previous the previous year.
"Wall Street has profited every year since the end of the recession in 2009, and compensation last year reached its highest point since the financial crisis,” said New York State Comptroller Thomas P. DiNapoli in a press release hailing the finance industry’s robust performance.
The average salary in the securities industry in New York state increased by 12 percent in 2017 to $403,100, the highest since 2008 and the third-highest on record after adjusting for inflation. New York had the highest average salary of any state in the nation, reflecting the concentration of highly compensated employees, such as chief executive officers, in New York City.”
Meanwhile, down here on planet earth we are supposed to get excited when the Bureau of Labor Statistics reports that in August the average hourly wage went up by 10 cents an hour in a country where the average workweek remains 34.5 hours.
According to the last monthly Bureau of Labor Statistics report workforce participation has declined to 62.7 percent under President Trump, continuing its general downward trajectory in has been on since the 1990s
So many of us are just barely getting by, nickeled and dimed in part-time America. Keep in mind that this hogging of the national prosperity is a daily heist already in progress as the 2008 dislocation continues, like a conveyor belt that takes so many to destitution.
As has been widely reported, there’s been a dramatic spike in the number of Americans 65 years and older filing for bankruptcy. In a report entitled “Graying of US Bankruptcy Fallout From Life In a Risk Society” researchers found a two-fold increase in the rate at which older Americans are filing for bankruptcy and a fivefold increase in the percentage of older persons in the U.S. bankruptcy system.
“The social safety net for older Americans has been shrinking for the past couple decades,” according to the study’s abstract. “The risks associated with aging, reduced income, and increased healthcare costs, have been offloaded onto older individuals.”
The abstract continues, “The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect . . . . For an increasing number of older Americans, their golden years are fraught with economic risks, the result of which is often bankruptcy.”
But it is not just more and more of the senior set that’s getting chewed up and spit out by the Great Pyramid scheme that sucks all wealth to the top. The lack of a broad-based prosperity has depressed household formation as an entire generation has been turned into debt slaves servicing their college borrowing living in their parents basement.
Consider that in 1972 we saw 1.9 million new households formed. In 2017 we saw just 400,000. In fact, last year in Trumplandia household formation slowed as did housing starts.
The annual report from the Joint Center for Housing Studies of Harvard University found that “homeownership rates among young adults are even lower than in 1988, and the share of cost-burdened renters is significantly higher, with almost half of all renters paying more than 30 percent of their income for housing.”
The analysis continues, “Soaring housing costs are largely to blame. The national median rent rose 20 percent faster than overall inflation between 1990 and 2016 and the median home price rose 41 percent faster.”
The Harvard researchers that “nearly a third of U.S. households (38.1 million) paid more than 30 percent of their incomes for housing in 2016” with more than half (20.8 million) being renters, with “fully 80 percent of renters and 63 percent of owners making less than $30,000” finding themselves struggling to pay for shelter.
At the same time the study found “increases in the median sales price of existing homes have outstripped growth in median household income for six straight years.”
Stucknation.
This is the part of the Obama legacy nobody talks about when he gets credited for "saving the economy." What he saved was that Wall Street machine that makes money off money and often incentivizes things like ecological destruction.
And don’t believe the partisan hype that just because they have a ‘D’ after their name that they are the friend of the huge army of tens of millions of Americans that work long hours yet struggle week-to-week to pay for shelter and the basics.
Exhibit A is former Vice-President Joe Biden, a former Senator from Delaware, the sanctuary state that has offered non-transparent limited liability corporation protection to the Russian Mafia, vulture capitalists and transnational corporations. As International Business Times reported back in 2015, it was ‘phony’ blue collar Joe, in the service of Delaware’s growing banking sector, who made it so that student loan debt was not dischargeable via the bankruptcy courts.
And what a pile of debt and misery has Joe’s handiwork stacked pyramid high. In 1990 there was just $24 billion of student debt. By 2012 it was up to $110. Today it is $1.5 trillion.
Now, that’s a monument.
They all talk a great game, but once they take up residence at 1600 Pennsylvania Avenue they take care of the people this country is owned by.
On this there is a bipartisan through line that started in the 1970s when average working class Americans saw their purchasing power start to slide, even as their productivity sky rocketed and the wealth generated by that labor was increasingly pocketed by the folks at the top.
This month marked the tenth anniversary of the spectacular collapse of Lehman Brothers and by every measure it would appear that the banksters that heisted $20 trillion in American family wealth are living larger than ever.
According to the New York State Comptroller Wall Street’s pretax profits totaled $13.7 billion in the first half of 2018, 11 percent higher than last year. Last year, pretax profits spiked 42 percent to $24.5 billion, which was up dramatically from the not too shabby 21 percent jump in previous the previous year.
"Wall Street has profited every year since the end of the recession in 2009, and compensation last year reached its highest point since the financial crisis,” said New York State Comptroller Thomas P. DiNapoli in a press release hailing the finance industry’s robust performance.
The average salary in the securities industry in New York state increased by 12 percent in 2017 to $403,100, the highest since 2008 and the third-highest on record after adjusting for inflation. New York had the highest average salary of any state in the nation, reflecting the concentration of highly compensated employees, such as chief executive officers, in New York City.”
Meanwhile, down here on planet earth we are supposed to get excited when the Bureau of Labor Statistics reports that in August the average hourly wage went up by 10 cents an hour in a country where the average workweek remains 34.5 hours.
According to the last monthly Bureau of Labor Statistics report workforce participation has declined to 62.7 percent under President Trump, continuing its general downward trajectory in has been on since the 1990s
So many of us are just barely getting by, nickeled and dimed in part-time America. Keep in mind that this hogging of the national prosperity is a daily heist already in progress as the 2008 dislocation continues, like a conveyor belt that takes so many to destitution.
As has been widely reported, there’s been a dramatic spike in the number of Americans 65 years and older filing for bankruptcy. In a report entitled “Graying of US Bankruptcy Fallout From Life In a Risk Society” researchers found a two-fold increase in the rate at which older Americans are filing for bankruptcy and a fivefold increase in the percentage of older persons in the U.S. bankruptcy system.
“The social safety net for older Americans has been shrinking for the past couple decades,” according to the study’s abstract. “The risks associated with aging, reduced income, and increased healthcare costs, have been offloaded onto older individuals.”
The abstract continues, “The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect . . . . For an increasing number of older Americans, their golden years are fraught with economic risks, the result of which is often bankruptcy.”
But it is not just more and more of the senior set that’s getting chewed up and spit out by the Great Pyramid scheme that sucks all wealth to the top. The lack of a broad-based prosperity has depressed household formation as an entire generation has been turned into debt slaves servicing their college borrowing living in their parents basement.
Consider that in 1972 we saw 1.9 million new households formed. In 2017 we saw just 400,000. In fact, last year in Trumplandia household formation slowed as did housing starts.
The annual report from the Joint Center for Housing Studies of Harvard University found that “homeownership rates among young adults are even lower than in 1988, and the share of cost-burdened renters is significantly higher, with almost half of all renters paying more than 30 percent of their income for housing.”
The analysis continues, “Soaring housing costs are largely to blame. The national median rent rose 20 percent faster than overall inflation between 1990 and 2016 and the median home price rose 41 percent faster.”
The Harvard researchers that “nearly a third of U.S. households (38.1 million) paid more than 30 percent of their incomes for housing in 2016” with more than half (20.8 million) being renters, with “fully 80 percent of renters and 63 percent of owners making less than $30,000” finding themselves struggling to pay for shelter.
At the same time the study found “increases in the median sales price of existing homes have outstripped growth in median household income for six straight years.”
Stucknation.
This is the part of the Obama legacy nobody talks about when he gets credited for "saving the economy." What he saved was that Wall Street machine that makes money off money and often incentivizes things like ecological destruction.
And don’t believe the partisan hype that just because they have a ‘D’ after their name that they are the friend of the huge army of tens of millions of Americans that work long hours yet struggle week-to-week to pay for shelter and the basics.
Exhibit A is former Vice-President Joe Biden, a former Senator from Delaware, the sanctuary state that has offered non-transparent limited liability corporation protection to the Russian Mafia, vulture capitalists and transnational corporations. As International Business Times reported back in 2015, it was ‘phony’ blue collar Joe, in the service of Delaware’s growing banking sector, who made it so that student loan debt was not dischargeable via the bankruptcy courts.
And what a pile of debt and misery has Joe’s handiwork stacked pyramid high. In 1990 there was just $24 billion of student debt. By 2012 it was up to $110. Today it is $1.5 trillion.
Now, that’s a monument.
Amazon Delivers Low-Paying Jobs and Dirty Air to California’s Poorest
BY Jess Clarke Truthout
PUBLISHED
September 11, 2018
US locations of Amazon’s current fulfillment centers
©2018 GOOGLE COURTESY OF WWW.FREIGHTOS.COM
Amazon, long known for its low pay and bad labor practices at the company’s fulfillment centers, is starting to feel some heat. One of the largest trade unions in the United Kingdom, GMB, is staging ongoingprotests, the SEIU has launched a “Warehouse Workers Stand Up” campaign in New Jersey and Sen. Bernie Sanders has introduced the Stop BEZOS Act. The legislation would recapture the hundreds of billions of taxpayer dollars provided by the US Treasury for health coverage, food stamps and other government payments to Amazon workers.
But Amazon is also wreaking havoc on the environment, and its delivery vehicles are generating untold amounts of greenhouse gases, ozone and particulate matter. California environmental advocates are taking on this challenge to protect the air quality in communities living with these warehouses in their backyards.
The US alone has more than 124 million square feet of fulfillment centers already built and another 41 million square feet in the planning stages, according to logistics industry trade publication MWPVL. Amazon is expanding its footprint at the expense of communities already overburdened by pollution and traffic of the dirty diesel trucks that move goods to and from the centers. From New Jersey to California, Amazon warehouses are remaking the physical environment.
As the real estate boom in California drives gentrification and displacement to even more remote suburbs, communities on the periphery that are already burdened by toxic landfills and pesticide-driven agriculture are battling a new source of poisoned air and water: warehouse distribution centers.
California is home to 18 of Amazon’s huge distribution complexes. The newest is the 855,000-square-foot facility in Fresno, a town located about halfway between Los Angeles and the San Francisco Bay area. One of the top three, coming at over 1.1 million-square-feet, is a facility built in San Bernardino County in 2016, directly east of Los Angeles.
The stakes are high for California’s once-rural suburbs. Life expectancy in West Fresno is more than 20 years lower than in the unpolluted East Side neighborhoods. The Inland Empire, which includes San Bernardino, has some of the worst ozone pollution in the country, according to the American Lung Association, and it has worsened over the last two years. Things have gotten so bad that Southern California’s South Coast Air Quality Management District voted in May to regulate warehouses as indirect sources of pollution because of the truck and locomotive traffic they attract.
Two California residents — Leo Macias and Dania De Ramon — both say they have experienced firsthand the impact of Amazon’s expanding footprint. Macias, who has owned a home in Fresno since 1967, describes the high rates of cancer he has observed on his street. De Ramon, a high school student in San Bernardino County, describes the widespread respiratory problems afflicting her classmates.
“Two of my family members have developed cancer, I have cancer, asthma and a lot of other respiratory problems,” said Macias. “My neighbors right next door to me passed away due to cancer, and another two neighbors on the other side. Yeah, this is very hard for us because we’re dealing with a lot of [contamination] in the air, in the water, in the soil, everything.”
De Ramon feels similarly frustrated. “We live in a toxic cycle where we depend on a supply and logistics industry that does little to curb its emissions and exploits folks in low-income communities for low pay. Most of us don’t even realize the harmful impacts on our health. I grew up believing that asthma was normal because I had so many classmates who had it,” De Ramon said.
Ashley Werner, senior attorney with Fresno-based Leadership Counsel for Justice and Accountability echoes these concerns. “It’s worth noting that this Fresno neighborhood has been identified under CalEnviroScreen as the most pollution-burdened census tract in California. That’s because, in addition to the new facilities the city is permitting, this area also has several hazardous waste sites, a landfill … and farming that uses hazardous pesticides.”
Macias has been working with the Leadership Counsel to fight locally against a huge expansion of warehouses for unknown new tenants, now planned at over 7 million square feet, but he says, “They want to build with no input from the community. When we talked to the city council, they ignored us and laughed at us.”
Macias and Leadership Counsel decided to take their fight to the Sacramento Legislature and are pushing AB 2447, a bill currently awaiting Gov. Jerry Brown’s signature. AB 2447 would give communities advance notice of developers’ plans to build or expand industrial facilities in environmentally burdened communities.
“In the past year and a half, the City of Fresno has approved millions of square feet of industrial warehouse space across the street from my neighborhood and near our local elementary school,” said Macias in testimony on AB 2447 in Sacramento. “We were never told about these projects while the city was planning them, and now the dust from construction is choking us and triggering our asthma.”
Allen Hernandez, executive director of the Center for Community Action and Environmental Justice, based in Southern California’s Inland Empire region, has also called on Governor Brown to take action. “The trucks that travel to and from warehouses contribute dangerous air emissions which causes more traffic congestion and that means more air and noise pollution near our homes and schools.”
The Center for Community Action and Environmental Justice is leading the fight against a new warehouse that would be built 70 feet away from a residential community and less than a tenth of a mile from a high school in the small town of Bloomington in San Bernardino County.
“The residents of Bloomington demand transportation justice for their health. California must re-shape our land-use planning to promote investments without displacement and move away from a culture that relies on fossil fuels.” said Hernandez.
For De Ramon, air quality isn’t the only impact. “When I was younger, my mother would work two jobs to financially support us,” he said. “Many times her work was in warehouses — where some days she would work up to 16 hours. There was a period of time in my childhood where I would see my mother only for a couple hours a day because she was constantly working to get the two of us by.”
The California Environmental Justice Alliance, a statewide environmental group, is supporting AB 2447 and also calling for much broader change.
“AB 2447 is a crucial first step to addressing long-standing pollution in many low-income neighborhoods and communities of color by creating ‘Green Zones’ — places where community-led visions and solutions are transforming toxic hot spots into healthy neighborhoods,” says Tiffany Eng, Green Zones program manager for the alliance.
The California Environmental Justice Alliance has also released a new report, “Green Zones Across California,” detailing community-led transformations in nine regions of the state. In addition the organization has set up a petition calling for statewide support to encourage Governor Brown to sign the bill.
And of course, all the groups have been turning out their members for the many demonstrations and actions being organized in response to Governor Brown’s Global Climate Action Summit that begins September 12 in San Francisco. The kick-off march Rise for Climate Jobs and Justice drew tens of thousands to the streets of SF and to protests across the US. Educational sessions at multiple locations and direct action at the summit itself are planned for the rest of the week.
But Amazon is also wreaking havoc on the environment, and its delivery vehicles are generating untold amounts of greenhouse gases, ozone and particulate matter. California environmental advocates are taking on this challenge to protect the air quality in communities living with these warehouses in their backyards.
The US alone has more than 124 million square feet of fulfillment centers already built and another 41 million square feet in the planning stages, according to logistics industry trade publication MWPVL. Amazon is expanding its footprint at the expense of communities already overburdened by pollution and traffic of the dirty diesel trucks that move goods to and from the centers. From New Jersey to California, Amazon warehouses are remaking the physical environment.
As the real estate boom in California drives gentrification and displacement to even more remote suburbs, communities on the periphery that are already burdened by toxic landfills and pesticide-driven agriculture are battling a new source of poisoned air and water: warehouse distribution centers.
California is home to 18 of Amazon’s huge distribution complexes. The newest is the 855,000-square-foot facility in Fresno, a town located about halfway between Los Angeles and the San Francisco Bay area. One of the top three, coming at over 1.1 million-square-feet, is a facility built in San Bernardino County in 2016, directly east of Los Angeles.
The stakes are high for California’s once-rural suburbs. Life expectancy in West Fresno is more than 20 years lower than in the unpolluted East Side neighborhoods. The Inland Empire, which includes San Bernardino, has some of the worst ozone pollution in the country, according to the American Lung Association, and it has worsened over the last two years. Things have gotten so bad that Southern California’s South Coast Air Quality Management District voted in May to regulate warehouses as indirect sources of pollution because of the truck and locomotive traffic they attract.
Two California residents — Leo Macias and Dania De Ramon — both say they have experienced firsthand the impact of Amazon’s expanding footprint. Macias, who has owned a home in Fresno since 1967, describes the high rates of cancer he has observed on his street. De Ramon, a high school student in San Bernardino County, describes the widespread respiratory problems afflicting her classmates.
“Two of my family members have developed cancer, I have cancer, asthma and a lot of other respiratory problems,” said Macias. “My neighbors right next door to me passed away due to cancer, and another two neighbors on the other side. Yeah, this is very hard for us because we’re dealing with a lot of [contamination] in the air, in the water, in the soil, everything.”
De Ramon feels similarly frustrated. “We live in a toxic cycle where we depend on a supply and logistics industry that does little to curb its emissions and exploits folks in low-income communities for low pay. Most of us don’t even realize the harmful impacts on our health. I grew up believing that asthma was normal because I had so many classmates who had it,” De Ramon said.
Ashley Werner, senior attorney with Fresno-based Leadership Counsel for Justice and Accountability echoes these concerns. “It’s worth noting that this Fresno neighborhood has been identified under CalEnviroScreen as the most pollution-burdened census tract in California. That’s because, in addition to the new facilities the city is permitting, this area also has several hazardous waste sites, a landfill … and farming that uses hazardous pesticides.”
Macias has been working with the Leadership Counsel to fight locally against a huge expansion of warehouses for unknown new tenants, now planned at over 7 million square feet, but he says, “They want to build with no input from the community. When we talked to the city council, they ignored us and laughed at us.”
Macias and Leadership Counsel decided to take their fight to the Sacramento Legislature and are pushing AB 2447, a bill currently awaiting Gov. Jerry Brown’s signature. AB 2447 would give communities advance notice of developers’ plans to build or expand industrial facilities in environmentally burdened communities.
“In the past year and a half, the City of Fresno has approved millions of square feet of industrial warehouse space across the street from my neighborhood and near our local elementary school,” said Macias in testimony on AB 2447 in Sacramento. “We were never told about these projects while the city was planning them, and now the dust from construction is choking us and triggering our asthma.”
Allen Hernandez, executive director of the Center for Community Action and Environmental Justice, based in Southern California’s Inland Empire region, has also called on Governor Brown to take action. “The trucks that travel to and from warehouses contribute dangerous air emissions which causes more traffic congestion and that means more air and noise pollution near our homes and schools.”
The Center for Community Action and Environmental Justice is leading the fight against a new warehouse that would be built 70 feet away from a residential community and less than a tenth of a mile from a high school in the small town of Bloomington in San Bernardino County.
“The residents of Bloomington demand transportation justice for their health. California must re-shape our land-use planning to promote investments without displacement and move away from a culture that relies on fossil fuels.” said Hernandez.
For De Ramon, air quality isn’t the only impact. “When I was younger, my mother would work two jobs to financially support us,” he said. “Many times her work was in warehouses — where some days she would work up to 16 hours. There was a period of time in my childhood where I would see my mother only for a couple hours a day because she was constantly working to get the two of us by.”
The California Environmental Justice Alliance, a statewide environmental group, is supporting AB 2447 and also calling for much broader change.
“AB 2447 is a crucial first step to addressing long-standing pollution in many low-income neighborhoods and communities of color by creating ‘Green Zones’ — places where community-led visions and solutions are transforming toxic hot spots into healthy neighborhoods,” says Tiffany Eng, Green Zones program manager for the alliance.
The California Environmental Justice Alliance has also released a new report, “Green Zones Across California,” detailing community-led transformations in nine regions of the state. In addition the organization has set up a petition calling for statewide support to encourage Governor Brown to sign the bill.
And of course, all the groups have been turning out their members for the many demonstrations and actions being organized in response to Governor Brown’s Global Climate Action Summit that begins September 12 in San Francisco. The kick-off march Rise for Climate Jobs and Justice drew tens of thousands to the streets of SF and to protests across the US. Educational sessions at multiple locations and direct action at the summit itself are planned for the rest of the week.
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Conjuring Up the Next Depression
Chris Hedges - truthdig
SEP 10, 2018
During the financial crisis of 2008, the world’s central banks, including the Federal Reserve, injected trillions of dollars of fabricated money into the global financial system. This fabricated money has created a worldwide debt of $325 trillion, more than three times global GDP. The fabricated money was hoarded by banks and corporations, loaned by banks at predatory interest rates, used to service interest on unpayable debt or spent buying back stock, providing millions in compensation for elites. The fabricated money was not invested in the real economy. Products were not manufactured and sold. Workers were not reinstated into the middle class with sustainable incomes, benefits and pensions. Infrastructure projects were not undertaken. The fabricated money reinflated massive financial bubbles built on debt and papered over a fatally diseased financial system destined for collapse.
What will trigger the next crash? The $13.2 trillion in unsustainable U.S. household debt? The $1.5 trillion in unsustainable student debt? The billions Wall Street has invested in a fracking industry that has spent $280 billion more than it generated from its operations? Who knows. What is certain is that a global financial crash, one that will dwarf the meltdown of 2008, is inevitable. And this time, with interest rates near zero, the elites have no escape plan. The financial structure will disintegrate. The global economy will go into a death spiral. The rage of a betrayed and impoverished population will, I fear, further empower right-wing demagogues who promise vengeance on the global elites, moral renewal, a nativist revival heralding a return to a mythical golden age when immigrants, women and people of color knew their place, and a Christianized fascism.
The 2008 financial crisis, as the economist Nomi Prins points out, “converted central banks into a new class of power brokers.” They looted national treasuries and amassed trillions in wealth to become politically and economically omnipotent. In her book “Collusion: How Central Bankers Rigged the World,” she writes that central bankers and the world’s largest financial institutions fraudulently manipulate global markets and use fabricated, or as she writes, “fake money,” to inflate asset bubbles for short-term profit as they drive us toward “a dangerous financial precipice.”
“Before the crisis, they were just asleep at the wheel, in particular, the Federal Reserve of the United States, which is supposed to be the main regulator of the major banks in the United States,” Prins said when we met in New York. “It did a horrible job of doing that, which is why we had the financial crisis. It became a deregulator instead of a regulator. In the wake of the financial crisis, the solution to fixing the crisis and saving the economy from a great depression or recession, whatever the terminology that was used at any given time, was to fabricate trillions and trillions of dollars out of an electronic ether.”
The Federal Reserve handed over an estimated $29 trillion of this fabricated money to American banks, according to researchers at the University of Missouri. Twenty-nine trillion dollars! We could have provided free college tuition to every student or universal health care, repaired our crumbling infrastructure, transitioned to clean energy, forgiven student debt, raised wages, bailed out underwater homeowners, formed public banks to invest at low interest rates in our communities, provided a guaranteed minimum income for everyone and organized a massive jobs program for the unemployed and underemployed. Sixteen million children would not go to bed hungry. The mentally ill and the homeless—an estimated 553,742 Americans are homeless every night—would not be left on the streets or locked away in our prisons. The economy would revive. Instead, $29 trillion in fabricated money was handed to financial gangsters who are about to make most of it evaporate and plunge us into a depression that will rival that of the global crash of 1929.
Kevin Zeese and Margaret Flowers write on the website Popular Resistance, “One-sixth of this could provide a $12,000 annual basic income, which would cost $3.8 trillion annually, doubling Social Security payments to $22,000 annually, which would cost $662 billion, a $10,000 bonus for all U.S. public school teachers, which would cost $11 billion, free college for all high school graduates, which would cost $318 billion, and universal preschool, which would cost $38 billion. National improved Medicare for all would actually save the nation trillions of dollars over a decade.”
An emergency clause in the Federal Reserve Act of 1913 allows the Fed to provide liquidity to a distressed banking system. But the Federal Reserve did not stop with the creation of a few hundred billion dollars. It flooded the financial markets with absurd levels of fabricated money. This had the effect of making the economy appear as if it had revived. And for the oligarchs, who had access to this fabricated money while we did not, it did.
The Fed cut interest rates to near zero. Some central banks in Europe instituted negative interest rates, meaning they would pay borrowers to take loans. The Fed, in a clever bit of accounting, even permitted distressed banks to use these no-interest loans to buy U.S. Treasury bonds. The banks gave the bonds back to the Fed and received a quarter of a percent of interest from the Fed. In short, the banks were loaned money at virtually no interest by the Fed and then were paid interest by the Fed on the money they borrowed. The Fed also bought up worthless mortgage assets and other toxic assets from the banks. Since Fed authorities could fabricate as much money as they wanted, it did not matter how they spent it.
“It’s like going to someone’s old garage sale and saying, ‘I want that bicycle with no wheels. I’ll pay you 100 grand for it. Why? Because it’s not my money,’ ” Prins said.
“These people have rigged the system,” she said of the bankers. “There is money fabricated at the top. It is used to pump up financial assets, including stock. It has to come from somewhere. Because money is cheap there’s more borrowing at the corporate level. There’s more money borrowed at the government level.”
“Where do you go to repay it?” she asked. “You go into the nation. You go into the economy. You extract money from the foundational economy, from social programs. You impose austerity.”
Given the staggering amount of fabricated money that has to be repaid, the banks need to build greater and greater pools of debt. This is why when you are late in paying your credit card the interest rate jumps to 28 percent. This is why if you declare bankruptcy you are still responsible for paying off your student loan, even as 1 million people a year default on student loans, with 40 percent of all borrowers expected to default on student loans by 2023. This is why wages are stagnant or have declined while costs, from health care and pharmaceutical products to bank fees and basic utilities, are skyrocketing. The enforced debt peonage grows to feed the beast until, as with the subprime mortgage crisis, the predatory system fails because of massive defaults. There will come a day, for example, as with all financial bubbles, when the wildly optimistic projected profits of industries such as fracking will no longer be an effective excuse to keep pumping money into failing businesses burdened by debt they cannot repay.
“The 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses,” Bethany McLean writes of the fracking industry in an article titled “The Next Financial Crisis Lurks Underground” that appeared in The New York Times. “In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter.”
The global financial system is a ticking time bomb. The question is not if it will explode but when it will explode. And once it does, the inability of the global speculators to use fabricated money with zero interest to paper over the debacle will trigger massive unemployment, high prices for imports and basic services, and a devaluation in which the dollar will become nearly worthless as it is abandoned as the world’s reserve currency. This manufactured financial tsunami will transform the United States, already a failed democracy, into an authoritarian police state. Life will become very cheap, especially for the vulnerable—undocumented workers, Muslims, poor people of color, girls and women, anti-capitalist and anti-imperialist critics branded as agents of foreign powers—who will be demonized and persecuted for the collapse. The elites, in a desperate bid to cling to their unchecked power and obscene wealth, will disembowel what is left of the United States.
What will trigger the next crash? The $13.2 trillion in unsustainable U.S. household debt? The $1.5 trillion in unsustainable student debt? The billions Wall Street has invested in a fracking industry that has spent $280 billion more than it generated from its operations? Who knows. What is certain is that a global financial crash, one that will dwarf the meltdown of 2008, is inevitable. And this time, with interest rates near zero, the elites have no escape plan. The financial structure will disintegrate. The global economy will go into a death spiral. The rage of a betrayed and impoverished population will, I fear, further empower right-wing demagogues who promise vengeance on the global elites, moral renewal, a nativist revival heralding a return to a mythical golden age when immigrants, women and people of color knew their place, and a Christianized fascism.
The 2008 financial crisis, as the economist Nomi Prins points out, “converted central banks into a new class of power brokers.” They looted national treasuries and amassed trillions in wealth to become politically and economically omnipotent. In her book “Collusion: How Central Bankers Rigged the World,” she writes that central bankers and the world’s largest financial institutions fraudulently manipulate global markets and use fabricated, or as she writes, “fake money,” to inflate asset bubbles for short-term profit as they drive us toward “a dangerous financial precipice.”
“Before the crisis, they were just asleep at the wheel, in particular, the Federal Reserve of the United States, which is supposed to be the main regulator of the major banks in the United States,” Prins said when we met in New York. “It did a horrible job of doing that, which is why we had the financial crisis. It became a deregulator instead of a regulator. In the wake of the financial crisis, the solution to fixing the crisis and saving the economy from a great depression or recession, whatever the terminology that was used at any given time, was to fabricate trillions and trillions of dollars out of an electronic ether.”
The Federal Reserve handed over an estimated $29 trillion of this fabricated money to American banks, according to researchers at the University of Missouri. Twenty-nine trillion dollars! We could have provided free college tuition to every student or universal health care, repaired our crumbling infrastructure, transitioned to clean energy, forgiven student debt, raised wages, bailed out underwater homeowners, formed public banks to invest at low interest rates in our communities, provided a guaranteed minimum income for everyone and organized a massive jobs program for the unemployed and underemployed. Sixteen million children would not go to bed hungry. The mentally ill and the homeless—an estimated 553,742 Americans are homeless every night—would not be left on the streets or locked away in our prisons. The economy would revive. Instead, $29 trillion in fabricated money was handed to financial gangsters who are about to make most of it evaporate and plunge us into a depression that will rival that of the global crash of 1929.
Kevin Zeese and Margaret Flowers write on the website Popular Resistance, “One-sixth of this could provide a $12,000 annual basic income, which would cost $3.8 trillion annually, doubling Social Security payments to $22,000 annually, which would cost $662 billion, a $10,000 bonus for all U.S. public school teachers, which would cost $11 billion, free college for all high school graduates, which would cost $318 billion, and universal preschool, which would cost $38 billion. National improved Medicare for all would actually save the nation trillions of dollars over a decade.”
An emergency clause in the Federal Reserve Act of 1913 allows the Fed to provide liquidity to a distressed banking system. But the Federal Reserve did not stop with the creation of a few hundred billion dollars. It flooded the financial markets with absurd levels of fabricated money. This had the effect of making the economy appear as if it had revived. And for the oligarchs, who had access to this fabricated money while we did not, it did.
The Fed cut interest rates to near zero. Some central banks in Europe instituted negative interest rates, meaning they would pay borrowers to take loans. The Fed, in a clever bit of accounting, even permitted distressed banks to use these no-interest loans to buy U.S. Treasury bonds. The banks gave the bonds back to the Fed and received a quarter of a percent of interest from the Fed. In short, the banks were loaned money at virtually no interest by the Fed and then were paid interest by the Fed on the money they borrowed. The Fed also bought up worthless mortgage assets and other toxic assets from the banks. Since Fed authorities could fabricate as much money as they wanted, it did not matter how they spent it.
“It’s like going to someone’s old garage sale and saying, ‘I want that bicycle with no wheels. I’ll pay you 100 grand for it. Why? Because it’s not my money,’ ” Prins said.
“These people have rigged the system,” she said of the bankers. “There is money fabricated at the top. It is used to pump up financial assets, including stock. It has to come from somewhere. Because money is cheap there’s more borrowing at the corporate level. There’s more money borrowed at the government level.”
“Where do you go to repay it?” she asked. “You go into the nation. You go into the economy. You extract money from the foundational economy, from social programs. You impose austerity.”
Given the staggering amount of fabricated money that has to be repaid, the banks need to build greater and greater pools of debt. This is why when you are late in paying your credit card the interest rate jumps to 28 percent. This is why if you declare bankruptcy you are still responsible for paying off your student loan, even as 1 million people a year default on student loans, with 40 percent of all borrowers expected to default on student loans by 2023. This is why wages are stagnant or have declined while costs, from health care and pharmaceutical products to bank fees and basic utilities, are skyrocketing. The enforced debt peonage grows to feed the beast until, as with the subprime mortgage crisis, the predatory system fails because of massive defaults. There will come a day, for example, as with all financial bubbles, when the wildly optimistic projected profits of industries such as fracking will no longer be an effective excuse to keep pumping money into failing businesses burdened by debt they cannot repay.
“The 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses,” Bethany McLean writes of the fracking industry in an article titled “The Next Financial Crisis Lurks Underground” that appeared in The New York Times. “In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter.”
The global financial system is a ticking time bomb. The question is not if it will explode but when it will explode. And once it does, the inability of the global speculators to use fabricated money with zero interest to paper over the debacle will trigger massive unemployment, high prices for imports and basic services, and a devaluation in which the dollar will become nearly worthless as it is abandoned as the world’s reserve currency. This manufactured financial tsunami will transform the United States, already a failed democracy, into an authoritarian police state. Life will become very cheap, especially for the vulnerable—undocumented workers, Muslims, poor people of color, girls and women, anti-capitalist and anti-imperialist critics branded as agents of foreign powers—who will be demonized and persecuted for the collapse. The elites, in a desperate bid to cling to their unchecked power and obscene wealth, will disembowel what is left of the United States.
Capitalism Is Not the “Market System”
BY
Richard D. Wolff Truthout
With the Democratic Socialists of America now counting 48,000 people within its membership and socialist candidates such as Alexandria Ocasio-Cortez pushing for free universities and Medicare for All, Americans are once again discussing capitalism versus socialism. Fortunately, they are not doing so in the old Cold War manner of uncritically celebrating one while demonizing the other. Rather, it’s a debate over the choice Americans must make now between keeping capitalism or changing the system to some form of socialism. As debates often do, this debate awakens us to problems and differences in how we understand its basic terms. For clarity and to make progress in this important debate, we need to stop conflating “capitalism” with the market. This is done far too often and on all sides of the debate.
Markets are a means of distributing resources and products, goods and services. Quid pro quo exchange defines markets: one person offers to sell to another who offers to buy at a mutually agreed ratio that may or may not be mediated by money. To say that a market exists means that such an exchange system is what accomplishes distribution. To say that a market exists says nothing about how production is accomplished or how resources are converted into products. Capitalism, on the other hand, is a description of how the production of goods and services is organized, and how the participants relate to one another in the process of production. Thus conflating “capitalism” with “the market system” loses sight of the fact that markets can exist in relation to different systems of production.
We can get at this in other words. Markets were mechanisms of distribution in societies with very different production systems. For example, in economies based on the enslavement of people, resulting in a production system involving masters and slaves, “inputs” and “outputs” — including enslaved people — were often bought and sold in markets. We might then speak of slave markets: when a slave production system coexisted with a market distribution system.
If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system.
To take another example, feudal manors were production systems that juxtaposed lords and serfs. Since serfs were not slaves, no market in serfs existed. They were distributed via other, non-market systems. However, their non-human inputs and outputs could be distributed via markets, and in European feudalism often were distributed via market exchanges. Capitalist production systems – organized around the employer-employee (rather than the master-slave or lord-serf) relationship – could likewise coexist with market systems of distribution. Under capitalism, non-human inputs, labor power (the capacity to do labor), and outputs are all often distributed via market exchanges.
Thus it is confused to refer to capitalism as a “market system.” Market distribution systems vary in their specific qualities according to the different production systems and systems of exploitation with which they co-exist. Capitalist markets differ from slave markets, and both differ from feudal markets, but they are all markets. Moreover, markets usually coexist and interact with state apparatuses. Those interactions are marked with greater or lesser degrees of state interventions: from rigid regulation of exchanges all the way over to “free” trade or markets where regulation is minimized or absent. The state apparatus can also abolish the market system and replace it with an alternative system of distribution.
In that event, however, capitalism is not abolished because the market has been abolished. If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system. For the state to replace markets with some administrative (e.g., planned) system of distribution says nothing about the production system. The resources and products of a capitalist system of production can be distributed via more or less state-regulated markets or via non-market distribution systems. The same applies to the resources and products of slave and feudal production systems.
Why does it matter to differentiate markets and other distribution systems from production systems? The answer emerges from the recognition that most economic systems combine one or more production systems with one or more distribution systems. For a long time, the observers of such combinations – both celebrants and critics – have tended to conflate the two systems combined, as if they were one. Indeed, defining capitalism as “the market” or the “free market” system is precisely such a conflation.
Karl Marx went to considerable lengths to differentiate critiques of market exchange from his critique of capitalist production. He believed that major social problems of his time – inequality, cyclical instability, etc. – emerged from the capitalist production system as much or more than from the market system. He was a critic of both, but he kept the criticisms separate for basic reasons of analytical clarity and revolutionary strategy.
From capitalism’s beginnings, reformers have sought to soften its hard edges often by means of state interventions in markets. Minimum wages, maximum interest rates, progressive taxation, and so on are among their chosen mechanisms. More generally, reformers responded to capitalism’s profit-driven distribution of wealth by having the state redistribute that wealth according to non-capitalist (non-profit) criteria.
A more extreme criticism of markets displaced them in favor of other mechanisms of distributing resources and products such as centralized or decentralized state institutions charged with distribution, private institutions similarly charged, etc. However, if and when the production system continued to juxtapose employers and employees, all the different distribution systems discussed above – “free” market, regulated market, and non-market – coexist and interact with a capitalist production system.
To the extent that capitalism’s problems – inequality, instability (cycles/crises), etc. – stem in part from its production relationships, reforms focused exclusively on regulating or supplanting markets will not succeed in solving them. For example, Keynesian monetary policies (focused on raising or lowering the quantity of money in circulation and, correspondingly, interest rates) do not touch the employer-employee relationship, however much their variations redistribute wealth, regulate markets, or displace markets in favor of state-administered investment decisions. Likewise, Keynesian fiscal policies (raising or lowering taxes and government spending) do not address the employer-employee relationship.
Keynesian policies also never ended the cyclical instability of capitalism. The New Deal and European social democracy left capitalism in place in both state and private units (enterprises) of production notwithstanding their massive reform agendas and programs. They thereby left capitalist employers facing the incentives and receiving the resources (profits) to evade, weaken and eventually dissolve most of those programs.
It is far better not to distribute wealth unequally in the first place than to re-distribute it after to undo the inequality. For example, FDR proposed in 1944 that the government establish a maximum income alongside a minimum wage; that is one among the various ways inequality could be limited and thereby redistribution avoided. Efforts to redistribute encounter evasions, oppositions, and failures that compound the effects of unequal distribution itself. Social peace and cohesion are the victims of redistribution sooner or later. Reforming markets while leaving the relations/organization of capitalist production unchanged is like redistribution. Just as redistribution schemes fail to solve the problems rooted in distribution, market-focused reforms fail to solve the problems rooted in production.
Since 2008, capitalism has showed us all yet again its deep and unsolved problems of cyclical instability, deepening inequality and the injustices they both entail. Their persistence mirrors that of the capitalist organization of production. To successfully confront and solve the problems of economic cycles, income and wealth inequality, and so on, we need to go beyond the capitalist employer-employee system of production. The democratization of enterprises – transitioning from employer-employee hierarchies to worker cooperatives – is a key way available here and now to realize the change we need.
Worker coops democratically decide the distribution of income (wages, bonuses, benefits, profit shares, etc.) among their members. No small group of owners and the boards of directors they choose would, as in capitalist corporations, make such decisions. Thus, for example, it would be far less likely that a few individuals in a worker coop would earn millions while most others could not afford to send children to college. A democratic worker coop decision on the distribution of enterprise income would be far less unequal than what typifies capitalist enterprises. A socialism for the 21st century could and should include the transition from a capitalist to a worker-coop-based economic system as central to its commitments to less inequality and less social conflict over redistribution.
Markets are a means of distributing resources and products, goods and services. Quid pro quo exchange defines markets: one person offers to sell to another who offers to buy at a mutually agreed ratio that may or may not be mediated by money. To say that a market exists means that such an exchange system is what accomplishes distribution. To say that a market exists says nothing about how production is accomplished or how resources are converted into products. Capitalism, on the other hand, is a description of how the production of goods and services is organized, and how the participants relate to one another in the process of production. Thus conflating “capitalism” with “the market system” loses sight of the fact that markets can exist in relation to different systems of production.
We can get at this in other words. Markets were mechanisms of distribution in societies with very different production systems. For example, in economies based on the enslavement of people, resulting in a production system involving masters and slaves, “inputs” and “outputs” — including enslaved people — were often bought and sold in markets. We might then speak of slave markets: when a slave production system coexisted with a market distribution system.
If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system.
To take another example, feudal manors were production systems that juxtaposed lords and serfs. Since serfs were not slaves, no market in serfs existed. They were distributed via other, non-market systems. However, their non-human inputs and outputs could be distributed via markets, and in European feudalism often were distributed via market exchanges. Capitalist production systems – organized around the employer-employee (rather than the master-slave or lord-serf) relationship – could likewise coexist with market systems of distribution. Under capitalism, non-human inputs, labor power (the capacity to do labor), and outputs are all often distributed via market exchanges.
Thus it is confused to refer to capitalism as a “market system.” Market distribution systems vary in their specific qualities according to the different production systems and systems of exploitation with which they co-exist. Capitalist markets differ from slave markets, and both differ from feudal markets, but they are all markets. Moreover, markets usually coexist and interact with state apparatuses. Those interactions are marked with greater or lesser degrees of state interventions: from rigid regulation of exchanges all the way over to “free” trade or markets where regulation is minimized or absent. The state apparatus can also abolish the market system and replace it with an alternative system of distribution.
In that event, however, capitalism is not abolished because the market has been abolished. If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system. For the state to replace markets with some administrative (e.g., planned) system of distribution says nothing about the production system. The resources and products of a capitalist system of production can be distributed via more or less state-regulated markets or via non-market distribution systems. The same applies to the resources and products of slave and feudal production systems.
Why does it matter to differentiate markets and other distribution systems from production systems? The answer emerges from the recognition that most economic systems combine one or more production systems with one or more distribution systems. For a long time, the observers of such combinations – both celebrants and critics – have tended to conflate the two systems combined, as if they were one. Indeed, defining capitalism as “the market” or the “free market” system is precisely such a conflation.
Karl Marx went to considerable lengths to differentiate critiques of market exchange from his critique of capitalist production. He believed that major social problems of his time – inequality, cyclical instability, etc. – emerged from the capitalist production system as much or more than from the market system. He was a critic of both, but he kept the criticisms separate for basic reasons of analytical clarity and revolutionary strategy.
From capitalism’s beginnings, reformers have sought to soften its hard edges often by means of state interventions in markets. Minimum wages, maximum interest rates, progressive taxation, and so on are among their chosen mechanisms. More generally, reformers responded to capitalism’s profit-driven distribution of wealth by having the state redistribute that wealth according to non-capitalist (non-profit) criteria.
A more extreme criticism of markets displaced them in favor of other mechanisms of distributing resources and products such as centralized or decentralized state institutions charged with distribution, private institutions similarly charged, etc. However, if and when the production system continued to juxtapose employers and employees, all the different distribution systems discussed above – “free” market, regulated market, and non-market – coexist and interact with a capitalist production system.
To the extent that capitalism’s problems – inequality, instability (cycles/crises), etc. – stem in part from its production relationships, reforms focused exclusively on regulating or supplanting markets will not succeed in solving them. For example, Keynesian monetary policies (focused on raising or lowering the quantity of money in circulation and, correspondingly, interest rates) do not touch the employer-employee relationship, however much their variations redistribute wealth, regulate markets, or displace markets in favor of state-administered investment decisions. Likewise, Keynesian fiscal policies (raising or lowering taxes and government spending) do not address the employer-employee relationship.
Keynesian policies also never ended the cyclical instability of capitalism. The New Deal and European social democracy left capitalism in place in both state and private units (enterprises) of production notwithstanding their massive reform agendas and programs. They thereby left capitalist employers facing the incentives and receiving the resources (profits) to evade, weaken and eventually dissolve most of those programs.
It is far better not to distribute wealth unequally in the first place than to re-distribute it after to undo the inequality. For example, FDR proposed in 1944 that the government establish a maximum income alongside a minimum wage; that is one among the various ways inequality could be limited and thereby redistribution avoided. Efforts to redistribute encounter evasions, oppositions, and failures that compound the effects of unequal distribution itself. Social peace and cohesion are the victims of redistribution sooner or later. Reforming markets while leaving the relations/organization of capitalist production unchanged is like redistribution. Just as redistribution schemes fail to solve the problems rooted in distribution, market-focused reforms fail to solve the problems rooted in production.
Since 2008, capitalism has showed us all yet again its deep and unsolved problems of cyclical instability, deepening inequality and the injustices they both entail. Their persistence mirrors that of the capitalist organization of production. To successfully confront and solve the problems of economic cycles, income and wealth inequality, and so on, we need to go beyond the capitalist employer-employee system of production. The democratization of enterprises – transitioning from employer-employee hierarchies to worker cooperatives – is a key way available here and now to realize the change we need.
Worker coops democratically decide the distribution of income (wages, bonuses, benefits, profit shares, etc.) among their members. No small group of owners and the boards of directors they choose would, as in capitalist corporations, make such decisions. Thus, for example, it would be far less likely that a few individuals in a worker coop would earn millions while most others could not afford to send children to college. A democratic worker coop decision on the distribution of enterprise income would be far less unequal than what typifies capitalist enterprises. A socialism for the 21st century could and should include the transition from a capitalist to a worker-coop-based economic system as central to its commitments to less inequality and less social conflict over redistribution.
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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.
---
2. Myth: Brand Loyalty Over Small Businesses
You know it when you see it: Nike, Adidas, Apple, Polo. People identify by the logos they wear, and they’ll pay top dollar for that logo. But why pay top dollar to advertise a company you have no connection to? Brands should pay you for your loyalty, but unless you’re Instafamous, they don't. For the hundreds you spend on a label, you could pay a local tailor or seamstress to make something tailored just for you. Retail doesn’t want you to do that, but why not give it a try? You might be surprised to find what replacing brand loyalty with real-world community loyalty can bring you.
3. Myth: Trickledown Economics Works
We’ve been talking about this issue as long as I can remember, and it still doesn’t work. Just because the rich received a special tax break that will make them exponentially richer does not mean they will spend any money on you, or contribute anything healthy or beneficial to any community other than their own. Isn’t that what "A Christmas Carol" was all about? That the only way the wealthy will ever share their wealth is if they are terrorized by ghosts? Believing in the benevolent goodness of the super-rich is one of the most perverse things we do in the U.S., and perhaps it’s rooted in the myth that you, too, can one day be wealthy.
4. Myth: Pull Yourself up by Your Bootstraps
The myth that if you just work hard enough you will one day be rich is a pervasive idea in the United States. This myth relies on the absence of inherited wealth and ignores the grievous injustices often committed in creating that wealth, and denies racism, marginalization and generational disenfranchisement. Yet people continue to preach it as gospel. The exceptions are held up as rules, without a close examination of how those folks got to where they are. No one in this world makes it to the top alone, and the lower one is on the ladder, the harder it is to get to the top—especially when the structure is the ladder of capitalism. Make the system a jungle gym, and have the community work together to navigate it, and see how much more successful and happy everyone can be.
5. Myth: Everyone Is Free in a Capitalist Society
In an age of clicks, sponsored content and fake news, it’s sometimes hard to tell capitalism from freedom. After all, capitalism is marketed to you every day as freedom, on television, social media and even NPR. But capitalism doesn’t equate freedom. Look at the prison industrial complex or the number of people going to debtors prison for unaffordable and unpaid civil infractions. Look at the nearly 20,000 households in Detroit that had their water shut off just this year as a result of unpaid water bills. Look at the homelessness created by bad mortgages from which lenders continue to profit. Capitalism in each of these cases isn’t promoting freedom, but robbing freedom from millions of Americans who could, in another time and under a humane system of economic governance, might prosper in communities they are able to contribute to and benefit from.
Capitalism is fueled by many more myths than just these. But these five might be nice places to start disassembling the dominant economic system that is causing too many Americans pain.
Here are five myths people continue to promote that we’ll all be better off without.
1. Myth: Jobs Will Save Us!
Permits to pollute and tax breaks are just two of the things corporations receive when they promise jobs to local populations. In a city like Detroit, which has struggled for decades with unemployment and economic decay, oil companies, real estate moguls and sports teams have all offered jobs in exchange for getting something big in return. At the end of the day, the promised jobs aren’t necessarily fulfilled. The rich get richer while the poor fund corporate projects, die from corporate pollution or end up on welfare because they never got the jobs promised in the first place.
---
2. Myth: Brand Loyalty Over Small Businesses
You know it when you see it: Nike, Adidas, Apple, Polo. People identify by the logos they wear, and they’ll pay top dollar for that logo. But why pay top dollar to advertise a company you have no connection to? Brands should pay you for your loyalty, but unless you’re Instafamous, they don't. For the hundreds you spend on a label, you could pay a local tailor or seamstress to make something tailored just for you. Retail doesn’t want you to do that, but why not give it a try? You might be surprised to find what replacing brand loyalty with real-world community loyalty can bring you.
3. Myth: Trickledown Economics Works
We’ve been talking about this issue as long as I can remember, and it still doesn’t work. Just because the rich received a special tax break that will make them exponentially richer does not mean they will spend any money on you, or contribute anything healthy or beneficial to any community other than their own. Isn’t that what "A Christmas Carol" was all about? That the only way the wealthy will ever share their wealth is if they are terrorized by ghosts? Believing in the benevolent goodness of the super-rich is one of the most perverse things we do in the U.S., and perhaps it’s rooted in the myth that you, too, can one day be wealthy.
4. Myth: Pull Yourself up by Your Bootstraps
The myth that if you just work hard enough you will one day be rich is a pervasive idea in the United States. This myth relies on the absence of inherited wealth and ignores the grievous injustices often committed in creating that wealth, and denies racism, marginalization and generational disenfranchisement. Yet people continue to preach it as gospel. The exceptions are held up as rules, without a close examination of how those folks got to where they are. No one in this world makes it to the top alone, and the lower one is on the ladder, the harder it is to get to the top—especially when the structure is the ladder of capitalism. Make the system a jungle gym, and have the community work together to navigate it, and see how much more successful and happy everyone can be.
5. Myth: Everyone Is Free in a Capitalist Society
In an age of clicks, sponsored content and fake news, it’s sometimes hard to tell capitalism from freedom. After all, capitalism is marketed to you every day as freedom, on television, social media and even NPR. But capitalism doesn’t equate freedom. Look at the prison industrial complex or the number of people going to debtors prison for unaffordable and unpaid civil infractions. Look at the nearly 20,000 households in Detroit that had their water shut off just this year as a result of unpaid water bills. Look at the homelessness created by bad mortgages from which lenders continue to profit. Capitalism in each of these cases isn’t promoting freedom, but robbing freedom from millions of Americans who could, in another time and under a humane system of economic governance, might prosper in communities they are able to contribute to and benefit from.
Capitalism is fueled by many more myths than just these. But these five might be nice places to start disassembling the dominant economic system that is causing too many Americans pain.
Capitalism: The Nightmare
Paul Street
From Truthdig: The neoliberal, arch-capitalist era we inhabit is chock full of statistics and stories that ought to send chills down the spines of any caring, morally sentient human. Nearly three-fourths (71 percent) of the world’s population is poor, living on $10 a day or less, and 11 percent (767 million people, including 385 million children) live in what the World Bank calls “extreme poverty” (less than a $1.90 a day). Meanwhile, Oxfam reliably reports that, surreal as it sounds, the world’s eight richest people possess among themselves as much wealth as the poorest half of the entire human race.
The United States, self-described homeland and headquarters of freedom and democracy, is no exception to the harshly unequal global reality. Six of the world’s eight most absurdly rich people are U.S. citizens: Bill Gates (whose net worth of $426 billion equals the wealth of 3.6 billion people), Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and Michael Bloomberg (former mayor of New York City). As Bernie Sanders said repeatedly on the campaign trail in 2016, the top 10th of the upper 1 percent in the U.S. has nearly as much wealth as the nation’s bottom 90 percent. Seven heirs of the Walton family’s Walmart fortune have among them a net worth equal to that of the nation’s poorest 40 percent. Half the U.S. population is poor or near-poor and half lacks any savings.
Just over a fifth of the nation’s children, including more than a third of black and Native American children, live below the federal government’s notoriously inadequate poverty level, while parasitic financers and other capitalist overlords enjoy unimaginable hyper-opulence. One in seven U.S. citizens relies on food banks in “the world’s richest country.” Many of them are in families with full-time wage-earners—a reflection of the fact that wages have stagnated even as U.S. labor productivity consistently has risen for more than four decades.
Failure by Design
These savage inequalities reflect government policy on behalf of “the 1 percent” (better, perhaps, to say “the 0.1 percent”). U.S. economic growth since the late 1970s has been unequally distributed, thanks to regressive policy choices that have served the rich and powerful at the expense of ordinary working people. As Joshua Bivens of the Economic Policy Institute showed in his important 2011 study, “Failure By Design,” the following interrelated, bipartisan and not-so-public policies across the long neoliberal era have brought us to a level of inequality that rivals the Gilded Age of the late 19th-century robber barons era. These policies include:
● Letting the value of the minimum wage be eroded by inflation.
● Slashing labor standards for overtime, safety and health.
● Tilting the laws governing union organizing and collective bargaining strongly in favor of employers.
● Weakening the social safety net.
● Privatizing public services.
● Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
● Shredding government oversight of international trade, currency, investment and lending.
● Deregulating the financial sector and financial markets.
● Valuing low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.
These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the 2007-09 Great Recession, sparked by the bursting of a housing bubble that resulted from the deregulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings.
After the crash, the government under both George W. Bush and Barack Obama bailed out the very financial predators who pushed the economy over the cliff. The Obama administration, populated by Goldman Sachs and Citigroup operatives, left the rest of us to wonder “Where’s our bailout?” as 95 percent of the nation’s new income went to the top 1 percent during his first term. (read more)
The United States, self-described homeland and headquarters of freedom and democracy, is no exception to the harshly unequal global reality. Six of the world’s eight most absurdly rich people are U.S. citizens: Bill Gates (whose net worth of $426 billion equals the wealth of 3.6 billion people), Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and Michael Bloomberg (former mayor of New York City). As Bernie Sanders said repeatedly on the campaign trail in 2016, the top 10th of the upper 1 percent in the U.S. has nearly as much wealth as the nation’s bottom 90 percent. Seven heirs of the Walton family’s Walmart fortune have among them a net worth equal to that of the nation’s poorest 40 percent. Half the U.S. population is poor or near-poor and half lacks any savings.
Just over a fifth of the nation’s children, including more than a third of black and Native American children, live below the federal government’s notoriously inadequate poverty level, while parasitic financers and other capitalist overlords enjoy unimaginable hyper-opulence. One in seven U.S. citizens relies on food banks in “the world’s richest country.” Many of them are in families with full-time wage-earners—a reflection of the fact that wages have stagnated even as U.S. labor productivity consistently has risen for more than four decades.
Failure by Design
These savage inequalities reflect government policy on behalf of “the 1 percent” (better, perhaps, to say “the 0.1 percent”). U.S. economic growth since the late 1970s has been unequally distributed, thanks to regressive policy choices that have served the rich and powerful at the expense of ordinary working people. As Joshua Bivens of the Economic Policy Institute showed in his important 2011 study, “Failure By Design,” the following interrelated, bipartisan and not-so-public policies across the long neoliberal era have brought us to a level of inequality that rivals the Gilded Age of the late 19th-century robber barons era. These policies include:
● Letting the value of the minimum wage be eroded by inflation.
● Slashing labor standards for overtime, safety and health.
● Tilting the laws governing union organizing and collective bargaining strongly in favor of employers.
● Weakening the social safety net.
● Privatizing public services.
● Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
● Shredding government oversight of international trade, currency, investment and lending.
● Deregulating the financial sector and financial markets.
● Valuing low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.
These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the 2007-09 Great Recession, sparked by the bursting of a housing bubble that resulted from the deregulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings.
After the crash, the government under both George W. Bush and Barack Obama bailed out the very financial predators who pushed the economy over the cliff. The Obama administration, populated by Goldman Sachs and Citigroup operatives, left the rest of us to wonder “Where’s our bailout?” as 95 percent of the nation’s new income went to the top 1 percent during his first term. (read more)
funnies and charts
Cartoon: Hedge fund nation
By Jen Sorensen
Tuesday Dec 19, 2017 · 5:01 AM PST
This Infographic Shows How Only 10 Companies Control All the World’s Brands
Tom Cahill | December 31, 2016
From U.S. Uncut: Almost all of the food and beverage brands we know are owned by just 10 global conglomerates, according to a blistering new report.
Oxfam’s 52-page “Behind the Brands” report goes into great detail about how just ten companies — Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously known as Kraft), Nestle, PepsiCo, and Unilever — own basically every brand of food sold in grocery stores around the globe. The report is part of Oxfam’s GROW campaign, which seeks to provide a sustainable food supply to an estimated global population of nine billion by 2050.
The “Behind the Brands” report grades each company through a series of scorecards, gauging how attentive it is toward core issues like how it treats farm workers, women, small-scale farmers, local land and water supplies, its climate change policy, and a company’s transparency. By and large, the scorecards found that the so-called “Big 10” food companies shirk their responsibility to local populations and the environment, falling far short of where they could be given their tremendous resources and influence. In some cases, Big 10 companies actually undermine food security, natural resources, and human rights, according to Oxfam:
• Companies are overly secretive about their agricultural supply chains, making claims of ‘sustainability’ and ‘social responsibility’ difficult to verify;
• None of the Big 10 have adequate policies to protect local communities from land and water grabs along their supply chains;
• Companies are not taking sufficient steps to curb massive agricultural greenhouse gas emissions responsible for climate changes now affecting farmers;
• Most companies do not provide small-scale farmers with equal access to their supply chains and no company has made a commitment to ensure that small-scale producers are paid a fair price;
• Only a minority of the Big 10 are doing anything at all to address the exploitation of women small-scale farmers and workers in their supply chains.
In addition to those damning declarations from Oxfam, the report also found that despite the enormous financial wealth concentrated among the Big 10 companies (an estimated $872.8 billion market cap amongst all but Mars, which is privately owned), the farmers working the land owned by these companies live in abject poverty.
Globally, some 450 million men and women work in the agriculture sector, and 60 percent of those live in poverty. In a cruel ironic twist, 80 percent of the global population classified as “chronically hungry” are farmers. The “Behind the Brands” report outlined how the practices of the Big 10 companies exacerbate the global problem of chronic hunger:
“[T]he use of valuable agricultural resources for the production of snacks and sodas means less fertile land and clean water is available to grow nutritious food for local communities. And changing weather patterns due to greenhouse gas emissions – a large percentage of which come from agricultural production – continue to make these small-scale farmers increasingly vulnerable… [T]he sourcing of commodities – cocoa, sugar, potatoes, tomatoes, soy, coffee, tea and corn – is still plagued with injustice and inequity, much as it was 100 years ago.”
But these concerns aren’t just coming from one nonprofit — in conducting research for the report, Oxfam found that where food comes from and whether or not a food producer is being socially and environmentally responsible is a top concern for a wide majority consumers in developed countries. This could also produce economic blowback for companies that don’t adhere to sustainable business standards. Weber Shandwick — a New York-based public relations firm — found that 70 percent of American consumers avoid buying products from companies they don’t like....
...As far as the scorecard for the Big 10 is concerned, none of the world’s largest food producers scored in the 8-10 (“good”) range on any of the criteria used for the evaluation. While Nestle and Unilever lead their competitors in several areas, they still fall short in how they treat the land, women, and small-scale farmers. The three worst offenders — General Mills, Kellogg’s and ABF — didn’t score above a 3 out of 10 score (“poor”) except for a scant few categories. And out of a maximum score of 70, Nestle, who ranked at #1 among the Big 10, still only scored 38 (only 54 percent). If the scorecard was a college exam, Nestle would still score an F.
Oxfam’s 52-page “Behind the Brands” report goes into great detail about how just ten companies — Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously known as Kraft), Nestle, PepsiCo, and Unilever — own basically every brand of food sold in grocery stores around the globe. The report is part of Oxfam’s GROW campaign, which seeks to provide a sustainable food supply to an estimated global population of nine billion by 2050.
The “Behind the Brands” report grades each company through a series of scorecards, gauging how attentive it is toward core issues like how it treats farm workers, women, small-scale farmers, local land and water supplies, its climate change policy, and a company’s transparency. By and large, the scorecards found that the so-called “Big 10” food companies shirk their responsibility to local populations and the environment, falling far short of where they could be given their tremendous resources and influence. In some cases, Big 10 companies actually undermine food security, natural resources, and human rights, according to Oxfam:
• Companies are overly secretive about their agricultural supply chains, making claims of ‘sustainability’ and ‘social responsibility’ difficult to verify;
• None of the Big 10 have adequate policies to protect local communities from land and water grabs along their supply chains;
• Companies are not taking sufficient steps to curb massive agricultural greenhouse gas emissions responsible for climate changes now affecting farmers;
• Most companies do not provide small-scale farmers with equal access to their supply chains and no company has made a commitment to ensure that small-scale producers are paid a fair price;
• Only a minority of the Big 10 are doing anything at all to address the exploitation of women small-scale farmers and workers in their supply chains.
In addition to those damning declarations from Oxfam, the report also found that despite the enormous financial wealth concentrated among the Big 10 companies (an estimated $872.8 billion market cap amongst all but Mars, which is privately owned), the farmers working the land owned by these companies live in abject poverty.
Globally, some 450 million men and women work in the agriculture sector, and 60 percent of those live in poverty. In a cruel ironic twist, 80 percent of the global population classified as “chronically hungry” are farmers. The “Behind the Brands” report outlined how the practices of the Big 10 companies exacerbate the global problem of chronic hunger:
“[T]he use of valuable agricultural resources for the production of snacks and sodas means less fertile land and clean water is available to grow nutritious food for local communities. And changing weather patterns due to greenhouse gas emissions – a large percentage of which come from agricultural production – continue to make these small-scale farmers increasingly vulnerable… [T]he sourcing of commodities – cocoa, sugar, potatoes, tomatoes, soy, coffee, tea and corn – is still plagued with injustice and inequity, much as it was 100 years ago.”
But these concerns aren’t just coming from one nonprofit — in conducting research for the report, Oxfam found that where food comes from and whether or not a food producer is being socially and environmentally responsible is a top concern for a wide majority consumers in developed countries. This could also produce economic blowback for companies that don’t adhere to sustainable business standards. Weber Shandwick — a New York-based public relations firm — found that 70 percent of American consumers avoid buying products from companies they don’t like....
...As far as the scorecard for the Big 10 is concerned, none of the world’s largest food producers scored in the 8-10 (“good”) range on any of the criteria used for the evaluation. While Nestle and Unilever lead their competitors in several areas, they still fall short in how they treat the land, women, and small-scale farmers. The three worst offenders — General Mills, Kellogg’s and ABF — didn’t score above a 3 out of 10 score (“poor”) except for a scant few categories. And out of a maximum score of 70, Nestle, who ranked at #1 among the Big 10, still only scored 38 (only 54 percent). If the scorecard was a college exam, Nestle would still score an F.
The "Golden Age of Capitalism" Was an Era of Racism and Secret Coups
By Emma Caterine, Truthout
From Bernie Sanders calling violently anti-Communist President Eisenhower a socialist, to a plethora of op-eds hailing the allegedly great policies the Republicans had toward labor and refugees, you have probably seen at least one liberal in your life mourn the loss of the Republicans of the so-called "Golden Age of Capitalism," the 1950s. These arguments usually rest on the achievements of that time, such as the desegregation of the military, a corporate tax rate of 50 percent, a top income tax rate of 91 percent, a rate of profit that stood above 20 percent throughout the decade and annual average Gross Domestic Product growth of 3.13 percent.
While most of these achievements are objectively true, this argument of the "once-good" Republican Party can only be sustained when one ignores the context in which these policies were created, the violent campaign against Communism domestically and abroad, and the caveats and exceptions to the policies that predominantly created wealth and welfare at the expense of people of color.
The Context
While there are disagreements as to the level of responsibility, it is generally agreed by economists and historians that the United States escaped the Great Depression, at least in part, by its engagement in World War II. There are two facets of how the war improved the economy: (1) Governmental investment and even takeover of industry created jobs and recycled stagnant fixed capital, such as factories and machinery; and (2) By bombing the post-war foreign competition out of existence, at least for a significant amount of time. The positive effect of the war on the economy was undeniable at the time, and it was a reality that the small government Republicans had to accommodate to.
But that certainly does not mean that they did not try to push for deregulation and a "free market" in the little ways that were politically feasible. President Eisenhower's election was in part due to the capitalists of the time becoming fed up with the Democrats' intervention, such as President Truman's failed attempt to seize the Youngstown Sheet & Tube Company to end strikes. President Eisenhower would employ the virtually opposite tactic during the Steel Strike of 1959 by using the "back-to-work" provision of the Taft-Harley Act. Ironically, the dispute was only settled by a politically ambitious then-Vice President Richard Nixon stepping in and telling steelmakers it was better to settle before the Democratic Congress began hearings on the strike, which would not be as supportive of the companies as Eisenhower was.
Republican US Imperialism at a Discount
With the current political debate around refugees, many liberals have pointed to the Refugee Relief Act of 1953 to shame the Republicans for their opposition to accepting more refugees. The Act did indeed result in 214,000 immigrants gaining admission to the country. But the problem is that under this Act, most -- if not all -- of the Syrian refugees would have been denied entry. The quotas for the Act were as follows: 90,000 West Germans and Austrians; 10,000 from NATO members, Turkey, Sweden, Iran and Trieste (now part of Italy); 2,000 Polish veterans; 60,000 Italians; 17,000 Greeks; 17,000 Dutch; 4,000 for those residing in US consulate districts in the "Far East;" 2,000 Chinese; and 2,000 for Jews and Palestinians of the new Israel who were part of the UN's refugee program.
These quotas show two things: (1) An obvious bias against people of color, with no quota whatsoever for North Africans who were affected by WWII and a pitifully small one for Chinese and Middle Eastern people; and (2) This Act was part of the Republican strategy against Communism abroad by rewarding NATO members and Western Europe. Iran is particularly notable because it was that same year, 1953, that Eisenhower's administration pioneered a new, cheaper version of overthrowing foreign democratic governments through a single CIA agent instigating a coup against the recently elected Prime Minister Mohammad Mosaddegh. The strategy was so successful that they did it again in Guatemala the next year, despite the previous Truman administration having aborted a similar mission in 1952 after public pressure.
Who Was Left Behind in the Golden Age?
US capitalism's "Golden Age" wasn't so golden for the people of color residing in the country. Despite the desegregation begun by President Truman and continued by President Eisenhower in the military, no effort was made to ensure that the Black veterans had equal access to the benefits of such service by either the Democrats or Republicans. President Eisenhower was the second Republican president in history get a plurality of the Southern votes during 1956, and despite his enforcement of the law at Little Rock, Arkansas (which he always maintained was not about integration, but about federal power), sympathized strongly with the Southern whites and their racist views on topics like "miscegenation."
The 83rd Republican-controlled Congress passed laws that criminalized affiliation with Communist organizations, which Attorney General Herbert Brownell, Jr., promptly used to shut down the Communist-affiliated Civil Rights Congress, which is most famous for the "We Charge Genocide" petition to the United Nations. Congress also began the privatization of the infamous Fannie Mae, ensuring that greed was prioritized over public good and setting the mortgage market down a path that has and continues to redline Black communities and systemically deprive them of wealth.
The Danger of Nostalgia
Many Bernie Sanders supporters have wondered why their candidate was not able to garner as much support from the Black community when his policy proposals were far more in favor of Black people than those proposed by Hillary Clinton. I have watched Senator Sanders' career for a long time, since I was a teenage community organizer lobbying for the Employee Free Choice Act, and I've observed him expressing the perverse kind of nostalgia that many older white leftists do for the 1950s and its middle class. Many women and people of color are justifiably skeptical about plans packaged as bringing back a "Golden Age" where they faced broad discrimination with little recourse. A political revolution against our current system would not be the return to a less megalomaniacal Republican Party, and certainly not the election of a xenophobic fascist billionaire who is an outsider in name only. The political revolution is happening every day, being carried about by the working class and the youth who know that this two-party system is a fraud. Consider this an invitation to join.
While most of these achievements are objectively true, this argument of the "once-good" Republican Party can only be sustained when one ignores the context in which these policies were created, the violent campaign against Communism domestically and abroad, and the caveats and exceptions to the policies that predominantly created wealth and welfare at the expense of people of color.
The Context
While there are disagreements as to the level of responsibility, it is generally agreed by economists and historians that the United States escaped the Great Depression, at least in part, by its engagement in World War II. There are two facets of how the war improved the economy: (1) Governmental investment and even takeover of industry created jobs and recycled stagnant fixed capital, such as factories and machinery; and (2) By bombing the post-war foreign competition out of existence, at least for a significant amount of time. The positive effect of the war on the economy was undeniable at the time, and it was a reality that the small government Republicans had to accommodate to.
But that certainly does not mean that they did not try to push for deregulation and a "free market" in the little ways that were politically feasible. President Eisenhower's election was in part due to the capitalists of the time becoming fed up with the Democrats' intervention, such as President Truman's failed attempt to seize the Youngstown Sheet & Tube Company to end strikes. President Eisenhower would employ the virtually opposite tactic during the Steel Strike of 1959 by using the "back-to-work" provision of the Taft-Harley Act. Ironically, the dispute was only settled by a politically ambitious then-Vice President Richard Nixon stepping in and telling steelmakers it was better to settle before the Democratic Congress began hearings on the strike, which would not be as supportive of the companies as Eisenhower was.
Republican US Imperialism at a Discount
With the current political debate around refugees, many liberals have pointed to the Refugee Relief Act of 1953 to shame the Republicans for their opposition to accepting more refugees. The Act did indeed result in 214,000 immigrants gaining admission to the country. But the problem is that under this Act, most -- if not all -- of the Syrian refugees would have been denied entry. The quotas for the Act were as follows: 90,000 West Germans and Austrians; 10,000 from NATO members, Turkey, Sweden, Iran and Trieste (now part of Italy); 2,000 Polish veterans; 60,000 Italians; 17,000 Greeks; 17,000 Dutch; 4,000 for those residing in US consulate districts in the "Far East;" 2,000 Chinese; and 2,000 for Jews and Palestinians of the new Israel who were part of the UN's refugee program.
These quotas show two things: (1) An obvious bias against people of color, with no quota whatsoever for North Africans who were affected by WWII and a pitifully small one for Chinese and Middle Eastern people; and (2) This Act was part of the Republican strategy against Communism abroad by rewarding NATO members and Western Europe. Iran is particularly notable because it was that same year, 1953, that Eisenhower's administration pioneered a new, cheaper version of overthrowing foreign democratic governments through a single CIA agent instigating a coup against the recently elected Prime Minister Mohammad Mosaddegh. The strategy was so successful that they did it again in Guatemala the next year, despite the previous Truman administration having aborted a similar mission in 1952 after public pressure.
Who Was Left Behind in the Golden Age?
US capitalism's "Golden Age" wasn't so golden for the people of color residing in the country. Despite the desegregation begun by President Truman and continued by President Eisenhower in the military, no effort was made to ensure that the Black veterans had equal access to the benefits of such service by either the Democrats or Republicans. President Eisenhower was the second Republican president in history get a plurality of the Southern votes during 1956, and despite his enforcement of the law at Little Rock, Arkansas (which he always maintained was not about integration, but about federal power), sympathized strongly with the Southern whites and their racist views on topics like "miscegenation."
The 83rd Republican-controlled Congress passed laws that criminalized affiliation with Communist organizations, which Attorney General Herbert Brownell, Jr., promptly used to shut down the Communist-affiliated Civil Rights Congress, which is most famous for the "We Charge Genocide" petition to the United Nations. Congress also began the privatization of the infamous Fannie Mae, ensuring that greed was prioritized over public good and setting the mortgage market down a path that has and continues to redline Black communities and systemically deprive them of wealth.
The Danger of Nostalgia
Many Bernie Sanders supporters have wondered why their candidate was not able to garner as much support from the Black community when his policy proposals were far more in favor of Black people than those proposed by Hillary Clinton. I have watched Senator Sanders' career for a long time, since I was a teenage community organizer lobbying for the Employee Free Choice Act, and I've observed him expressing the perverse kind of nostalgia that many older white leftists do for the 1950s and its middle class. Many women and people of color are justifiably skeptical about plans packaged as bringing back a "Golden Age" where they faced broad discrimination with little recourse. A political revolution against our current system would not be the return to a less megalomaniacal Republican Party, and certainly not the election of a xenophobic fascist billionaire who is an outsider in name only. The political revolution is happening every day, being carried about by the working class and the youth who know that this two-party system is a fraud. Consider this an invitation to join.
There’s No Such Thing as a ‘Free Market’
Capitalism with absolutely no government intervention is a myth — and always was.
By Jill Richardson
From Other Words: The debates leading up to the election this year will no doubt invoke the “American value” of capitalism. But what, exactly, does that mean? And what should it mean?
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.
In fact, the growing British Empire was undertaking economic interventions on a colossal scale — and would do even more in the centuries to come. The British set out all over the globe, claiming colonies in the New World and later India and Africa, setting up trade policies that benefited the British at the expense of the colonized.
The British imported cotton from their colonies for their own factories, as well as wheat to feed British workers in the isles. Colonial India, meanwhile, suffered several massive famines. Even as tens of millions of Indians starved to death, record amounts of Indian wheat were exported to feed British factory workers laboring in a so-called free market.
Before the Industrial Revolution, Indian textiles reigned supreme. But British authorities kept industrial textile technologies out of India in order to capture the global textile market, impoverishing the colony further.
Other British staples — tea and sugar — were also imported from British colonies. That sugar was produced by enslaved Africans in the Caribbean.
Some invisible hand.
Smith also overlooked the utter misery textile workers lived in, even in Britain. The system “worked” at making some people rich. But the squalid and wretched lifestyles of laborers, including children — which inspired the writing of Charles Dickens — were its cost.
We in America have meddled in markets plenty in our own right — not least through historical crimes like slavery and colonialism. But we’ve also developed more benign interventions that can actually help people.
We ban child labor, for example, and enforce (admittedly inadequate) minimum wage protections. We require businesses to offer safe and healthy workplaces. We ban the sale of dangerous drugs. We try to regulate pharmaceuticals to make sure they’re safe and effective.
In other words, capitalism with absolutely no government intervention is a myth — and always was.
We can debate the pros and cons of specific regulations. But if you hear a candidate claiming that capitalism means doing away with all regulations — or that any government interference in the market equates to socialism or communism — they’re being dishonest.
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.
In fact, the growing British Empire was undertaking economic interventions on a colossal scale — and would do even more in the centuries to come. The British set out all over the globe, claiming colonies in the New World and later India and Africa, setting up trade policies that benefited the British at the expense of the colonized.
The British imported cotton from their colonies for their own factories, as well as wheat to feed British workers in the isles. Colonial India, meanwhile, suffered several massive famines. Even as tens of millions of Indians starved to death, record amounts of Indian wheat were exported to feed British factory workers laboring in a so-called free market.
Before the Industrial Revolution, Indian textiles reigned supreme. But British authorities kept industrial textile technologies out of India in order to capture the global textile market, impoverishing the colony further.
Other British staples — tea and sugar — were also imported from British colonies. That sugar was produced by enslaved Africans in the Caribbean.
Some invisible hand.
Smith also overlooked the utter misery textile workers lived in, even in Britain. The system “worked” at making some people rich. But the squalid and wretched lifestyles of laborers, including children — which inspired the writing of Charles Dickens — were its cost.
We in America have meddled in markets plenty in our own right — not least through historical crimes like slavery and colonialism. But we’ve also developed more benign interventions that can actually help people.
We ban child labor, for example, and enforce (admittedly inadequate) minimum wage protections. We require businesses to offer safe and healthy workplaces. We ban the sale of dangerous drugs. We try to regulate pharmaceuticals to make sure they’re safe and effective.
In other words, capitalism with absolutely no government intervention is a myth — and always was.
We can debate the pros and cons of specific regulations. But if you hear a candidate claiming that capitalism means doing away with all regulations — or that any government interference in the market equates to socialism or communism — they’re being dishonest.
Why Tax Havens Are Political and Economic Disasters
Seeking prosperity through lax business and tax regulations leaves countries worse off
by Brooke Harrington
From The Atlantic: In the early 1990s, economists coined the term "the resource curse" to describe a paradox they observed in countries where valuable natural resources were discovered: Rather than thriving, such countries often crumbled, economically and politically. The newfound wealth, instead of raising living standards for all, generated violence, as well as accelerating the growth of inequality and corruption. Terry Karl, a Stanford political science professor, dubbed this the "paradox of plenty." The same story has played out again and again all over the world, from Venezuela (where Karl did her research on the destruction wrought by oil wealth) to Sierra Leone (home of blood diamonds) and Afghanistan (which, despite $3 trillion in mineral wealth, remains among the poorest and most corrupt countries in the world).
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable; the "resource" they discover is human capital, in the form of a population literate and numerate enough to provide financial services, such as the filing and compliance tasks linked to offshore corporations, trusts, and foundations. For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure, such as high-speed internet access.
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
This has led to increasing economic fragility for offshore financial centers, along with political corruption and social decline, as evidenced by a rise in crime and violence. I experienced the latter in my own research on the global wealth-management industry: In the course of visiting 18 tax havens in every major region of the world, I encountered this social decay directly through a number of experiences, including being robbed at Pae Moana in the Cook Islands. A local fisherman I met afterwards said the rise in burglary and violent crime in the islands began with the growth of the offshore industry. Not only the wealth it brought in, but also the new value system focused on exploitation and greed, meant that “everyone calls us the ‘Crook Islands’ now.” The finance industry had begun to eat away at the nation’s democratic institutions: Referring to a recent political-corruption scandal, the fisherman said, “They’ve got our government in their pockets. I hate what they've done to my country.”
But as I learned, the workings of the finance curse have shaped not only the development of small post-colonial nations like the Cook Islands, but also that of seemingly wealthy and well-established ones. For example, recent reporting on the Channel Island of Jersey has documented the crippling of the country's economy, government, and society in one of the world's leading financial centers—a place that was once considered a "miracle of plenty" and a role model for other would-be tax havens.
The corrosion described by the finance curse has affected even some of the wealthiest financial centers, such as Luxembourg, which is the domicile of choice for $3.5 trillion worth of mutual-fund shares and over 150 banks. As a result of a robust financial-services sector that contributes 27 percent of the country’s economic production, the Grand Duchy boasts the highest per capita GDP in the Europe, far outstripping its nearest rivals, Norway and Switzerland. At first blush, Luxembourg would appear to be in terrific shape: a wealthy democracy, thriving in the center of Western Europe.
However, as the economist Gabriel Zucman has shown, Luxembourg's role as a leading tax haven has benefitted foreigners at the expense of locals, across the board. Over 60 percent of the country’s workforce is comprised of foreigners, who reap virtually all the benefits of the wealth generated by the Duchy. The society, as a result, is fracturing along expat-versus-local lines, both in economic and political terms.
As Zucman documents, inequality in the Grand Duchy has skyrocketed, with poverty doubling since 1980, and real wages for ordinary Luxembourgers stagnating for the past 20 years. Meanwhile, salaries for expat wealth managers have exploded, tripling housing prices in Luxembourg City. However, even this new wealth has not benefitted the local economy: Due to Luxembourg’s tax policies, public institutions such as the educational system are in "accelerated decline," mainly to the detriment of locals. The result, Zucman observes, is that Luxembourg has become more of a free-trade zone than a state.[...]
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable; the "resource" they discover is human capital, in the form of a population literate and numerate enough to provide financial services, such as the filing and compliance tasks linked to offshore corporations, trusts, and foundations. For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure, such as high-speed internet access.
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
This has led to increasing economic fragility for offshore financial centers, along with political corruption and social decline, as evidenced by a rise in crime and violence. I experienced the latter in my own research on the global wealth-management industry: In the course of visiting 18 tax havens in every major region of the world, I encountered this social decay directly through a number of experiences, including being robbed at Pae Moana in the Cook Islands. A local fisherman I met afterwards said the rise in burglary and violent crime in the islands began with the growth of the offshore industry. Not only the wealth it brought in, but also the new value system focused on exploitation and greed, meant that “everyone calls us the ‘Crook Islands’ now.” The finance industry had begun to eat away at the nation’s democratic institutions: Referring to a recent political-corruption scandal, the fisherman said, “They’ve got our government in their pockets. I hate what they've done to my country.”
But as I learned, the workings of the finance curse have shaped not only the development of small post-colonial nations like the Cook Islands, but also that of seemingly wealthy and well-established ones. For example, recent reporting on the Channel Island of Jersey has documented the crippling of the country's economy, government, and society in one of the world's leading financial centers—a place that was once considered a "miracle of plenty" and a role model for other would-be tax havens.
The corrosion described by the finance curse has affected even some of the wealthiest financial centers, such as Luxembourg, which is the domicile of choice for $3.5 trillion worth of mutual-fund shares and over 150 banks. As a result of a robust financial-services sector that contributes 27 percent of the country’s economic production, the Grand Duchy boasts the highest per capita GDP in the Europe, far outstripping its nearest rivals, Norway and Switzerland. At first blush, Luxembourg would appear to be in terrific shape: a wealthy democracy, thriving in the center of Western Europe.
However, as the economist Gabriel Zucman has shown, Luxembourg's role as a leading tax haven has benefitted foreigners at the expense of locals, across the board. Over 60 percent of the country’s workforce is comprised of foreigners, who reap virtually all the benefits of the wealth generated by the Duchy. The society, as a result, is fracturing along expat-versus-local lines, both in economic and political terms.
As Zucman documents, inequality in the Grand Duchy has skyrocketed, with poverty doubling since 1980, and real wages for ordinary Luxembourgers stagnating for the past 20 years. Meanwhile, salaries for expat wealth managers have exploded, tripling housing prices in Luxembourg City. However, even this new wealth has not benefitted the local economy: Due to Luxembourg’s tax policies, public institutions such as the educational system are in "accelerated decline," mainly to the detriment of locals. The result, Zucman observes, is that Luxembourg has become more of a free-trade zone than a state.[...]
Reverse mortgages: The final blow killing middle class wealth
From Demo Underground: Many fellow Americans that have worked their entire lives, weathered several recessions and depressions, put their children through school, helped many in need, and faithfully paid their mortgages for decades are now being taken advantage of once again. Most have followed all the rules necessary to be considered fiscally responsible, yet because of "legal fraud" by the financial sector and policies effected by purchased politicians, their years in retirement will be compromised.
The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.
...........//snip
Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.
The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the heirs must pay 95 percent of what is owed to the bank with the government paying the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.
Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to survive.
The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.
...........//snip
Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.
The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the heirs must pay 95 percent of what is owed to the bank with the government paying the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.
Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to survive.
America’s Future Depends on Containing Neoliberalism
By Frank Fear ~ LA Progressive
The Rise and Evolution of Neoliberalism
The concept was born in 1930s Europe in reaction to The New Deal in America and The Nazi Movement in Germany. Both expressions were seen as totalitarian, squelching individual freedom and initiative. Over time, Neoliberalism morphed, becoming especially attractive to those who favored reducing regulatory oversight, downsizing government, and accentuating capitalism as the coin of the realm.
“The market” would take care of things—literally all things—and the market metaphor expanded to embrace a variety of domains associated with social and economic life. In Monbiot’s view, “Neoliberalism sees competition as the defining characteristic of human relations…. The market ensures that everyone gets what they deserve.”
It wasn’t until the early 1980s—with Margaret Thatcher in power in Great Britain and Ronald Reagan in the U.S.—that a neoliberal philosophy became a guiding force for national and international affairs. In famously declaring, “There is no alternative,” Thatcher showed how dedicated she was to free markets, free trade, and global capitalism. The American analogue, “Reaganomics” (aka supply-side economics), focused on redressing “an undue tax burden, excessive government regulation, and massive public spending programs that hampered growth.”
“Call it Reaganism or Thatcherism, economism, or market fundamentalism,” William Deresiewicz writes, “neoliberalism is an ideology that reduces all values to money values. The worth of a thing is the price of the thing. The worth of a person is the wealth of the person. Neoliberalism tells you that you are valuable exclusively in terms of your activity in the marketplace — or, in Wordsworth’s phrase, your ‘getting and spending’.”
Neoliberalism was no short-term political fancy, either. It persisted and expanded, promulgated by powerful advocates, to the point that it changed the way America does business. Nobel Prize-winning economist Joseph Stiglitz believes that Neoliberalism has “rewritten the rules” of the U.S. economy by privileging elites. It did so by deregulating business affairs, privatizing public and human services, cutting social services, lowering taxes, and reducing government size and scope. In exchange, elites promised “trickle down benefits” and declared “A Thousand Points of Light” would take care of human and social needs.
Impacts of Neoliberalism
Neoliberalism proceeded, undeterred, without a counterweight. In so doing, though, it created a stink in social affairs. Today, America is something different from what it was before. The unimaginable now happens. Consider three examples.
•Flint, Michigan. There was a time when what happened to Flint wouldn’t have happened in this country. Today it does, in part, because of lower taxes, corporate dependency, limited regulations, and cost-savings for public services. But “Flint,” the city, isn’t just one place. Metaphorically it’s everywhere: a racially concentrated population in socioeconomic distress with an affluent population living comfortably distant.
•Infant mortality. It’s mindboggling to conceive that 21st Century America would struggle in this domain, but it does. The Centers for Disease Control and Prevention reported recently that about 25 industrialized countries are doing better than the U.S. in keeping children alive. A recent New York Times headline was harsh and direct: The U.S. Is Failing in Infant Mortality, Starting at One Month Old.
•Income. According to a new report released by The Congressional Budget Office, American incomes increased differentially across income categories from 1975-2013. Incomes for the Top 1% increased nearly 200% during that 35-year period, but rose only 18% for those in the bottom four income quintiles. (Note: According The Economic Policy Institute, family income of about $400k per year is required in the U.S. to get into the 1% category; and the average income in that bracket is $1.2 million dollars. The average family income for everybody else is about $46k per annum). “Increased inequality is prominent,” conclude researchers at The World Bank. Stiglitz confirms that conclusion with this finding: “91% of all increases in income from 2009 to 2012 in the U.S. went to the wealthiest 1% of Americans.”
The challenge is clear: America won’t be America much longer—at least how we many of us perceive America to be—if circumstances and trends like these continue. But it won’t be easy to shift into a different gear. Neoliberalism is embedded in American psyche and culture. Around for such a long time, it has become “the way things are”—what’s “normal.”[...]