Category: US Corporations

Is Our System More Like Huxley, or Orwell?

Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can save it. – Judge Learned Hand

Yesterday was Human Rights Day. Maybe, with all that has happened to our human rights in post-9/11 America, it is a good time to look very carefully at the current spate of bad outcomes for people who draw attention from our police. One question is, who still believes in our system? Below is one answer that points to where we are:

Trust the police Here is the poll question that produced the above response:

How much confidence do you have in police officers in your community to not use excessive force on suspects: A great deal, a fair amount, just some, or very little confidence?

Note that “no confidence” was not an option for your answer. One way to look at the poll is that it shows that our system is working exactly as it is intended to work. From Ian Welsh: (emphasis by the Wrongologist)

If a police officer tells you to do anything, you do it immediately. If you do not, anything that happens to you, up to and including death, is your problem. The legal system exists today to ensure compliance.

And if you fail to do what is asked, the police will say, “He/she was non-compliant.” That is a way that this part of the American system performs as designed. It rewards compliance, it identifies those who will not obey laws, or who will fight or organize against the system, and then it works to push them down.

In our system, the wolves and the sheep self-identify, they know which group they belong to. If an injustice is committed, if people protest, the most aggressive protestors, even if not violent, are arrested. Our oligarchy is built on the idea that we must keep people from effectively resisting. More from Ian Welsh:

Any part of the population which is inclined to resist, must be taught that it cannot resist. Get out millions to demonstrate against the Iraq war: it will not work. Protest against police killings of African Americans, it will not work.

Occupy Wall Street? That didn’t work either. The system operates in two ways to repress and control people. America’s system has been 80% Huxley and 20% Orwell for decades, but now, the ratios are approaching 50/50. Let’s unpack the Orwell vs. Huxley worldviews: (h/t highexistence.com)
huxley_orwell1

 • Orwell feared the government would ban books.
• Huxley feared that there would be no reason to ban books, because no one would want to read them.
• Orwell feared the government would deprive us of information.
• Huxley feared they would give us so much information that we would be reduced to passivity.

Orwell feared that the truth would be concealed from us. Huxley feared the truth would be invisible in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture.
So, we became the trivial culture that Huxley feared. Now, the powers that be are tilting to Orwell to nudge us toward a captive culture.

Huxley’s vision of how human nature or human aspirations could be manipulated for the purposes of the controlling elite rings true in the US. But, Orwell’s depiction of the controlling/interlocking elites of allegedly opposed factions (R’s vs. D’s, government vs. private sector, Wall Street vs. Main Street) is truer than ever before.

So, both are right. Orwell’s fear is already a reality in the East (North Korea, China, Iran) and Huxley’s fear is reality in the West (US, Scandinavia, UK).

Look at how easily the citizenry acquiesced to militarized police in Boston a couple of years ago. Tanks rolled down the streets and officers dressed like they were in Afghanistan demanded that people go inside their houses, for their “safety”. This “army” then searched for the two suspects in the Boston Marathon bombing. This took place over a huge area—whole towns. Was this just the police testing their new toys? Or was it also something darker… like a test of how far the government can go with the Security State? It didn’t hurt that the people got to say they were “Boston Strong” and got the rest of the country to buy in to that.

Power and information are continua. The Orwellian vision tends towards power, while the Huxleyian view tends toward information. However, they are neither separate, nor divisible. Human history has always used deceit as a tool, backed by power, while the biggest bullies have tried to control things since prehistory.

Both manifest legalized lies, backed by legalized violence, wherein the government becomes the largest organized crime syndicate, controlled by the best organized criminals. Welcome to America.

These “crime syndicates” are destroying the foundations of our society, creating the twin near-religions of the State and the Corporation.

The system will not change until the people who want change have enough power to force change. But first, they have to open their eyes to what is happening: Ordinary citizens cannot change the system if the elites don’t agree with the changes the plebes want to make. If they try, they will be arrested or killed at the scene. This must change first.

After that, we can begin working to restore the fundamental systemic change that we brought about during the times of FDR through LBJ.

 

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Today, Limousine Liberals are Neoliberals

Commenting on Monday’s post, blog commenter Terry McKenna closed with:

…we abandoned the worker for the limousine liberal.

You can read Terry’s blog here. Let’s pick up on his thought. “Limousine liberal” is a reference to the wealthy (including celebrities) who try to persuade others to their political and societal points of view. Critics assert that their wealth and status means they are out of touch with the American middle and lower middle classes they purport to support. Interestingly, its first use was in 1969, when a Democrat referred to Republican Mayor John V. Lindsay in his reelection campaign.

While Terry’s point is true, the “liberals” we need to be afraid of are the neoliberals.

“Neoliberalism” is a set of economic ideas that have become widespread since Ronald Regan. The term used rarely used in the US, but you can clearly see the effects of neoliberalism here as the rich grow richer and the poor grow poorer. Neoliberalism is not “liberalism” or “liberals”.

“Liberalism” can refer to political, economic, or religious ideas. In the US, political liberalism has largely been a strategy to diminish the impact of potential social conflict that could arise from racial inequality, economic insecurity and lack of political power. It is described to the poor and to working people as a set of progressive values, compared to conservative values.

“Neo” means we are talking about a new form of economic liberalism. The liberal school of economics was based on Adam Smith’s The Wealth of Nations, written in 1776. Smith advocated the abolition of government intervention in economic matters. No restrictions on manufacturing, no barriers to commerce, no tariffs. He said free trade was the best way for a nation’s economy to develop. Such ideas were “liberal” in the sense of no controls. This liberalism encouraged “free” enterprise,” “free” competition — which meant, free for the capitalists to make profits however they wished, using whatever means necessary.

In the 1930’s John Maynard Keynes’s theory challenged economic liberalism as the best policy for growing nations. He said that full employment was necessary for growth, and it could be achieved if governments and central banks intervened when necessary to do what they could to increase employment.

Keynes’s theories had considerable influence on FDR’s New Deal −The belief that government should advance the common good became widely accepted. But, over the last 30 years, the global corporate elite has revived economic liberalism as neoliberalism. That’s why it is “neo” or new. With the rapid globalization of our economy, we see neoliberalism flourishing on a global scale.

The main ideas of neoliberalism include:

1. The Supremacy of the Market: Liberating private enterprise from any bonds imposed by the government. Greater openness to international trade and investment, as in NAFTA, or the coming Trans Pacific Partnership (TPP). Lower wages by de-unionizing workers. In all, total freedom of movement for capital, goods and services. It’s St. Ronnie’s “supply-side” and “trickle-down” economics − but somehow the wealth never trickles down.
2. Cutting Non-Military Public Expenditures: Reducing the safety net for the poor, reducing expenditures on public education, social services and welfare. Disinvesting in infrastructure (roads, airports, ports, the Internet) in the name of reducing government’s role.
3. Deregulation: Reducing government’s role in regulation of anything that could diminish profits, including protecting the environment and job safety.
4. Privatization: Selling state-owned enterprises, the commons, and provision of some services to private investors. This could include prisons, railroads, toll highways, electricity, schools, and even fresh water. Although usually promoted in the name of greater efficiency, privatization has mainly had the effect of making the public pay more for its services, while concentrating more wealth in fewer hands.
5. Eliminating the Concept of “The Public Good”: The “public good” is usually an application of a collective ethical notion of “the greater good” in political decision-making. Eliminating it pressures the poorest people in a society to find their own solutions to their lack of health care, education and social security by themselves — then blaming them, if they fail, as “lazy.”

In the US, neoliberalism is working to:

• Weaken social service programs by reducing benefits
• Attack the rights of labor (including immigrant workers)
• Cut back taxes to “starve the beast” of government
• Weaken the political power of the poor and lower middle class

The Republican “Contract” with America in 1994 was pure neoliberalism. Its supporters were attempting to move their agenda by saying it would “get government off our backs.” It worked. From Reagan in the 1980’s through Obama today, the neoliberal agenda has been strengthened. Banks, Big Oil, and the top .01% call the shots.

Neoliberalism and its buddy riding shotgun, neo-conservatism, are designed to assist large, mostly American corporations to harvest the wealth of our nation and that of others, and hide it in tax havens. For the vast majority, neoliberalism has brought lesser financial security, more debt, more underemployment and a smaller voice in government.

So, its neoliberals, not liberals, in those limousines.

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Sunday Cartoon Blogging – November 2, 2014

When people decide not to vote because the parties are not different from each other, candidates with strong ideological commitments win. That elected person then tries to move the country in the direction of an ideology supported by a minority of voters.

For the past 20 years, that direction has been a death warrant for the American middle class. If you think that the middle class is really what made America “exceptional,” then those political leaders elected to implement and sustain a corporatist agenda have worked to destroy the American Dream, while they hypocritically endorsed and exploited it in order to get elected.

The US is in the middle of a course of corporate political imperialism that has savaged average Americans, while it enriched plutocrats. Wealth has been consolidated, the means-of-production have been concentrated in the hands of a few corporations, and big business has effectively purchased our governments, both state and federal. Mostly because not enough of us take the time to bone up on the issues, or to vote in the off-year elections.

Two things need to change: First, more people need to vote. Second, we must throw off our corporate political masters. As long as we have a situation where corporations have all of the rights, but none of the liabilities of the people, they always have a competitive advantage over the public.

For both your Halloween hangover and your pre-election headache:

COW Halloween Masks

 

 

 

 

 

 

 

 

 

Jeb Bush floats idea of continuing the family dynasty:
COW Jebbie

Ebola Volunteers are heroes and potential disease vectors. Some politicians can’t hold both thoughts:

COW Ebola Recruting

Other epidemics caused by not voting:

COW Other Epidemics

Texas has apparently “solved” the voter fraud problem:

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Retail Store Closings Reflect Middle Class Income

Today, we take a business trip!

The retail sector of the US economy is not doing so well. The Census Bureau tracks retail sales in the US, and sales decreased 0.30% in September, compared to the previous month. Retail Sales month over month in the US gained an average of 0.37% from 1992 until 2014, reaching an all-time high of 6.71% in October of 2001.

This week, NCR, the maker of point-of-sale devices for the retail industry who call themselves “the global leader in consumer transaction technologies”, announced disappointing third quarter results. NCR blamed particularly the “challenging retail market” for its debacle. CEO Bill Nuti explained it this way:

Market conditions within the retail industry worsened in the third quarter, as evidenced by weak same store sales comparisons and financial results. This resulted in our retail customers spending more cautiously than anticipated and further delaying solution roll-outs…Additionally, ongoing retail consolidation continues to be a factor impacting our performance.

NCR has noticed that brick-and-mortar retailers are cutting back. “Ongoing retail consolidation,” Nuti called it. And some, like Radio Shack, are likely to use bankruptcy courts to do it. The structural problems in the brick-and-mortar retail industry include Sears, which is closing 300 Sears stores and 80 Kmart stores.

Some of us wonder why anyone still buys there. Retail chains, large and small, have announced an epidemic of store closings in 2014. Here are the “Top 20? announcements of store closings. For these 20 chains, the total number of stores to be closed exceeds 4,200. The number of closed stores is the first column:

US-announced-retail-store-closings-2014Store closings add up: Jobs are lost, consumer spending weakens, and fewer tax revenues are paid to states and the federal government. This process has been going on for years. As a side note: when all this washes out, who is going to fill the vacant retail space in our malls? That’s one of the many secondary effects of the troubles in the American retail industry.

Hopefully, you haven’t invested in those Shopping Center Trusts.

 

Source: Wolf Richter

Yet, some box store retail continues to grow. Starbucks is opening another 1400 stores in the US by 2017, a 13% growth rate. They prove there is a market for things that can’t be ordered and delivered hot over the Internet. But, the openings of new retail locations for 2014 will not offset the closures. Much of domestic retail expansion in 2014 is about discount stores. Between Dollar General, Family Dollar and Dollar Tree, more than 1400 new discount stores will be opening, using the original Walmart expansion strategy. At the same time, Walmart is abandoning its own strategy. The New York Times reports that: (brackets by the Wrongologist)

Walmart’s woes [are causing] a change in corporate strategy. Walmart will slow store openings in the United States next year, opening 60 to 70 supercenters, compared with 120 this year…The Company is shifting its focus toward smaller Neighborhood Market grocery stores, and it said it would open 180 to 200 of them next year. It is also accelerating its online offerings…

Auto sales (mostly at retail box stores) have been booming, Reuters reports that: (brackets by the Wrongologist)

The annualized sales rate slowed to 16.4 million [units]…above last year’s 15.4 million, but well below the 17.5 million [annualized] pace in August.

This performance was partly due to cheap money, long financing terms, and a focus on subprime customers. Jim Lentz, US chief executive at Toyota Motor Corp:

We are seeing more ‘subprime,’ which is good.

In one report, a 71 year old Queens NY woman on food stamps got a $16,000 loan on a used car:

After two test drives and about two hours, the dealership found her a loan: $16,000 financing for a used 2014 Ford Fiesta. There would be a bank fee of about $4,000, and she would have an interest rate of 20.23%

Subprime, indeed. As for the role of consumer spending in our economy, American consumers are stressed. Many have had to curtail their spending, or make up the difference with borrowed money. Closing retail stores may be the canary in a coal mine for our consumer economy. For some business owners, considering some retail store analytics might provide insight into how to keep their stores open.

The best measure of economic security is ownership of wealth. Yet, using Median Wealth as a yardstick, the middle class in the US ranks only 27th in the world. Here is how we rank against two of our allies:

#27 USA: $44,911 ? hardly enough to pay for an operation in a US hospital
#1 Australia: $219205
#6 United Kingdom: $111,524

Global wealth has reached a new all-time high of $241 trillion, up 4.9% since last year and 68% since 2003, with the USA accounting for 72% of the latest increase.

Perhaps the solution in the US is to not to tax based only on income, but to tax based on income and assets. If you own or control 80 to 90% of the assets of this country, and the country’s resources are securing, maintaining, and protecting your assets, it stands to reason that you should also be bearing the majority of the tax burden of the country.

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Friday Music Break – October 10, 2014

Today, we review the song “Sixteen Tons”. Here is the chorus:

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store

The song is about economic exploitation of coal miners. Depending on your view of history, the song was written by Merle Travis in 1946, or George Davis in the 1930’s as “9 to 10 Tons”. Of course, older readers know of the 1956 Tennessee Ernie Ford version of the song. It sold 20 million copies as a single!

Part of the exploitation was that miners were paid in scrip, not in cash. Scrip is non-transferable credit vouchers which could be exchanged only for goods sold at the company store. Workers also lived in company-owned dormitories or houses, the rent for which was automatically deducted from their pay. This had the feature of lowering the costs of labor for the mining companies, while making it impossible for workers to accumulate any cash savings. In the US, the associated debt bondage persisted until after the 1914 Ludlow Massacre.

The Massacre was the result of a strike against the Colorado Fuel & Iron Company, owned by John D. Rockefeller, Jr., the Rocky Mountain Fuel Company, and the Victor-American Fuel Company. The strike resulted in the violent deaths of at least 19 people.

Howard Zinn in The Politics of History described the Ludlow Massacre as:

The culminating act of perhaps the most violent struggle between corporate power and laboring men in American history

The Ludlow Massacre quickly evolved into a national rallying cry for labor unions and eventually helped lead to New Deal labor reforms. But over the years, the tragedy in Ludlow Colorado has been largely forgotten.

Here is the Wrongologist’s favorite version of the song by Jeff Beck and ZZ Top’s Billy Gibbons, who toured together this year. They are supported by Tai Wilkenfeld on bass:

Note that the performance ends at 3:49.

Now, please ask yourself how much you are worth. Then look around you and realize that you are also a part of the most underpaid workforce since the days of the company store.

If politics is about power, then the powerful will always have the advantage. There will be an endless loop of the more powerful crushing the less powerful, with any change in the balance of power simply a random fluke, like what happened after Ludlow catalyzed the United Mine Workers.

If politics can be about policy, then power will not have an insurmountable advantage, and progress can happen again.

 

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Stock Buybacks: Who Benefits?

Bloomberg reported this week that companies in the S&P 500 are poised to spend $914 billion on share buybacks and dividends this year, or about 95% of their corporate earnings. Data compiled by Bloomberg and S&P Dow Jones Indices show that money returned to stock owners exceeded profits in the first quarter and may again in the third quarter of 2014.

The proportion of cash flow used for stock repurchases has almost doubled over the last decade while it’s slipped for capital investments. So, who is benefiting? From Bloomberg: (emphasis by the Wrongologist)

Buybacks have helped fuel one of the strongest rallies of the past 50 years as stocks with the most repurchases gained more than 300% since March 2009. Now, with returns slowing, investors say executives risk snuffing out the bull market unless they start plowing money into their businesses.

The S&P 500 Buyback Index (yes that is a thing) is up 7.5% percent this year through October, compared with the 6.5% advance in the S&P 500. It did better in the past, beating it by an average of 9.5% since 2009. Excluding the two years in which we had a recession (2001 and 2008), dividends and stock buybacks have represented 85% of corporate earnings since 1998. So, there has been little reinvestment in the business going on. Stock repurchases have helped buoy the bull market since 2009 by about $2 trillion.

Consider that corporate revenues have had an average growth rate of 2.6% per quarter in the past two years, while per-share earnings grew at 6.1%, more than twice as fast, says Bloomberg. Since earnings per share (EPS) is the ratio of the total earnings divided by the number of shares outstanding, you can either increase the numerator or decrease the denominator in order to grow EPS.

Corporate America has decided it is easier to reduce shares rather than to grow earnings.

This translates into bad long-term corporate strategy. During the same period, the portion of earnings used for capital spending has fallen to about 40% from more than 50%. This use of cash to fund buybacks has left US-based companies with the oldest plants and equipment in almost 60 years. Bloomberg says that the average age of fixed assets reached 22 years in 2013, the highest level since 1956, according to annual data compiled by the Commerce Department.

Today, shareholders are the most mobile of corporate stakeholders. The days of “buy and hold” investing are over; it is now just for the smallest of investors. For example, high frequency trading (HFT) represents 70+% of trading by volume. The HFT “investors” often hold share ownership for fractions of a second. The HFT firms are in bed with professional fund managers who own large chunks of equity in public companies. Together, these shareholders ONLY want corporate strategies that maximize short-term profits and increasing dividends. Coupled with the growing trend of limited, or little, voting rights for stock ownership by the public, professional managers have a free hand to get wealthy without responsibility for longer term corporate performance. This plays into the hands of CEOs and other C-level managers who derive most of their compensation from increasing value of stock. Equilar, an Executive Compensation firm, reports that about 63% of S&P CEO compensation is in the form of stock.

This is not managing a business, it is liquidating a business. While it may be in the individual executive’s short-term interest (company stock appreciation and bonuses) ultimately, it will kill the US economy. Look for more complaints about the American workers when they are unable to compete, using worn out, or obsolete equipment.

We need different ideas to inform our effort to steer the ship of state to higher GDP growth and full employment. How about tying executive performance to adequate return targets for all STAKEHOLDERS rather than to a maximized return to shareholders who no longer buy and hold shares?

You can only go so far with financial engineering before you actually have to improve your business with real revenue and profit growth. Companies have done about all that they can in terms of maximizing the ability to do these buybacks.

What would be wrong with trying some new ideas?

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