Re: Castro
 

I want to vomit agreeing with this, as I find religion both ludicrous and divisive, but yes -- this would help to build communities. It is a good idea.

Re: Castro
 

Are you getting the sense that low skill workers in the rust belt are excited about new neighbors? Or about emigrating?

Re: Castro
 

Some of these jobs are available to low skill workers, but not near as many as you think. And often, a contractor can't hire low skill workers because to get insurance and project bonding, you have skill criteria that can be pretty high, and people with convictions are either precluded or drive insurance costs high. Contractor margins are slim. Even small increases make a job unprofitable.

But yes, infrastructure is a good idea and this would create jobs.

You don't need taxes to do these jobs. You could do a lot of these projects using a mix of public and private money, as they do in Europe. It's good risk for investors and banks, as its guaranteed payment by the state or feds.

Unfortunately, one party insists that this all be done with exclusively public money. (Despite the fact that it puts assets on the books of participating banks, which in fractional banking system allows them to loan more into the Main Street economy! [Lewis Black voice here, screaming.])

People don't like to move. Particularly people who don't know anything else and haven't had much education.

I'm talking about governments. Ya think Switzerland is interested in having a village of displaced Joe Sixpacks from St. Louis move to Geneva?

Re: Castro
 

Ty is a fascist, at least based on how he has ran the one thing ever entrusted to him, this board.

Re: Castro
 

Neither. But since you raise that issue, I'd bet we'd quickly separate the xenophobes (who are also probably the lazy) from the would-be productive rust belters by having immigrants move into those communities. The smart ones would see opportunity and seek to interact. The others would move somewhere even more remote and hopeless.

ETA: Caveat: My assessment of what rust belters think is possibly suspect. I had exposure to many after the 2008 collapse, as I was working a bit in consumer debt. And I grew up with regular exposure to them. But as my wife has told me numerous times, "you've never even worn a uniform, or served anyone." My summer jobs involved lots of driving. I selected things that didn't involve taking orders, or punching a clock. This might be why I really fucking hated working with lots of lawyers.

Re: Castro
 

Re: Castro
 

While I'm less eager than you to turn revenue-producing infrastructure over to banks on the assumption that government will get a good deal in the negotiations, I don't think you can say one party says, "no" as no one has realistically put that one the table. Because the president from one party said he wanted that and then backed away from discussions repeatedly.

Personally, I'd take letting the government get swindled if it was the only realistic way to get investment in infrastructure, but I'm not sure it will actually sell well with your disgruntled friends.

ETA: And I'd rather the government borrow at historically low rate (perhaps even negative) than put that money in the banks' pockets.

Re: Castro
 

If we could get the people we're talking about to move (with Ty's caveat about housing costs), we'd go a long way toward addressing the issue.

Re: Castro
 

This is exhausting. Why don't you guys sort out between you whether I'm a fascist or a crypto-libertarian, and then once you've got that straightened out and have agreed among yourselves, I can tell you you're wrong.

Re: Castro
 

Sebby says the problem is that Americans aren't ambitious, and you want to find a way to get them to move? If we could get them to all grow wings, then they could fly wherever they want, but that doesn't mean they'd want to.

Re: Castro
 

Calling that a “must-read” is actually an understatement. Every American should have a copy nailed to his front door.

Re: Castro
 

Wait a minute, are these things mutually exclusive?

Re: Castro
 

I try to be more welcoming around here. I've proposed to my wife that my old jeep would make a nice lawn ornament, for example.

Y’all think I’m bullshitting
 

But on twitter a very famous bass player for a very famous band (with a recent movie) tweeted about how he secretly fantasized about being me.

Re: Y’all think I’m bullshitting
 

Send him a link to an LSAT prep class?

Re: Castro
 

I generally don’t reply twice to a post, but undramatically, with deepest appreciation for the clinical conciseness of this article: Send It To Everyone You Know.

To slam it so well in so few sentences... This is fucking fantastic. What media needs to do. What it has an obligation to do.

Re: Y’all think I’m bullshitting
 

Dude, You Are The Champion... of the World!

Re: Castro
 

Martin Wolf is great... the American economic journalists who I'd rank with him are Richard Rubin at the WSJ and Megan Greene wherever she is today. Among the three of them, they probably have one percent of the readership of Ben Shapiro's twitter feed.

Getting people to read this stuff is hard. Lord knows, there is probably no one in the white house today with the attention span needed to get through that article.

Re: Castro
 

I’ve read him before, but this is a lightning strike. The scope but also economy of words... This one fits the Melville quote: “Genius, all over the world, stands hand in hand, and one shock of recognition runs the whole circle round.”

Geniuses may be rare, but if this piece doesn’t cause a Eureka moment for you, as in, “He just nailed almost all of it!,” you’ve not been paying close attention. If this doesn’t resonate, you’re asleep. This is Piketty in executive summary form.

Um...
 

Why? Why?

Again. If I might ask...

Okay, so —

No. There is no excuse. Even if you grew up in a family full of closeted racists, this is insane.

In fact, put aside the racism thing... I’ve dressed as a sheik for Halloween. And we were fucked up. And I wore eye make up. But it was Bowie shit. What kind of person says, “Honey, while you’re doing the eyes... How about painting me in brown face? It’ll be the hit of the party!”

No. No. No one ever— no one with half a fucking brain, ever, ever does this. If not because it’s been offensive for, uh, forever, but also because it’s seriously fucking hard to remove that much makeup! “Oh, this’ll be a gas. I’ll pass out and wake up having destroyed someone’s carpet and covered in acne from clogged pores! Epic fun!”

https://www.nytimes.com/2019/09/18/w...brownface.html

Re: Y’all think I’m bullshitting
 

Not quite, but did see all The Dirt.

Re: Y’all think I’m bullshitting
 

No, didn't see that one, but it makes sense now.

Re: Um...
 

Yeah, I took this position about a similar controversy at a recent family dinner with a relative who is an upstate NY bank exec, and he didn't get what I was saying at all. The blackface seemed like normal behavior to him.

(Full disclosure, yeah, he's racist)

Re: Castro
 

I really liked the article, but I seem to have introduced you to a new religion.

I do hope everyone here reads it. It's damn good.

Re: Y’all think I’m bullshitting
 

I think he meant the other guy.

Re: Castro
 

I have worshiped at the altar of the Church of Less Financialization for nearly a decade now. A lot of my criticisms of the "corporate" are actually more criticisms of financialization. Over the past 40 years, these things have become almost one in the same.

I grew up among bankers. My father worked in banking for 30 years. The fiinancialization of today is not useful capital allocation. It's a mix of flipping, predation, rent seeking, etc. It's a casino. I could rant about the endless ways it has harmed society, but that article and its links makes the point so concisely, all I'll need to do now is send the link.

I've already sent it to a bunch of people I know who work in speculative finance. The reply will be crickets, I'm sure.

On a similar note: https://www.amazon.com/Transaction-M.../dp/0374277885

Re: Castro
 

About 45 miles from here, there's a massive cricket complex going up in the middle of what used to be a cow pasture. There are a lot of people who are very, very excited about this. Doesn't just have to be religion.

Re: Castro
 

That's cool. I think I'd like Houston, if it weren't for the weather.

Re: Y’all think I’m bullshitting
 

Wow. They are few and far between, and we have to weigh through the constant Picasso and fascist bullshit to get there, but when you finally hit, it's fucking funny.

TM

Re: Castro
 

Would like to, but apparently you need to subscribe, which is against my religion. Cut-and-paste?

TM

Re: Um...
 

I went to a Halloween party two years ago where not one but two people wore blackface. Both claimed it was ok because they were specific people and not a race as a whole.

Re: Castro
 

I googled the title and reached this link. It might get you there.

Re: Um...
 

I grew up around a fair amount of racists. Most weren't overt, but some were. Some were quite flagrant about it (classic Archie Bunker sorts).

Even in that environment, people would have lost their minds if they saw a person in blackface. It'd be seen as insane - the kind of shit you just cannot do.

Re: Um...
 

It is good to know that I’m not the only one who is glad that neither I nor anyone I know (or associate with) would ever even consider for a second that this was something to do.

I don’t know what kind of fucked up ivory tower or gated community someone would have to grow up in to consider this for even a second.

Re: Um...
 

Apparently one where nobody told you you shouldn't be doing that the first two times...

Re: Um...
 

So odd to hear Sebby sound so much like Ms Slothrop.

Re: Um...
 

Nope.

[Note, this is directed at no one specific.] So this might be weird coming from me, but some of this shit is just white person-bubble naiveté. The casual racism that comes from stereotypes cultivated from a complete lack of exposure and understanding, mixed with completely homogenous neighborhoods and a one-note perspective entertainment industry (fuck, society at large), creates a solid foundation of bullshit like this because there was only one voice ever being represented.

I grew up in the 70s all over the place and in the 80s in fucking NYC. I went to school in MN. The standard for how everyone was viewed, discussed, judged, whatever, in all of these places, was a white person's. That perspective was everything, all the time. That's why people's skin color or culture or heritage or nationality was a costume that white people think they can wear for fun. It's why Bugs Bunny or Tintin could outsmart dark-skinned, big-lipped savages or why Speedy Gonzales' cousin was a walking stereotype of a lazy Mexican. It's why the girl and boy next door brings up a very specific picture of who that person is in your head to this day. It's why when you picture a doctor or lawyer or accountant in your head, it's always a white person. And why, when you hear, "thug," you picture a black man.* People of color have spent decades upon decades asking for this shit to change--to be respected--because of shit like this. The push-back is exhausting.

"How am I supposed to keep track of what you want to be called?"
"Ugh. I can't say anything anymore because of all this bullshit political correctness!"
"Don't be so sensitive all the time!"
"Now I have to worry about micro-aggressions?"

This is all the same shit. Whenever people of color are like, "Hey. You think we can be treated the same as you guys?" white people lose their minds. The next time you hear someone talk about how overly-PC the world is or how stupid the concept of "woke" is or how new pronouns are so stupid, think about this shit. It's all related. It's all the same fucking shit.

But as a person of color, I'll take someone like Trudeau who has grown and seems to genuinely care very much about people of color and inclusion over the innumerable quiet assholes who fight for nothing but their wallets any day.

TM

*I was talking fantasy football the other day and the white dude who was talking about how guys who were holding out were thugs this and thugs that couldn't comprehend why what he was saying was the height of fucking racism. He probably thinks I'm overly sensitive because I walked straight the fuck away from him.

Re: Um...
 

Sounds like you've a damn fine partner there. Smart. Take her advice over your own.

(PS: What's she say about Biden being the only possible Trump vanquisher?

...I thought so.)

Re: Um...
 

All three of us agree.

I think she sees Biden like a glacier: Old, white, slow-moving, and slowly melting.

Re: Um...
 

https://www.ft.com/content/5a8ab27e-...7-807ebd53ab77

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.”*

With this sentence, the*US Business Roundtable, which represents the chief executives of 181 of the world’s largest companies, abandoned their longstanding view that “corporations exist principally to serve their shareholders”.*

This is certainly a moment. But what does — and should — that moment mean? The answer needs to start with acknowledgment of the fact that something has gone very wrong. Over the past four decades, and especially in the US, the most important country of all, we have observed an unholy trinity of slowing productivity growth, soaring inequality and huge financial shocks.*

As*Jason Furman of Harvard University and Peter Orszag of Lazard Frères noted in a paper last year: “From 1948 to 1973, real median family income in the US rose 3 per cent annually. At this rate . . . there was a 96 per cent chance that a child would have a higher income than his or her parents. Since 1973, the median family has seen its real income grow only 0.4 per cent annually . . . As a result, 28 per cent of children have lower income than their parents did.”


So why is the economy not delivering? The answer lies, in large part, with the rise of*rentier capitalism.*In this case “rent” means rewards over and above those required to induce the desired supply of goods, services, land or labour.*“Rentier capitalism” means an economy in which market and political power allows privileged individuals and businesses to extract a great deal of such rent from everybody else.

That*does not explain every disappointment. As Robert Gordon, professor of social sciences at Northwestern University, argues,*fundamental innovation slowed after the mid-20th century. Technology has also created greater reliance on graduates and raised their relative wages, explaining part of the*rise of inequality. But the share of the top 1 per cent of US earners in pre-tax income jumped from 11 per cent in 1980 to 20 per cent in 2014. This was not mainly the result of such skill-biased technological change.

If one listens to the political debates in many countries, notably the US and UK, one would conclude that the disappointment is mainly the fault of imports from China or low-wage immigrants, or both. Foreigners are ideal scapegoats. But the notion that rising inequality and slow productivity growth are due to foreigners is simply false.


An Amazon warehouse in the UK. The platform giants are the dominant examples of monopoly rentiers
Every western high-income country trades more with emerging and developing countries today than it did four decades ago. Yet increases in inequality have varied substantially. The outcome depended on how the institutions of the market economy behaved and on domestic policy choices.*

Harvard economist Elhanan Helpman ends his overview of a huge academic literature on the topic with the*conclusion that “globalisation in the form of foreign trade and offshoring has not been a large contributor to rising inequality. Multiple studies of different events around the world point to this conclusion.”*

The shift in the location of much manufacturing, principally to China, may have lowered investment in high-income economies a little. But this effect cannot have been powerful enough to reduce productivity growth significantly. To the contrary, the shift in the global division of labour induced high-income economies to specialise in skill-intensive sectors, where there was more potential for fast productivity growth.

Donald Trump, a naive mercantilist, focuses, instead, on bilateral trade imbalances as a cause of job losses.*These deficits reflect bad trade deals, the American president insists. It is true that the US has overall trade deficits, while the EU has surpluses. But their trade policies are quite similar.*Trade policies do not explain bilateral balances. Bilateral balances, in turn, do not explain overall balances. The latter are macroeconomic phenomena. Both theory and evidence concur on this.


The economic impact of immigration has also been small, however big the political and cultural “shock of the foreigner” may be.*Research*strongly suggests that the effect of immigration on the real earnings of the native population and on receiving countries’ fiscal position has been small and frequently positive.

Far more productive than*this politically rewarding, but mistaken, focus on the damage done by trade and migration is an examination of contemporary rentier capitalism itself.*

Finance plays a key role, with several dimensions. Liberalised finance tends to metastasise, like a cancer. Thus, the financial sector’s ability to*create credit and money finances its own activities, incomes and (often illusory) profits.

A 2015*study by Stephen Cecchetti and Enisse Kharroubi for the Bank for International Settlements said “the level of financial development is good only up to a point, after which it becomes a drag on growth, and that a fast-growing financial sector is detrimental to aggregate productivity growth”. When the financial sector grows quickly, they argue, it hires talented people. These then lend against property, because it generates collateral. This is a diversion of talented human resources in*unproductive, useless directions.


Again, excessive growth of credit almost always leads to crises, as Carmen Reinhart and Kenneth Rogoff showed in*This Time is Different. This is why no modern government dares let the supposedly market-driven financial sector operate unaided and unguided. But that in turn creates huge opportunities to gain from irresponsibility: heads, they win; tails, the rest of us lose.*Further crises are guaranteed.

Finance also creates rising inequality. Thomas Philippon of the Stern School of Business and Ariell Reshef of the Paris School of Economics*showed that the relative earnings of finance professionals exploded upwards*in the 1980s with the deregulation of finance. They estimated that “rents” — earnings over and above those needed to attract people into the industry — accounted for 30-50 per cent of the pay differential between finance professionals and the rest of the private sector.*


US president Donald Trump, a naive mercantilist, focuses on bilateral trade imbalances as a cause of job losses © Getty Images
This explosion of financial activity since 1980 has not raised the growth of productivity. If anything, it has lowered it, especially since the crisis. The same is true of the explosion in pay of corporate management, yet another form of rent extraction. As*Deborah Hargreaves, founder of the High Pay Centre, notes, in the UK the ratio of average chief executive pay to that of average workers rose from 48 to one in 1998 to 129 to one in 2016. In the US, the same ratio rose from 42 to one in 1980 to 347 to one in 2017.*

As the US essayist HL Mencken wrote: “For every complex problem, there is an answer that is clear, simple and wrong.” Pay linked to the share price gave management a huge incentive to raise that price, by manipulating earnings or borrowing money to buy the shares. Neither adds value to the company. But they can add a great deal of wealth to management. A related problem with governance is conflicts of interest, notably over independence of auditors.

In sum, personal financial considerations permeate corporate decision-making. As the independent economist Andrew Smithers argues in*Productivity and the Bonus Culture, this comes at the expense of corporate investment and so of long-run productivity growth.*

A possibly still more fundamental issue is the decline of competition. Mr*Furman and Mr*Orszag*say there is evidence of increased market concentration in the US, a lower rate of entry of new firms and a lower share of young firms in the economy compared with three or four decades ago. Work by the*OECD*and*Oxford Martin School*also notes widening gaps in productivity and profit mark-ups between the leading businesses and the rest. This suggests weakening competition and rising monopoly rent. Moreover, a great deal of the increase in inequality arises from radically different rewards for workers with similar skills in different firms: this, too, is a form of rent extraction.


A part of the explanation for weaker competition is “winner-takes-almost-all” markets: superstar individuals and their companies earn monopoly rents, because they*can now serve global markets so cheaply. The network externalities — benefits of using a network that others are using — and zero marginal costs of platform monopolies (Facebook,*Google,*Amazon, Alibaba and*Tencent) are the dominant examples.*

Another such natural force is the network externalities of agglomerations, stressed by Paul Collier in*The Future of Capitalism. Successful metropolitan areas — London, New York, the Bay Area in California — generate powerful feedback loops, attracting and rewarding talented people. This disadvantages businesses and people trapped in left-behind towns. Agglomerations, too, create rents, not just in property prices, but also in earnings.*

Yet monopoly rent is not just the product of such natural — albeit worrying — economic forces. It is also the result of policy. In the US,*Yale University law professor Robert Bork argued in the 1970s that “consumer welfare” should be the sole objective of*antitrust policy. As with shareholder value maximisation, this oversimplified highly complex issues. In this case, it led to complacency about monopoly power, provided prices stayed low. Yet tall trees deprive saplings of the light they need to grow. So, too, may giant companies.*


Some might argue, complacently, that the “monopoly rent” we now see in leading economies is largely a sign of the “creative destruction” lauded by the Austrian economist Joseph Schumpeter. In fact, we are not seeing enough creation, destruction or productivity growth to support that view convincingly.

A disreputable aspect of rent-seeking is radical tax avoidance. Corporations (and so also shareholders) benefit from the public goods — security, legal systems, infrastructure, educated workforces and sociopolitical stability — provided by the world’s most powerful liberal democracies. Yet they are also in a perfect position to exploit tax loopholes, especially those companies whose location of production or innovation is difficult to determine.*

The biggest challenges within the corporate tax system are tax competition and base erosion and profit shifting. We see the former in falling tax rates. We see the latter in the location of intellectual property in tax havens, in charging tax-deductible debt against profits accruing in higher-tax jurisdictions and in rigging transfer prices within firms.*

A 2015*study by the IMF*calculated that base erosion and profit shifting reduced long-run annual revenue in OECD countries by about $450bn (1 per cent of*gross domestic product) and in non-OECD countries by slightly over $200bn (1.3 per cent of GDP). These are significant figures in the context of a tax that raised an average of only 2.9 per cent of GDP in 2016 in OECD countries and just 2 per cent in the US.*


Brad Setser of the Council on Foreign Relations shows that US corporations report seven times as much profit in small tax havens (Bermuda, the British Caribbean, Ireland, Luxembourg, Netherlands, Singapore and Switzerland) as in six big economies (China, France, Germany, India, Italy and Japan). This is ludicrous. The*tax reform under Mr Trump changed essentially nothing. Needless to say, not only US corporations benefit from such loopholes.

In such cases, rents are not merely being exploited. They are being created, through lobbying*for*distorting and unfair tax loopholes and*against*needed regulation of mergers, anti-competitive practices, financial misbehaviour, the environment and labour markets.*Corporate lobbying overwhelms the interests of ordinary citizens. Indeed, some studies suggest that the wishes of ordinary people count for*next to nothing in policymaking.*

Not least, as some western economies have become more Latin American in their distribution of incomes, their politics have also become more Latin American. Some of the new populists are considering radical, but necessary, changes in competition, regulatory and tax policies. But others rely on xenophobic dog whistles while continuing to promote a capitalism rigged to favour a small elite. Such activities could well end up with the death of liberal democracy itself.


Members of the Business Roundtable and their peers have tough questions to ask themselves. They are right: seeking to maximise shareholder value has proved a doubtful guide to managing corporations. But that realisation is the beginning, not the end. They need to ask themselves what this understanding means for how they set their own pay and how they exploit — indeed actively create — tax and regulatory loopholes.

Read more by Martin Wolf
CHIEF ECONOMICS COMMENTATOR
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They must, not least, consider their activities in the public arena. What are they doing to ensure better laws governing the structure of the corporation, a fair and effective tax system, a safety net for those afflicted by economic forces beyond their control, a healthy local and global environment and a democracy responsive to the wishes of a broad majority?

We need a dynamic capitalist economy that gives everybody a justified belief that they can share in the benefits. What we increasingly seem to have instead is an unstable rentier capitalism, weakened competition, feeble productivity growth, high inequality and, not coincidentally, an increasingly degraded democracy. Fixing this is a challenge for us all, but especially for those who run the world’s most important businesses. The way our economic and political systems work must change, or they will perish.

About Martin Wolf
As the FT’s chief economics commentator, Martin Wolf paints on a wide canvas. He focuses on the world economy, and has paid particular attention to globalisation, financial crises and, more recently, trade wars. Pro-market but pragmatic, he ranges broadly and skilfully from the challenge of climate change to the rise of populism, and even the prediction that interest rates would remain very low for a very long time.

Follow Martin Wolf with*myFT*and on*Twitter.

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