Tag: Capitalism Reform

We’re Being Sold a Story

The Daily Escape:

Plague Fort (or Fort Alexander), St. Petersburg, RU. It was built between 1838 and 1845 on an artificial island in the Gulf of Finland. From 1899 to 1917, the fort housed a research lab focused on plague and other bacterial diseases. It was abandoned in 1983.

The Economist has an 8500-word interview with the documentary film maker, Adam Curtis. For 30 years, Curtis has produced documentaries on politics and society. Apparently, he has emerged as a cult-hero to the UK’s young thinkers trying to comprehend our chaotic world.

His latest film, “HyperNormalisation” (you can view the trailer here, or watch the entire 2+hour documentary here) argues that governments, financiers, and technological utopians have, since the 1970s, structured a simple “mostly fake world” for us, run by corporations, and kept stable by politicians.

Wrongo was attracted to this in part because Curtis takes the title of his documentary from work by a Russian historian, Alexei Yurchak, now a professor at Berkley. He introduced the word in his book Everything Was Forever, Until It Was No More: The Last Soviet Generation (2006). Yurchak says that in the 1980s, everyone from the top to the bottom of Soviet society knew that it wasn’t working. They knew that it was corrupt. They knew that the bosses were looting the system. They knew that the politicians had no vision. And they knew that the Party bosses knew they knew that.

Everyone knew it was fake, and they just accepted the fakeness as normal. Yurchak coined the term “HyperNormalisation” to describe that feeling. When Wrongo was in Russia in October, he heard a few Russians express this exact idea about the end stages of the Soviet Union in the 1980s.

The fall of the Soviet Union didn’t stop them from despising Gorbachev, who ended the state economy and replaced it with a less-than-functioning market economy. They longed for the simpler state of affairs, with less to think about, and less to worry about. Where everyone knew that the system didn’t work, but they all had jobs, and there was food in the markets.

2018 America is far from being the Soviet Union, but this is exactly the way the US is today. In most ways, everything the government touches, like elections, environment, tax policy, and health policy, could be substantially better for all of our citizens.

We all know everyone is unhappy, but everyone just says, “It’s the system. We can’t change it.”

A quote from Curtis:

There is a sense of everything being slightly unreal; that you fight a war that seems to cost you nothing and it has no consequences at home; that money seems to grow on trees; that goods come from China and don’t seem to cost you anything; that phones make you feel liberated, but that maybe they’re manipulating you, but you’re not quite sure.

He talks about the concept of “risk”, and how it entered our discussion, migrating from finance to politics in the 1980s. Today, everything has become about risk analysis, and how to stop bad things happening in the future: (emphasis by Wrongo)

Politics gave up saying that it could change the world for the better and became a wing of management, saying instead that it could stop bad things from happening. The problem with that is that it invites all the politicians to imagine all the bad things that could possibly happen—at which point, you get into a nightmare world where people imagine terrible things, and say that you have to build a system to stop them.

Can the people take power back from corporations and their captured politicians? Maybe, maybe not. People like stability and they fear instability. We saw that with Gorbachev in Russia in the 1980s.

But if we are to move past the collusion of corporations and politicians trying to keep us accepting things we know are unacceptable, we need to have better politicians.

The job of a master persuader is to tell a story that says, “Yes this is risky, but it’s also thrilling, and it might lead to something extraordinary”. The persuader must say, “Yes, I understand your fears but look, what’s happening isn’t right. We can do better than this”.

People are asking, “What is our future? What is this existence for?”

  • If you live in West Virginia surrounded by people taking opioids, you surely want to know what all that sorrow is for
  • If you are a recently laid-off GM worker, you’re asking the same thing
  • If you’re a student with $75k in student debt, and a cog job, you’re asking the same thing
  • If you’re a plumber with no health insurance and pancreatic cancer, you’re asking the same thing
  • If you’ve worked hard to elect someone who just lost because of ballot-stuffing, you’re asking the same thing

These are the questions that our politicians should be answering.

Do you see someone who can bring people together behind a better vision?

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Monday Wake Up Call – December 10, 2018

The Daily Escape:

The twin peaks of Ushba, Caucasus Mountains, Georgia – photo by Pflunt

Last week, Bernie Sanders was with Paul Jay on the Real News Network. The discussion was about how growing income inequality isn’t simply unfair. Bernie said:

Concentration of wealth in America causes concentration of political power.

Sanders had spoken at (his wife Jane’s) Sanders Institute in Vermont on Wednesday. In his subsequent interview, Bernie said:

But it is not just that the one tenth of 1 percent owns more wealth than the bottom 90%. They don’t put their wealth underneath their mattresses….They use that wealth to perpetrate, perpetuate their power. And they do that politically. So you have the Koch brothers and a handful of billionaires who pour hundreds of millions of dollars into elections, because the Supreme Court gutted the campaign finance laws…and now allow billionaires quite openly to buy elections.

We all know that wealth equals political power. Sanders gave a great example:

Lloyd Blankfein, the head of Goldman Sachs, came to Congress a few years ago…after the taxpayers of this country bailed them out because of their greed and their illegal behavior…..These guys, after getting bailed out, they come to Congress. They say, you know what we think Congress should do is…cut Social Security, and Medicare, and Medicaid. And by the way, lower corporate tax rates and give more tax breaks to the wealthy. That’s power. That’s chutzpah. We have it all, we can do whatever we want to do.

He closes with this:

My vision is that we have got to have the guts to take on Wall Street, take on the pharmaceutical industry, take on the insurance industry, take on the 1 percent, and create an economy that works for all.

….We’re seeing great young candidates who didn’t wait on line for 20 years to get permission to run, but kind of jumped in and beat some long-term incumbents. They’re saying, hey, I come from the community. I know what’s going on in this community, and I’m going to fight for working people, and I’m not afraid to take on big money…..So a two-part approach…..we need to fight for our agenda. We need to elect candidates from the grassroots who…are going to implement that agenda.

Bernie is the best messenger about our urgent need to reform capitalism.

In a similar vein, Seth Godin wrote last week about what he calls “Linchpin Jobs”. These are jobs that few can do, and which contribute greatly to society. That’s an interesting concept, but Wrongo focused on his apt description of “Cog Jobs”, which anyone can do, and which can be done with little effort, or skills: (emphasis by Wrongo)

Industry offered a deal to the worker:

Here’s a job. We’ll pay you as little as we can get away with while still being able to fill the job. We’ll make sure it’s easy to find people for this job, because we don’t want you to have much in the way of power or influence….In return, you’ll work as little as you can get away with. That’s the only sane way to respond to the role of being a cog.

This is the dilemma that faces low-skilled workers today: They can find work, but they can’t live on what they make at only one job. Clearly, cog-like work doesn’t create nearly as much value as intelligent work, but not everyone can find a linchpin job, they’re rare.

Can the paradigm that concentration of wealth equals concentration of power be shifted? Is Bernie Sanders the next FDR? While Wrongo thinks we need a younger leader to reform capitalism, Bernie is the right messenger for reform. His effectiveness as a messenger is clear when we see that 70% of the American people now support Medicare for All, just two years after his 2016 campaign.

And the message is clear. Without reform, we’ll have to look our grandchildren in the eye, and say we’ve wrecked their future.

Time to wake up America! This is the signal issue of our time. The reform of Capitalism must be at the top of our agenda.

Whomever the Democrats nominate for president in 2020 has to be a person that can start America down the road toward reducing the concentration of both money and power in America.

The choice in 2020 will either be more Trump, or a Democrat.

We shouldn’t select another tepid corporate Democrat. They probably won’t win. If by some chance one wins, we’d have to watch as our society becomes even more unequal for the rest of our lifetimes.

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Can America Learn From France’s Yellow Vest Movement?

The Daily Escape:

Turtlehead Pond, Groton State Forest, VT – October 2018 photo by mattmacphersonphoto

The Yellow Vests have thrown France into turmoil with their protests in recent weeks. They say they want lower taxes, higher salaries, freedom from gnawing financial fear, and a better life.

It’s a uniquely French phenomenon. Every automobile in France is supposed to be equipped with a yellow vest, so that in case of car accident or breakdown, the driver can put it on to ensure visibility and avoid getting run over.

That enabled the wearing of a yellow vest to demonstrate against unpopular government measures to catch on quickly. Most people had one. The symbolism was fitting: in case of an income inequality emergency, show people that you don’t want to be run over.

What set off the protests was a rise in gasoline taxes. But it became immediately clear that much more was driving the protests, that the gasoline tax was the last straw in a long series of measures favoring the rich at the expense of the majority of the population.

That’s why the movement achieved almost instant popularity and support.

The Yellow Vests held their first demonstrations on Saturday, November 17 on the Champs-Elysées in Paris. Most French trade union demonstrations are well organized. People carry banners and listen to speeches from leaders at the end. But, the Yellow Vests showed up without any organization, and no leaders to tell them where to go, or to speak for the crowd’s demands.

They were just there in yellow vests, angry and ready to explain their anger to any listener. Their message was:

We can’t make ends meet. The cost of living keeps going up, and our incomes keep going down. We just can’t take it anymore. The government must stop what it’s doing and change course.

This is another example that income disparity between the rich and rest of us is out of control on a global basis.

The Yellow Vest protesters know that our political systems are controlled by the rich, and by their captured politicians. They are enriching themselves on the backs of the working and middle classes. Interestingly, it was the French economist, Thomas Piketty, who has researched and publicized the fact that the US has the largest income gap of any Western nation.

We should be paying closer attention both to Piketty and the Yellow Vests.

Global corporations and their fellow traveler politicians know that this sort of discontent is infectious, so politicians always try to quell it quickly. If the American 90% got the idea from France, revolution might migrate, as our revolution in 1776 migrated to France in 1789.

It is interesting that the NYT reports that in France, the Yellow Vest protests were totally unanticipated by the government.

We all know that income inequality is a growing global problem, so how can it be that the suffering of a country’s citizens and their protest against the French government’s plan to increase gas taxes would be “totally unanticipated by the parties’’?  Are the powers that be in France completely tone-deaf to the needs of their constituents?

So, are there lessons for America in the Yellow Vest movement? There should be, because the issue here is similar to the issue in France, and elsewhere in Europe. That issue is economic insecurity.

There’s no political will to deal with job insecurity. There’s no mechanism in place for those who can’t pay their bills. Soon, given automation and AI, there will not be enough work available for everyone to support themselves and their families. Underemployed people will still need food, shelter, and health care, so they might start by demonstrating in order to get them.

The sooner our corporate and political leaders decide to work on these problems, the better we all will sleep at night. But, no one in the top 10% of our economic strata has any idea what it is like to go without the necessities; it is simply inconceivable to them.

Many think that there are no consequences to the inequality that has developed in America since 1980, but there certainly will be consequences. We are in the midst of economic class warfare. The politicians, bought by the corporate plutocrats, are pushing their corporatist agenda down the throats of the middle and working classes.

We can either engage in a slow reform of Capitalism, or we can wait another generation, and participate in an urgent, rapid destruction of Capitalism as we know it today.

If we opt to go slow, let’s not kid ourselves. You don’t close a deep wound with a Band-Aid. It takes surgery.

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Tax Abatements Are Killing School Budgets

The Daily Escape:

Egmont National Park, NZ – photo by vicarious_NZ

A new report shows that US public schools in 28 states lost at least $1.8 billion in tax revenues last year as a result of tax incentives granted to corporations. The study analyzed the financial reports of 5,600 of the nation’s 13,500 independent public school districts.

Good Jobs First examined the first full year of reporting under a new accounting standard for school districts, adopted by the Governmental Accounting Standards Board (GASB), the body that sets accounting rules for all states and most localities. The new rule, GASB Statement No. 77 on Tax Abatement Disclosures, requires most state and local governments to report annually on the amount of revenue they’ve lost to corporate tax abatements.

This is extremely important, since most local schools are very dependent on revenue from property taxes, but they rarely have influence over corporate tax abatements granted by their towns, and/or the cities or counties where they are located.

And local voters have had no way to see how much they are forced to pay in additional taxes that were lost to enrich the pockets of corporate employers.

Good Jobs found that the 10 most affected states could have hired more than 28,000 new teachers if they were able to use the lost revenues. Or, they could have avoided higher home property taxes, or provided their teachers with better resources, or higher pay.

States and cities have long used abatements and other tax incentives to lure companies, or to keep them from leaving, and/or to encourage them to expand locally. Often, those companies make their choice of location based on the quality of local schools and colleges.

These abatement deals are made by local politicians and are meant to boost local economic development. Their proponents say the lost tax revenue is worth it, because they grow the local economy. But it is difficult to know whether the benefits outweigh the burdens.

And until GASB 77, it has been impossible to see just how much a school system may have lost because of a company’s tax break. The new rule is especially helpful in understanding local schools finances, because it requires the reporting of revenue losses even if they are suffered passively by the school system as the result of decisions made by another body of government.

Of the five districts that lost the most, three are in Louisiana. Together, they lost more than $158 million, or $2,500 for each student enrolled. The School District of Philadelphia, which only last year regained local control from the state after climbing out of a deep fiscal crisis, lost the second most revenue at $62 million.

Overall, nearly 250 school districts lost at least $1 million each, and in four districts, tax abatements reduced classroom resources by more than $50 million.

But most school districts have not yet complied with Rule 77, which was implemented in 2015. Good Jobs First estimates that another $500 million of subsidies and abatements are currently unreported.

Most of us believe that our governments are supposed to govern in the interests of the “general welfare,” that when voters put people in positions of power, based on the legitimacy of our electoral process, is the limit of our responsibility as voters.

We accept that somebody has to say what the rules are, and then enforce them.

But in our neoliberal economic times, voters have to remember that our governments often act as wholly owned subsidiaries of the 1%. It takes suspension of belief to accept that our republic, ruled as it is by an oligarchy, is working for the general welfare of all of our citizens.

Why do we think that, our “governments”, all of which are subject to capture and ownership by the few, are going to somehow provide decency, comity, or fairness to all of us?

We need to abandon the article of faith that the free market, one without government oversight, promotes the best economic outcome for all of us.

Today’s inequality says the opposite.

We need a new vision of the role of government. But it isn’t really a “new” vision. It is simply a return to insisting on the “promotion of the General Welfare for all” as the paramount object of government.

Here’s another thought from Gordon Wood, in his book, Creation of the American Republic:

In a republic each individual gives up all private interest that is not consistent with the general good, the interest of the whole body. For the republican patriots of 1776 the commonweal was all encompassing—a transcendent object with a unique moral worth that made partial considerations fade into insignificance.

The last outcome that American revolutionaries wanted was to be ruled by oligarchs. But, here we are.

We need to reform our capitalism.

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We’re Too Short to be on This Ride

The Daily Escape:

Lion’s Head, Capetown South Africa, viewed from Tabletop Mountain – 2012 photo by Wrongo

A WaPo report said that Donald Trump discussed giving Janet Yellen another term as head of the Federal Reserve, but was concerned that she was too short. He thought that at 5 feet, 3 inches, she just wasn’t tall enough to get the job done.

Wrongo thinks Yellen’s performance was about the same as her predecessor, Ben Bernanke, and her successor, Jerome Powell. Shouldn’t the real question be: Do we know what’s wrong with our economy, and do we have people in place with enough strength and/or courage to fix it? They can also be short, as long as they have ability and vision.

And it isn’t only in the US: (brackets by Wrongo)

Income inequality has increased in nearly all regions of the world over the past four decades, according to the World Inequality Report 2018. Since 1980, the global top 1% of earners have…[garnered] twice as much of the global growth as have the poorest 50%.

More from the World Inequality Report: (emphasis by Wrongo)

Such acute economic imbalances can lead to political, economic, and social catastrophes if they are not properly monitored and addressed….Governments need to do more to keep society fair…Public services, taxation, social safety nets – all of these have a role to play.

We’re seeing a slow-rolling social catastrophe in the US. We’re seeing alienation across class, race, age and gender. We’re divided as never before, with the possible exception of the pre-Civil War period.

Aren’t we all too short to be on this ride?

Central banks play an integral part in the global economy, and their performance (including the Fed’s) during the 2008 Great Recession was for the most part, admirable.

But central banks can only use monetary policy to partially solve issues of economic inequality. The most robust solutions lie in fiscal policy. Fiscal policy is how Congress and other elected officials influence the economy using spending, taxation and regulation.

Take student loans. Many of our university students are simply being led to the debt gallows. Currently, 44.5 million student loan borrowers in the US owe a total of $1.5 trillion. Student loans are the fastest growing segment of US household debt, seeing almost 157% growth since the Great Recession.

From Bloomberg:

Student loans are being issued at unprecedented rates as more American students pursue higher education. But the cost of tuition at both private and public institutions is touching all-time highs, while interest rates on student loans are also rising. Students are spending more time working instead of studying. (Some 85% of current students now work paid jobs while enrolled.)

Student loan debt has the highest “over 90 days” delinquency rate of all household debt. More than 10% of student borrowers are at least 90 days delinquent. Mortgages and auto loans have a 1.1% and 4% 90-day delinquency rate, respectively,

And if the student loan can’t be repaid, it isn’t expunged by bankruptcy. In fact, students can’t outlive their debt. The feds can garnish social security payments to repay a student’s outstanding debt.

As young adults struggle to pay back their loans, they’re forced to make financial choices that create a drag on the economy. Student debt has delayed marriages. It has led to a decline in home ownership. Sixteen percent of young workers aged 25 to 35 lived with their parents in 2017, up 4% from 10 years earlier.

We are only beginning to understand the social costs of our politics. We are in the midst of a brewing social disaster. And these are self-inflicted wounds, fixable with different government policies. But, most of today’s politicians are too short to get on that ride.

So, how to solve the simultaneous equations of high poverty rates, income inequality and an impending social disaster?

It won’t be easy, and it starts with politicians admitting that our economy doesn’t work for everyone, and that it must be reformed. Then, we can move beyond the tired rallying cries of “more tax cuts” to a capitalism which incorporates a social consciousness that can get people on the track to better paying, and more secure jobs.

An April 2018 study of survey data from 16 European countries found that economic deprivation increased right-wing populist tendencies. Sam van Noort, a co-author of the report said:

Individuals who “feel economically less well-off” were more likely to be attracted by the far right…and radical right respondents are more likely to be male, subjectively poorer, less educated [and] younger.

This will also happen here, unless the voters have determination, and even the short politicians have courage.

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Capitalism Must Be Reformed

The Daily Escape:

Mt. Fuji, Japan at sunset – November, 2018 photo by miles360x

From the Economist:

In 2016, a survey found that more than half of young Americans no longer support capitalism.

One reason that young people have lost faith in capitalism is the exceptional market concentration that has taken place in the US in the past few years. US firms have gotten bigger, often by acquiring their competition. This is true across many markets. Vox reports that: (parenthesis by Wrongo)

Four companies…control 97% of the dry cat food sector: NestlĂ©, J.M. Smucker, Supermarket Brand, and Mars. According to the report, NestlĂ© has a 57% (share of)…the industry, owning brands such as Purina, Fancy Feast, Felix, and Friskies. Altria, Reynolds American, and Imperial have a 92% market share of the cigarette and tobacco manufacturing industry. Anheuser-Busch InBev, MillerCoors, and Constellation have a 75% share of the beer industry. Hillenbrand and Matthews have a 76% share of the coffin and casket manufacturing industry.

On November 26th, the Open Markets Institute, an anti-monopoly think tank, released a data set showing the market share of the largest companies in each industry. Pulling the data together was a challenge, because the FTC halted the collection and publication of industry concentration data in 1981, during the time of Ronald Regan. Now, David Leonhardt of the NYT has turned it into a table:

As you can see, big companies are much more dominant than they were just 15 years ago. More from Leonhardt:

The new corporate behemoths have been very good for their executives and largest shareholders — and bad for almost everyone else. Sooner or later, the companies tend to raise prices. They hold down wages, because where else are workers going to go? They use their resources to sway government policy. Many of our economic ills — like income stagnation and a decline in entrepreneurship — stem partly from corporate gigantism.

Sarah Miller, deputy director of the Open Markets Institute, told Vox: (brackets by Wrongo)

… [When] you go to the store, you see all of these brands, but guess what? They’re all being operated by the same companies…She called the system a scam economy where competition is an illusion, and choice is an illusion.

The primary issue with corporate concentration is its potential to drive up prices. The fewer sellers, the fewer choices consumers have for goods and services, and thus, there is less pressure for the big competitors to hold prices down.

Even if many consumers don’t immediately realize they are victims of concentration, it’s visible when millions of homes only have one internet provider. Or, when four cellphone providers control 98% percent of the market (Verizon, AT&T, T-Mobile, and Sprint). And if the T-Mobile and Sprint merger plan goes through, there will be just three.

Ultimately, monopolies aren’t just an economic problem. They are also a political one. Democrats believe that anti-monopolism can be a political winner. It’s a way to address voters’ anxiety over high drug prices, digital privacy, and low wages.

We have been at this rodeo before. At the start of the 20th century, we broke up monopolies in railways and energy. In 1984, we broke up AT&T, only to see the “Baby Bells” recombine in the 1990s. We’ve simply stopped enforcing our anti-trust laws over the past 40 years.

Meanwhile, the public has been manipulated to believe that ever larger companies are in their best interests. We celebrate the “right” of large corporations to operate in unfettered ways.

But, Econ 101 shows that the trajectory of a monopoly starts with economies of scale, and ends with economies of exploitation. And remember that six corporations own 90% of the media. We won’t hear much about wrongdoing at Amazon from the Washington Post.

The required anti-trust laws are already on the books, but interpretation of them has changed over the years under Republican administrations. Eventually, we will have to break up existing giants, like we did before. One obvious candidate is Amazon, a company that will soon dominate the supply chain and all logistics in the US.

Facebook, which has gobbled up Instagram and WhatsApp, may be another candidate.

America is very late in addressing the negative outcomes of free markets, so there’s no time like the present to begin to Make America Love Small Business Again.

Voters need to push for anti-trust enforcement, which can only be done by the federal government. We have to insist that the protection of citizens is more important than protecting the 1%.

Let’s close with this quote from Louis Brandeis: “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”

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