US Corporations – Page 6 – The Wrongologist

Free Trade’s Double-Edged Sword

The Bernie Sanders win in Michigan is chalked up to his attacks on trade agreements, in particular, the Trans Pacific Partnership that resonated with a broader audience than his attacks on Wall Street. Along the way, Donald Trump has been plowing the same ground, talking about how America is losing jobs to Mexico and Asia.

So the question is, are we seeing a political backlash against trade? Can Sanders or Trump gain sufficient political traction to win with this issue? And can we blame trade for losing jobs to China and elsewhere?

Jared Bernstein in Monday’s New York Times made an excellent point: (emphasis by the Wrongologist)

The economic populism of the presidential campaign has forced the recognition that expanded trade is a double-edged sword. The defense of globalization rests on viewing Americans primarily as consumers, not workers, based on the assumption that we care more about low prices than about low wages.

When you hear politicians speak about free trade, they talk about cheaper products. They sidestep the terrible impact on American jobs, they sidestep the concern that many, many jobs have been lost through free trade agreements. The free trade deals have also exacerbated the loss of union power, which means fewer (and lower paying) jobs, fewer hours, and poorer benefits, including pensions.

The trade topic is obviously a huge driver of Trump’s and Sanders’s appeal. It is a problem for Hillary, since she was for the Trans-Pacific Partnership before she was against it.

Despite being on opposite ends of the political spectrum, the two populists are using the same message: The government, both political parties, and business are working at cross-purposes with the needs of the American people. In a democracy, populism is a warning sign that government has been disconnected from its citizens. Consider that while Americans lost at least 4 million jobs, corporate profits are up, and the 1% has gotten much wealthier.

It’s true that off-shoring is good for the global economy. Chinese people working to make iPads are richer than they were, but it’s not a win-win situation. It’s more of a win-lose, where Chinese workers win relatively big, while American workers lose medium.

Another problem is that workers directly impacted by trade have little power or influence in their firms or the country as a whole. In the US, exports only make up about 13.5% of GDP. But in Sweden, Denmark or Germany, exports are north of 40% percent of GDP. And these countries, with far fewer natural resources, have robust social safety nets in addition to high wages. And as Bernstein says:

The real wage for blue-collar manufacturing workers in the United States is essentially unchanged over the past 35 years, while productivity in the sector is up more than 200%.

Why? Because governments in these other countries stress building high-skill industries that compete based on producing high value-added products, while low-skill industries that compete based on exploiting their employees are discouraged. This is called having an industrial policy, which encourages business to meet government priorities. In America, we are against having industrial policies, because it sounds like socialism.

Bernstein points out that the free trade negotiation process has been captured by investors and corporate interests:

According to the Washington Post, 85% of the members of the outside committees advising the administration on the proposed Trans-Pacific Partnership were from private businesses and trade associations (the rest were from labor unions, NGOs, academics and other levels of government).

And that’s the world we live in. Business is driving most of the decisions that our politicians make, ensuring that whatever is enacted is primarily good for business, and secondarily, if at all, for We, the People.

And in the world we live in, free trade has significantly boosted wages and quality of life for overseas workers and has helped lift millions of Chinese and other Asian citizens out of poverty, while our middle class, a prerequisite for our stable society, has been hollowed out.

Yet, America’s plutocrats and politicians push for even MORE free trade.

The current election cycle may horrify the “political establishment,” of both parties, but it was preordained by their bought-and-paid-for politics.

Americans have a real gripe. They don’t see, or care about the benefits to Chinese and other third world workers that lower or stagnant wages at home help to provide. The Bernie win in Michigan and Trump’s success in the GOP primaries show people are super pissed off.

Our political parties better start coming up with ways to mitigate the trade and wage problem before someone like DonDon actually succeeds in becoming president.

Has The Progressive Moment Returned?

(This is the second and final column on the Progressive Movement)

Few issues in the history of 20th and 21st century America have inspired more disagreement than the value of the Progressive movement to our society. Our high school texts taught that it was a movement by the people to curb the power of the special interests in our government:

COW Bosses

The Bosses of the Senate by Joseph Keppler, 1889

The 1890s Progressive Movement was a response to dislocations in American life. There had been rapid industrialization of the economy, but there had been no corresponding changes in social and political institutions. Economic power had moved to ever larger private businesses, while social and political life remained centered primarily in local communities, even within rapidly growing cities, with great variability in quality of life.

But early Progressives believed that the problems society faced (poverty, violence, greed, racism, class warfare) could best be addressed by providing good education, better working conditions and an efficient workplace. The desire to regulate big business was mostly focused on creating a fair(er) deal for small businesses and workers. Others encouraged Americans to register to vote, fight political corruption, and let the voting public decide how issues should best be addressed (via direct election of senators, the initiative, and the referendum).

Essentially the struggle was a clash between the “public interest” and “corporate privilege.”

Daniel Rodgers’s Atlantic Crossings (1998), shows how European reforms at the time influenced American progressives, suggesting that the movement was not just an American phenomenon, but had roots in a European process of change. He describes the international roots of social reforms such as city planning, workplace regulation, rural cooperatives, municipal transportation, and public housing that traveled across the ocean to our shores.

This is something we see today. Populist movements from the left and the right are roiling Europe, just as they are in America.

In the mid-1930s, the New Deal allowed the country to return to a pent-up agenda of its Progressive past. Once again, we had an economic crisis, once again, the power of business was outsized versus the power of the worker.

Another Roosevelt reformer stepped into the role of Progressive-in-Chief. But where Teddy was a Republican, FDR was a Democrat. Regardless, change again ensued.

We hear Progressivism referred to as synonymous with the American welfare state. But, the original Progressives did not believe that a ‘welfare state’ was an end goal. In fact, the term ‘welfare state’ did not come into currency until the end of the 1940s, as a new label in the Republican Party’s attack on Social Security and other programs of the New Deal.

As we wrote in the review of One Nation Under God (2015) by Kevin Kruse, James Fifield, a minister who worked to bring Corporate America and Christians together said in 1935:

Every Christian should oppose the totalitarian trends of the New Deal…

Overall, Kruse’s book is an excellent analysis of how Christian fundamentalism and capitalism were conflated in the 1950s to erode the divide between church and state, re-casting Progressive political philosophy as both “un-American”, and “anti-Christian” at the same time.

Progressives were called Reds or socialists. It was a charge that would follow Progressives throughout the 20th Century, whenever Progressives returned to the cause of economic equality.

In American Dreamers: How the Left Changed a Nation (2012), Michael Kazin shows that the US is unique among Western nations in that we never developed a viable, left-wing political movement. Unlike Europe, a progressive party has never succeeded in establishing more than a temporary foothold in American politics, despite the hysterical rhetoric of conservatives. We have had a Congressional Progressive Caucus only since 1991. It is comprised of one Senator and 75 Congress people, all Democrats.

Yet, Progressives still have had great success in shaping American society. During presidencies from LBJ to GW Bush, there was far more radical dissent in the US than at any time in the 1950s. Millions of Americans, perhaps a majority, came to reject racial and sexual discrimination, to question the need for and morality of military intervention abroad, and to worry that industrial growth might be destroying the climate.

Since Teddy Roosevelt and the Bull Moose Party in 1912, Progressives have had little historic influence on electoral politics. In the earliest days of Bernie Sanders’s presidential campaign, it was thought that his role was not to win the election, but to slip a few liberal planks into Hillary Clinton’s candidacy. But on the campaign trail, Sanders started drawing crowds of thousands, his ratings surged, and his became a Progressive moment in electoral politics.

Today, Progressivism is a cause in search of a candidate.

Many have called our time a new Gilded Age.

If so, the question then becomes whether Progressivism can once again move back into the halls of government, and be a positive force for change.

1890s Progressivism: When the Movement Worked

Last week, Wrongo read “The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism” by Doris Kearns Goodwin (Simon and Schuster, 2013). The book covers the birth of the Progressive Era, a period of social activism and political reform across the US, from the 1890s to 1920.

For context about the times, does any of this sound familiar?

The gap between rich and poor has never been wider…legislative stalemate paralyzes the country…corporations resist federal regulations…spectacular mergers produce giant companies…the influence of money in politics deepens…bombs explode in crowded streets…small wars proliferate far from our shores…a dizzying array of inventions speeds the pace of daily life.

That was the political landscape in the 1890s. This was the time of the Gilded Age, a time of income and wealth inequality. From 1860 to 1900, the wealthiest 2% of American households owned more than a third of the nation’s wealth, while the top 10% owned roughly three-fourths of it. The bottom 40% had no wealth at all.

“The Bully Pulpit” tries to do three things simultaneously: It is a biography of Theodore Roosevelt, and a biography of William Howard Taft; third, it introduces us to McClure’s magazine and the rise of Muckraking journalism. The muckrakers were investigative reporters who exposed corrupt politicians and business leaders at all levels. Goodwin includes mini-bios of Ida Tarbell, Lincoln Steffens, Ray Stannard Baker and William A. White, all of whom were titans of investigative journalism at the time. A key finding by Goodwin is how TR encouraged the Muckrakers. He offered them access and friendship, and received information about the problems they were investigating, a synergy that enabled both to influence policy and politics for 30 years.

Consider the times: Corporations were ascendant. Politicians were reluctant to involve the federal government too heavily in the private sector. In general, they accepted the concept of laissez-faire, opposing government interference in the economy except to maintain law and order. This attitude started to change during the depression of the 1890s when small businesses, farmers, and labor movements began asking the government to intercede on their behalf.

By the start of the 20th century, the middle class was leery of the emerging corporate giants called “Trusts”. The Trusts consolidated businesses, using horizontal (controlling competitors) or vertical integration (controlling supply and distribution), and thus, created monopolies. For example, John D. Rockefeller drove other oil companies out of business and created a giant oil company, Standard Oil.

The Progressives argued the need for government regulation of business practices to ensure competition and free enterprise. Under President Benjamin Harrison, Congress regulated railroads in 1887 (the Interstate Commerce Act), and in 1890, the Sherman Antitrust Act, which prevented large firms from controlling a single industry. But, these laws were not rigorously enforced until Teddy Roosevelt, vice president under McKinley, became president after McKinley’s assassination in 1901.

Roosevelt and William Howard Taft became close friends when both were part of the Harrison administration in 1888. Taft became a key member of President Roosevelt’s cabinet, and later his handpicked successor, in the election of 1908. While TR thought Taft a “genuine Progressive”, Taft was not the politician that TR was, and he was by temperament, more conservative. In 1910, TR broke bitterly with Taft on a series of issues and when in the 1912 nomination process, Roosevelt failed to block Taft’s re-nomination, he launched the Bull Moose Party. This ultimately led to them both losing in 1912 to Democrat Woodrow Wilson, who also ran as a Progressive.

This wave of reforms was continued by Wilson. The legacy of the Progressive Era includes the Pure Food and Drug act, the progressive income tax, direct election of senators and the women’s vote.

All of this makes “Bully Pulpit” a very long book at 928 pages. But, it is a very worthwhile read, particularly since many of the same issues we face today were in full flower back then. And it is remarkable how similar the political and ideological arguments of the time are nearly identical to the arguments today.

The book gives us some hope that, at one time, divided government could morph into a movement that won by embracing progressive values. That happened because interest groups, including farmers, small businesses and unions joined together with local governments, journalists like the Muckrakers, and sympathetic politicians of both parties to energize a movement that was directed at solving specific problems – the consequences of the Gilded Age.

Can it happen again? Can investigative journalism return, or is it dead?

Tomorrow, we will take a look at why Progressivism died and was then reborn under another Roosevelt.

Bonus Cartoon Thursday – March 3, 2016

How about an extra helping of political cartoons in honor of the silly season? After Super Tuesday, you might need some Bernie Crème:

COW Bernie Creme

Instead of “Yes we can,” Democrats have adopted a new slogan this election year: “Why try?” In spite of Hillary’s Miami victory speech, which sounded like it was written by Bernie, Clinton supporters believe we shouldn’t aim high, that we shouldn’t try for broad fundamental change, because we might fall short. Why is it better to proceed incrementally, to settle for less than we deserve because we might not get everything we want? Why do the establishment Dems proceed from the presumption that settling for incremental change is the only way to real change? Didn’t they learn anything from the 2014 mid-term elections?

Justice Scalia non-nomination creates GOP euphemisms:

COW GOP euphamisms.png

The Parties have selective views of what is realistic when choosing a candidate:

COW Trump Bern

Why is a huge corporation protecting us from our government? Shouldn’t it be the other way around?

COW Hal Phone

Obama: Right on Cuba, Wrong on Scalia Funeral

Mr. Obama made two decisions this week, to visit Cuba, and to not attend Justice Scalia’s funeral.

The Scalia decision may not be so smart. From Politico:

President Barack Obama is preparing for a fierce battle with the Senate over the Supreme Court vacancy, but he’s not planning to attend Justice Antonin Scalia’s funeral — a decision that puzzled even some of his allies and incensed conservative media.

Yep, the decision to forgo the funeral on Saturday is called a partisan snub by the Right. They ignore that Mr. Obama and first lady Michelle Obama will go to the Supreme Court on Friday to pay their respects to Justice Scalia while the justice lies in repose in the Court’s Great Hall.

Vice President Joe Biden and his wife Jill Biden, who share Scalia’s Catholic faith, will attend the Catholic funeral services, representing the Administration.

Politico reports there is little precedent for presidents attending the funerals of sitting justices. President George W. Bush attended, and eulogized Supreme Court Chief Justice William Rehnquist in 2005. But before Rehnquist, the last justice to die in office was Robert H. Jackson in 1954.

It’s a can’t-win situation for Obama. If he attends, the right will pick apart his mannerisms, facial expressions and interactions with other attendees, criticizing what they will call snubs of various kinds.

While not attending again shows Obama’s tin ear when it comes to domestic politics, his decision is acceptable. Attending the funeral would not suddenly change the stance of Republicans who think that Obama should not nominate a Scalia replacement.

His decision to visit Cuba is smart. Obama will be the first US president to visit the island in 88 years. The last US president to travel to Cuba was Calvin Coolidge in January 1928.

Obama and Cuban President Raul Castro announced a diplomatic thaw in December 2014, after more than 50 years of disruption and confrontation between the two countries. The US and Cuba formally resumed bilateral relations in July, 2015. A month later, US Secretary of State, John Kerry, officially opened the US Embassy in Havana, becoming the first US diplomatic head to visit Cuba in 70 years.

Why do we care about opening Cuba? Here is one reason: a story in Forbes this week underlines what we can expect from opening relations.

Horace Clemmons and Saul Berenthal, both 72-year-old retired software engineers, are slated to become the first Americans since 1959 to set up a manufacturing plant in Cuba. Their plan: produce small, easily maintained tractors for use by family farmers. Under new regulations issued by the Obama administration, the US Treasury Department’s Office of Foreign Assets Control gave the Paint Rock, AL-based partners the go-ahead last week. Once they get final approval from the Cubans…in early 2017, they’ll start building a factory in a special economic zone set up by the Cuban government in the port city of Mariel.

The Wrongologist visited Cuba in 2014. Below is a photo of tobacco farming in Pinar Del Rio, a predominantly agricultural region about 2 hours from Havana that produces 70% of Cuba’s cigar tobacco. This farmer is using oxen to plow his tobacco field. Most independent farmers use animals for plowing.

The tractors that we did see were Soviet-era imports:

OLYMPUS DIGITAL CAMERA

Clemmons and Berenthal got rich in tech here in the US, and identified the need for cheap tractors in Cuba. They will be showing their first tractor model at a Cuban agricultural fair in March. Why are they doing this? They have a desire to be helpful to the Cuban people, but they want profits:

Our business model says we are investing in Cuba and reinvesting any profits we make. We’ll do what we did with our other businesses. We’ll create value and then sell the company.

And was it easy for them to get US government approval? Berenthal told Forbes:

In all honesty it was tedious rather than difficult. We had to wait for the regulations to change so that the proposal we made was covered by the regulations implemented over the last nine months.

Isn’t it interesting that two entrepreneurial guys can identify a big market and jump in before the big US agricultural manufacturers?

And despite Mr. Cruz’ and Mr. Rubio’s yelling about Obama dealing with a Communist regime, the Cuban government appears willing to offer financial backing to private farmers who choose to buy from a privately owned US company.

Kudos to Obama, and to Clemmons and Berenthal. It is long overdue, yet somehow, just in time.

Workin’ in a Coal Mine

American Experience ran a documentary called “The Mine Wars” on January 26th. It told the story of West Virginia coal miners’ battle against mine owners at the start of the 20th century.

Few know that the WV mine workers struggle against the mine owners led to the largest armed insurrection after the Civil War and turned parts of West Virginia into a war zone that required federal troops to pacify.

The battle started in 1920 with a shootout in Matewan, WV. It was triggered by a plan by the United Mine Workers (UMW) to organize Mingo County, where Matewan is located, and the thuggish reaction by mine owners. There is a fine movie that documents this, “Matewan”, by John Sayles.

The town’s union-sympathizing Police Chief Sid Hatfield confronted a group of private detectives from the Baldwin-Felts company who were hired by the coal mine owners. The detectives had come to Matewan to evict the families of unionized miners. The “Battle” of Matewan left seven Baldwin-Felts men dead, along with the mayor and two townspeople.

Some background: Workers were paid based on the weight of the coal they mined. Each car brought from the mines theoretically held a specific amount of coal (2,000 pounds). However, cars were altered by owners to hold more coal than the specified amount, so miners would be paid for 2,000 pounds when they actually had brought in 2,500. In addition, workers were docked pay if rock was mixed in with the coal. Miners mostly lived in company-owned homes, and were forced to shop at company-owned stores.

The UMW started organizing and striking in WV in 1912. When the strikes began, the mine owners used hired guns to inflict plenty of violence on miners and their families.

There is a sordid history of similar efforts throughout the US. Check out the Ludlow Massacre in 1914.

But before WWI, the UMW was unsuccessful in changing working conditions or wages for miners. The US entry into WWI in 1917 sparked a boom in demand for coal, also bringing increasing wages. After the War, demand for coal fell, and so did miners’ wages.

At that time, the largest non-unionized coal region in the eastern US were WV’s Logan and Mingo counties, and the UMW made them a top priority. Mine owners in Logan bought off the Logan County Sheriff Don Chafin to keep the union out of the county. In 1921, after increasingly violent confrontations with the owners and their hired guns, miners moved to fight back.

In August, approximately 5,000 armed union men entered Logan County. Logan city was protected by a natural barrier, Blair Mountain. Chafin’s forces took positions at the top of Blair Mountain, while the miners assembled near the bottom of the mountain. There were skirmishes and deaths. On September 1, President Harding sent in federal troops to break up the battle, and the miners soon surrendered to the feds.

By 1924, UMW membership in the state had dropped by about 50% of its total in 1921.

Mine owners also engaged in a PR campaign that portrayed the UMW as “Bolsheviks”. The Red Scare in 1919-1920 was based on fears that the labor movement would lead to radical political agitation, or would spread communism and anarchism within the country. This sense of paranoia was driven in part by the mining companies.

Does any of this sound familiar? How many red scare equivalents have we had in the last 100 years?

Corporations have always been at war with workers. Here’s the real question: Is it possible for capitalism, by its very nature, NOT to incite a constant battle between the .01% and everyone else?

Probably not. Class is a feature of capitalism, so it follows that class conflict will always be part of capitalist economies. We may find ways to mitigate the effects of that conflict, but it will always be a struggle to do so.

At the same time, we see every day that the interests of private capital are not aligned with the needs of society as a whole. We re-learn these lessons because our public institutions periodically get co-opted by capital. Until private capital’s stranglehold over our political process is ended, it will always try to rig the system.

The miners’ struggle in West Virginia was not just a backwoods conflict. The WV experience has direct relevance to today’s American economy, to today’s capitalists, and to the state of labor in America today.

What happened in West Virginia is an object lesson for what all of America might look like with unfettered corporatism.

Take a look and listen to Lee Dorsey’s 1966 hit “Workin in Coal Mine” written by the late, great Alan Toussaint:

For those who read the Wrongologist in email, you can view the video here.

Pacific Gas Gooses Prices: Why?

Pacific Gas and Electric is America’s largest electric utility and the second largest gas utility measured by number of customers. You may remember that their gas pipeline exploded in 2010 in San Bruno CA, just south of San Francisco, killing 8, injuring 66, and burning down 38 homes. The legal fallout is still in the courts, with the trial scheduled to begin on March 8 in US District Court in San Francisco.

PG&E announced a price increase on December 30, when few would be paying attention. SF Gate carried the customer-friendly part of the announcement:

We want our customers and their families to know that we are here to help them make smart energy choices and save money whenever possible…

That’s corporate-speak for turn down the heater, put on another fleece, buy more efficient appliances, and find subsidies available to low-income households.

The increase was effective two days later, on January 1st. It will hike natural gas rates for the average residential customer by 4.0% and electricity rates by a stunning 8.5%, for a combined rate increase of 7%, the steepest since 2006.

Utilities raise prices all the time. But maybe a few things about PG&E’s price increase are worth a look:

• Natural gas prices have fallen steadily since 2008, much of the power PG&E distributes is generated by natural gas. In fact, in its third quarter financial statement, PG&E says its cost of electricity over the first nine months of 2015 dropped 8.8% year-over-year, and its cost of natural gas plunged 36%.
• The California Public Utilities Commission (PUC) agreed in 2014 to let PG&E collect an extra $2.37 billion in revenue from its customers over three years, through the end of 2016. The additional money will pay for maintenance and upgrades to PG&E’s sprawling electricity grid and natural gas pipeline network.
• PG&E pays quarterly dividends of $0.455 per common share. With 489 million shares outstanding, dividends for a year would amount to $890 million.So for the three-year period in question (2014-2016), this amounts to about $2.7 billion, which would have paid for the maintenance and upgrades of its system.

There’s more: In September, PG&E asked the PUC for another $2.7 billion in revenue increases for the three-year period of 2017-2019. That particular amount of money would be used ostensibly to prepare for natural disasters. But, as Wolf Richter reports, over the same period, PG&E would pay out another $2.7 billion in dividends.

The PUC, already under federal grand-jury investigation for its ties to PG&E about the San Bruno disaster, hasn’t voted on this increase. If PG&E had a real regulator, it would be forced to pay for maintenance and upgrades with funds it sourced from something other than rate increases. Particularly when its fuel costs are plunging, and it’s paying out an $890 million annual dividend.

PG&E’s is following the “maximize profits and shareholder value” dictates of a modern market-driven corporation. But in the case of private utilities, the state regulator is supposed to review rate applications and ensure the company is not reaping excessive profits and is charging fair prices.

That the CA PUC allowed these price increases perhaps demonstrates incompetence, or excessive favoritism. Help may be on the way: SF Gate reports that Gov. Jerry Brown shook up the five-member utilities commission, nominating one of his former top advisers, Michael Picker, to be its new president. He also nominated Liane Randolph from the state’s Natural Resources Agency to join the commission. So, perhaps the back-room deals are over, but Californians will have to wait and see.

Capitalism, like any game, needs referees who are beyond influence. The clear operating strategy of the “free market capitalists” is to have regulators of all stripes squeezed by lower funding and by packing the regulatory boards with industry insiders. Far too many of the referees (regulatory agencies) are insiders in the industry game.

Maybe there is help on the way in California. If not, maybe it’s time to put a few corporate heads up on pikes in the California sun!

Monday Wake Up Call – November 30, 2015

Today’s wake up is for the American worker. While you were sleeping, corporate executives were piecing together an economy and associated tax regulations that allowed them to become America’s oligarchs.

The Center for Effective Government just came out with a study of CEO retirement funds. You already know the conclusion, but you didn’t know the facts:

• The 100 largest CEO retirement funds are worth a combined $4.9 billion. That’s equal to the entire retirement account savings of 47 million American families
• Nearly half of all working age Americans have no access to a retirement plan. The median balance in a 401(k) plan at the end of 2013 was $18,433, enough to generate a monthly retirement check of $104.

In addition, 73% of Fortune 500 firms have also set up special tax-deferred compensation accounts for their executives. These are similar to the 401(k) plans that some Americans have through their employers. But average workers face limits on how much pre-tax income they can invest each year in similar plans, while the plans the F500 provides to their top executives do not. They are free to shelter unlimited amounts of compensation in their retirement funds where their money can grow tax-free, until retirement.

But for the average employee? The GAO says that 29% of workers approaching retirement (aged 50-65) do not have pension or retirement savings in a 401(k) or IRA. While according to a study by the Schwartz Center at the New School, 55% of those aged 50-64 will be forced to rely solely on Social Security (which averages $1,233 a month).

The current rules mean that if CEO’s slash worker retirement benefits, they can boost corporate profits and thereby, stock prices. And since much of executive compensation is tied to the company’s stock price, these rules (and company practice) create a powerful incentive for CEO’s to choose their pocketbooks over those of their employees.

We are talking about market power. The CEO’s and their firms have little to fear from Mr. Market. In turn the rising wealth at the top buys growing political influence, through campaign contributions, lobbying, and the rewards of the revolving door between government jobs and those in the private sector. Political influence in turn is used to write the rules of the game—the tax laws we are speaking of here, antitrust laws, deregulation, union-busting—all in a way that reinforces income concentration.

The result is a feedback loop between political power and market power that created, and now maintains, a vicious circle of oligarchy.

Well, time to wake up from a snooze that allowed our politicians and the largest corporations and their CEOs to turn our country and economy into their private sandbox.

To help with today’s wake-up, here is Rage Against the Machine, the gone but not forgotten band, with Zach de la Rocha on vocals and the superb Tom Morello on guitar. They are performing “No Shelter”, written in 1998:

https://www.youtube.com/watch?v=6NEoesmnYU4

Sample Lyrics:
Empty ya pockets son, they got you thinkin’ that
What ya need is what they selling
Make you think that buying is rebelling
From the theaters to malls on every shore
Tha thin line between entertainment and war

Chained to the dream they got ya searchin’ for
Tha thin line between entertainment and war

There be no shelter here
Tha front line is everywhere
There be no shelter here
Tha front line is everywhere

American eyes, American eyes
View the world from American eyes
Bury the past, rob us blind
And leave nothing behind

Just stare
Just stare
Relive the nightmare

Those who read the Wrongologist in email can view the video here.

Soon, Antibiotics Won’t Work

It’s estimated that more people will die from bacterial infections than from cancer by 2050. Two disparate factors are driving this. First, scientists in China say they’ve identified a gene that makes common, dangerous bacteria resistant to “last-resort” antibiotics called polymyxins. The mutated gene, called mcr-1, was found in the Enterobacteriaceae germ in both pigs and people in South China, according to a report published in The Lancet.

Study author Jian-Hua Liu, a professor at South China Agricultural University in Guangzhou, China, said:

The polymyxins (colistin and polymyxin B) were the last class of antibiotics in which resistance was incapable of spreading from cell to cell…

The new gene was found on mobile forms of DNA that are easily copied and transferred between different bacteria. According to the researchers, this suggests a much greater potential for the gene to spread and diversify in different types of bacteria.

Liu went on to say that the discovery points to the emergence of a gene which can create multidrug resistance that:

is readily passed between common bacteria, including E. coli and the Klebsiella pneumoniae germ, which can cause deadly pneumonias or bloodstream infections.

We have all heard that extensive use of antibiotics in agriculture may contribute to this resistance gene. Liu’s team said that pigs were more likely than people to have bacteria with mcr-1 gene-related colistin resistance. That suggests that the resistance originated in animals and then spread to people.

The discovery bodes ill for public health worldwide. Timothy Walsh, Professor at the University of Cardiff in Wales, told BBC News: (emphasis by the Wrongologist)

All the key players are now in place to make the post-antibiotic world a reality. If MCR-1 becomes global, which is a case of when not if, and the gene aligns itself with other antibiotic resistance genes, which is inevitable, then we will have very likely reached the start of the post-antibiotic era.

According to the Review on Antimicrobial Resistance, drug-resistant infections could kill an extra 10 million people across the world every year by 2050 if new antibiotics are not found. That’s 350 million people lost. By 2050, this could cost the world around $100 trillion in lost output: That’s more than the size of the current world economy, and roughly equivalent to the world losing the output of the UK economy every year, for 35 years. Here is a graphic representation of the scale of the problem:

The second factor driving this disaster is our Bad Corporate Citizens. There are two classes of these bad actors. The food conglomerates that feed antibiotics to animals raised for meat, so that pig farmers can make more profit, and the Big Pharma companies that spend their intellectual calories on corporate inversions (such as Pfizer is doing in its merger with Allergan) rather than on antibiotic research. As David Cox reports about drug company research:

They’re happy to sell existing antibiotics, but they’re not interested in researching and developing new ones.

Professor William Fenical at the Scripps Institute of Oceanography in San Diego discovered a new antibiotic capable of attacking the bacteria MRSA, a hospital superbug. However, most large pharmaceutical companies abandoned their antibiotic programs by 1995. And even though we know that animals raised with no antibiotics are less likely to contain drug-resistant bacteria than those routinely given antibiotics, about 80% percent of antibiotics sold in the US are given to animals raised for food production.

So, we have a perfect storm brewing: To enhance corporate profits, we give antibiotics to animals, weakening the value of those antibiotics in controlling human disease. And we look the other way when the big drug companies use innovation to avoid taxes, while saying that research into new antibiotics is “too risky” for their shareholders.

Again, the strategy of big business is “privatize the gains, socialize the losses.” And maybe when you get sick, the doctor will only be able to prescribe you a pork chop.

The world needs a new capitalism. Mr. Market isn’t going to fix this.

The Republican “Free Stuff” Meme

At the last Republican presidential debate, Chris Christie (R-NJ) characterized the Democratic candidates’ debate as:

A parade of, ‘I’ll give you this for free; I’ll give you that for free’.

Senator Marco Rubio said: (brackets by the Wrongologist)

It [the first Democratic debate] was basically a…debate about who was going to give away the most free stuff: Free college education, free college education for people illegally in this country, free health care, free everything.

Jeb Bush says that black voters should back him, since his:

…message is one of hope and aspiration, not one of division and get in line and we’ll take care of you with free stuff…

For the record, Medicare, Medicaid, Social Security, and unemployment have dedicated tax revenue streams. If we back out those funded benefits, all other elements of the so-called social safety net “free stuff” adds up to ~$405 billion, a fraction of the $1.2 trillion in “unfunded” Federal entitlements, and most of the rest goes to top income earners.

So, what do Republicans mean when they say “Free Stuff”? From Jared Bernstein:

There are at least three definitions of “free stuff.” The broadest would simply include all government benefits. A narrower version might apply only when people receive more in benefits than they pay in taxes. A third might refer to any net gain relative to the status quo.

Under any of these definitions, the Republican claims are misleading: they attack help for people who need it, while implicitly condoning tax subsidies for the wealthy. What the Republicans want us to focus on are public education, Medicaid, and direct cash assistance to the poor, but the government provides other subsidies, some of which the GOP seems perfectly happy to keep in place.

For example, Rubio and Bush want to cut capital gains taxes below the current level (Rubio would completely abolish them). But today’s reduced cap gains rate already provides a significant benefit to people who invest in assets (i.e., the wealthy). Then there are things like regressive housing tax breaks, about 70% of which go to those in the top 20%. In addition, 68% of the tax benefits for retirement savings and 64% of subsidies for individual retirement accounts (IRAs) accrue to the top 20%.

Can it be that government benefits for poor people are “free stuff”, while benefits for the wealthy are not?

Maybe Christie, Rubio, and Bush subscribe to the second definition described above: It’s “free stuff” if you receive more in benefits than you pay in taxes, but not if you pay more in taxes than you receive in benefits.

The third way to think about “free stuff” mirrors the most accepted concept of “free”. Bernstein asks:

Suppose, for example, that you opened your email today to find an unexpected $100 Amazon gift card. No matter how much money you had spent or planned to spend at Amazon, you would call this “free” money. Or imagine that you go out to dinner at a restaurant and a waiter decides to “comp” your dessert. Regardless of the overall price of your meal, you would likely consider that dessert item to be “free.”

Under this definition, “free stuff” from the government would be new benefits or reduced taxes relative to one’s current situation. Since the Christie, Rubio, and Bush tax plans all contain massive tax cuts, they would give away huge amounts of foregone tax revenue as “free stuff,” and unlike the “free stuff” proposed by the Democratic candidates – the GOP “free stuff” would go to their very wealthy patrons.

From the carried interest loophole, to drug patent law, to defense industry markups, to sweetheart deals for the oil industry, the total “free stuff” for the 1% dwarfs that available to the rest of us. Yet, the nattering nabobs of trickledown continue to target removing the scraps doled out to the 99%.

Social stability is the reason the rich should not begrudge the support given to those that are less fortunate in our society. The rich have the most to lose should the vast majority decide they have suffered enough, and we see an “off with their heads” moment.

Extra money in the hands of the 1% or the .01% just creates bidding wars for penthouse apartments that the 2% can no longer afford.

The Wrongologist

Geopolitics, Power and Political Economy

Category: US Corporations