Week-end Wrap – Political Economy – November 28, 2021
by Tony Wikrent
Strategic Political Economy
Destroying Democracy Is Central to the Privatization of Public Goods
[Jacobin, via Naked Capitalism 11-22-2021]
How Delaware Became the World’s Biggest Offshore Haven
[Foreign Policy, via Naked Capitalism 11-21-2021]
The American Ruling Class Has Never Let Us Build Back Better
[Jacobin, via The Daily Poster, November 21, 2021]
The defeat of Reconstruction was the nation’s first failure to build back better, and it set the stage for the failures that followed. American austerity politics found their first full expression during this period, pivoting on an ideological turn to classical liberalism within the Republican Party. The events of the 1870s created a pattern of missed opportunities and reactionary blowback that has since been repeated time and again.”
Fighting the Inflation Profiteers
David Dayen, November 24, 2021 [The American Prospect]
Companies are raising prices well above increases in their costs. The only antidote is to finally take action against corporate power….
“Executives are seizing a once in a generation opportunity to raise prices,” reads a Wall Street Journal storyexplaining that around two-thirds of the largest publicly traded companies are showing profit margins higher today than they did in 2019, before the pandemic. Over 100 companies show profit margins of 50 percent or more above those 2019 levels…. Corporate executives are not hiding their handiwork; instead, they’re boasting about it in financial disclosures and earnings calls. “We have not seen any material reaction from consumers,” said the chief financial officer of Procter & Gamble, the world’s largest consumer goods company, which has hiked prices three times in the past year. “What we are very good at is pricing,” said Colgate-Palmolive’s CEO. “We find that taking several small price increases is more effective than one large price jump,” added the CFO of Unilever. Dollar Tree, a discount store which has the word “dollar” in its name, has decided to permanently set its price point at $1.25, stating specifically that the move is “not a reaction to short-term or transitory market conditions.”
Class war and economic disequilibrium
Big Business Declares War on Lina Khan
Matt Stoller [BIG, via Naked Capitalism 11-22-2021] A must-read (and especially insightful on factional conflict in the Republican Party). L 11-22
The U.S. Chamber of Commerce gets ready to go after the anti-monopoly movement and its leader at the Federal Trade Commission. But the conservative-corporate coalition is now splintering….
Since the Senate confirmed Lina Khan to be one of two key antitrust enforcers in June, the network of corporatist operatives in D.C. and Wall Street have been quietly trying to undermine her. This week, the campaign came into the open. The U.S. Chamber of Commerce just announced in the Wall Street Journal that it will be engaged in open conflict with the Federal Trade Commission, and more broadly with anti-monopolists across government.
“It feels to the business community that the FTC has gone to war against us, and we have to go to war back,” said Chamber President and CEO Suzanne Clark. The plan from the Chamber is endless harassment of the agency. They are filing Freedom of Information Act requests for the correspondence of Khan and her staff, writing warning letters about the commission’s actions, and threatening to sue the FTC at every step (even on things that went through on a bipartisan vote). The Chamber is also sending letters to every agency in government, in organized pushback against the Biden executive order on competition. The goal is to frighten lawyers at these agencies, to make it too painful to try and govern….
the real challenge in the antitrust world is the historic merger wave. According to Bloomberg, “Companies have announced $2.8 trillion of deals so far in 2021, an unprecedented number that puts this year on track to be the most active ever.” (These are a result of cheap credit from the Fed and the CARES Act passed in 2020.) This wave creates a special problem for the FTC. While European competition enforcers can simply block a deal until it’s been investigated, in the U.S. deals automatically go through unless the FTC brings a challenge in court with a deeply researched complaint. With thousands of deals going through, the experience of being at the FTC today is like playing tennis against a machine that shoots tennis balls at you unrelentingly.
In the midst of this merger boom, Khan has been pursuing every possible trick to address the problem. She has demanded merging firms get prior approval before pursuing new mergers, ended the process of quickly clearing mergers, and withdrawn loose merger guidelines. The FTC is now sending letters to firms telling them that the commission may undo mergers in the future, thus creating an incentive for firms to delay deals. These moves are not enough to stop the historic wave, but they have slowed it slightly, and generated concern among dealmakers. “This is significant and could have collateral consequences on the M&A deal space, particularly for private equity firms and their exit plans for a carve-out business or assets,” said Erica Weisgerber, partner at Debevoise & Plimpton LLP.
In response to this newfound skepticism of mergers, the antitrust bar, which openly encourages firms to pursue illegal mergers, is now suggesting a collective strategy to overwhelm both the DOJ and FTC. Here’s Paul Weiss partner Scott Barshay offering a plan to his fellow attorneys:….
Two weeks ago, roughly at the same time as Wilson’s speech, conservative Republican Senator Tom Cotton joined Democrat Amy Klobuchar in cosponsoring a bill opposing big tech mergers, a bill that Jordan opposed in the House Antitrust Subcommittee…. to have someone like Cotton come out squarely on the opposite side of Jordan over big tech means that the Republican Party will be fractured.
And Cotton’s not alone. His approach to big tech mirrors that of multiple Senators on the right, including Chuck Grassley, Josh Hawley, Marsha Blackburn, John Kennedy, Lindsay Graham and John Thune.
“Wall Streeters Are Scouting Condos and Yachts Ahead of a Record Bonus Season” [New York Magazine, via Naked Capitalism Water Cooler 11-23-2021]
“On Tuesday, Wall Street compensation consulting firm Johnson Associates put out a report confirming that just about everyone who had a hand in this financial free-for-all is going to get rewarded more handsomely than any time since at least the financial crisis. In its report, the company predicts a double-digit increase in bonuses this year practically across the board, with as much as a 35 percent bump for bankers who helped bring new companies to the public markets. For Wall Street’s biggest earners, though, they’re looking at much more than that — as much as three times their biggest bonus, ever, Intelligencer was told. For established bankers, that could mean millions more in their total compensation, just for this year.”
As Pandemic Evictions Rise, Spaniards Declare ‘War’ on Wall Street Landlords
[New York Times, via Naked Capitalism 11-24-2021]
[Twitter, via Naked Capitalism 11-24-2021]
[MedPage Today, via Naked Capitalism Water Cooler 11-24-2021]
“In a hospital setting, however, most infection control protocols focus on contact transmission…. n March 2018, we embarked on a 3-year journey to test a theory: that mitigating the airborne transmission of viruses and bacteria is just as important as, or more important than, measures to reduce contact transmission. St. Mary’s Hospital for Children was the laboratory for this experiment. We had no idea at the time that we would soon find ourselves in the midst of a global pandemic. Three years later, the results are in: the deployment of advanced air purification measures significantly contributed to a 45% reduction in healthcare-associated infections, according to the study recently published in the Journal of Hospital Infection. If we extrapolate those results nationally, it could mean 765,000 fewer hospital infections each year. This study is novel. To our knowledge, it is one of the few studies — perhaps the only study — of an engineering solution to airborne disease transmission conducted in a real-world hospital setting with over 100,000 patient days. Many studies of indoor air quality are conducted in labs or rooms fabricated to mimic the real world. More real-world studies can only advance our knowledge of the most effective tools for air purification. As promising as these results are for hospitals, they also provide a blueprint for reducing the airborne transmission of diseases in other indoor settings such as schools, restaurants, retail stores, office buildings, nursing homes, and more.” • Important, because members of the (hidebound) hospital infection control often serve as gatekeepers for policy, and to this point have worked hard to prevent a paradigm shift to aerosol transmission.
The carnage of mainstream neoliberal economics
Boeing Built an Unsafe Plane, and Blamed the Pilots When It Crashed
[Bloomberg BusinessWeek, via The Big Picture 11-21-2021]
Cost-cutting, corporate arrogance, and a new plane that was supposed to be easy to fly. An exclusive excerpt from Flying Blind: The 737 Max Tragedy and the Fall of Boeing….
Boeing’s Safety Review Board, a formal gathering of engineers and pilots, discussed the Lion Air crash in early November. Among themselves, board members had earlier acknowledged some of the software’s flaws. But they’d expected that pilots would safely respond to a misfire of the software. Now they questioned their own assumptions….
There was another reason for the reluctance to admit that the design had fallen short—one involving race and nationality, not cost. The empathy Boeing’s aviators might have had for a pilot who looked like them wasn’t being extended to Suneja and Harvino. Conversations at Boeing kept focusing on how Harvino, once he took over the controls, hadn’t been able to trim the plane with the thumb switch. Boeing’s pilots, predominantly older White men, had long shared private jokes about the incompetent crews they ran into overseas. “Too dumb to spell 737,” went a frequent refrain of one pilot, according to someone who heard it. Another trainer would ask rhetorically if “Chung Fo Ho” could handle a given procedure….
In plain language, the directive was saying that Boeing’s brand-new airplane, supposedly a marvel of modern technology, could crash itself into the ground based on bad data from one tiny sensor. It sounded like the kind of single-point failure commercial aircraft weren’t supposed to have. And as Boeing employees began privately talking more with airlines about MCAS, elaborating on how the software worked, the pilot grapevine started jumping.
What most alarmed pilots was that this new feature overturned decades of Boeing design philosophy, the thing the manufacturer had always claimed set it apart from chief rival Airbus….
Boeing sent a vice president named Mike Sinnett and chief test pilot Craig Bomben to clear the air with pilots from major U.S. customers. On Nov. 27 the two men visited the American Airlines pilots’ union in Fort Worth. Dan Carey, president of the union, had agreed with staffers beforehand that if what they heard sounded insincere, he’d record the conversation. The Boeing executives had been talking for only a few minutes when Carey discreetly turned on his phone’s recorder.
Structural Issues Still Slowing 787 Production Rate
[American Machinist, via Naked Capitalism 11-25-2021]
“Premature aging of the airframe.”
I’m A Twenty Year Truck Driver, I Will Tell You Why America’s “Shipping Crisis” Will Not End
[Medium, via The Big Picture 11-21-2021]
This slowdown is warehouse management related: very few warehouses are open 24 hours, and even if they are, many are so short staffed it doesn’t make much difference, they are so far behind schedule. It means that as a freight driver, I cannot pick up as much freight in a day as I used to, and since I can’t get as much freight on my truck, the whole supply chain is backed up. Freight simply isn’t moving.
Poor conditions and low pay for truckers helped fuel supply chain crisis
[NBC, via Naked Capitalism 11-26-2021]
Cost of shipping a container from Asia jumped over 500% since last year, Traeger Grills CEO says
[CNBC, via Naked Capitalism 11-23-2021]
Robert Kuttner, November 23, 2021 [The American Prospect]
...The deeper problem is the deregulation and excessive offshoring and the resulting abuse of private corporate power that produced these bottlenecks.
American consumers and workers may be suffering, but the cartel of shipping companies that control the terms of this global trade (none of them U.S.-owned) have never been more profitable. The container ship industry booked net profits in the third quarter of 2021 of a mind-blowing $48.1 billion, a ninefold increase over profits in the third quarter of 2020, which were already a record.
The industry reported that net profits were a staggering 42 percent of gross revenues, also a record. Basically, the congestion that has caused inconvenience and inflation for the rest of us has been a source of increased market power and price-gouging for the ocean shipping cartel—price hikes that are part of the inflation.
[American Affairs, via Naked Capitalism 11-26-2021]
[Wall Street Journal, via Naked Capitalism Water Cooler 11-23-2021]
Charter rates have soared, thanks in part to a global economic rebound that is translating into Covid-19-related labor shortages and port logjams. Cargo ships are in demand, following a yearslong decline in the number of container ships ordered and continued consumer spending on goods rather than services. To capitalize on the boom, hedge funds and lenders are flipping container ships, signing multiyear contracts to charter them out at high rates and taking gains on their equity stakes in container-shipping companies whose stock prices have soared…. The recovery is turning what looked like losing bets for earlier investors in shipping into winning ones.”
[Twitter, via The Daily Poster, November 24, 2021]
Building Back Better Through Taxing Stock Buybacks
Harold Meyerson, November 23, 2021 [The American Prospect
For the past four decades—ever since Ronald Reagan’s appointees to the Securities and Exchange Commission changed a rule and opened a floodgate— stock buybacks have been a major contributor to the misshaping of the American economy.
When the top executives of a publicly traded corporation decree that their company will buy back a set amount of the company’s shares, it increases the values of the remaining shares, since the underlying value of the company remains the same but the number of outstanding shares decreases. As those same top executives tend to be very handsomely rewarded for increases in the price of the company’s shares, buying back stock is a legal and apparently painless way of making themselves m-f–ing rich. Nice work if you can get it.
The practice of buying back shares went all but unnoticed by economists until the middle of the last decade, when University of Massachusetts economics professor William Lazonick documented that the sum total of buybacks by the corporations on the S&P 500 over the preceding decade approximated the sum total of their profits. Rather than investing in new equipment or research and development or (God forbid) wage increases, America’s corporate sector was buying back its own stock, to the advantage of their leading executives and their shareholders (chiefly, of course, large shareholders), and to the detriment of, well, the economy at large.
Restoring balance to the economy
The Deere strike and new contract:
[Twitter, via Naked Capitalism Water Cooler 11-23-2021]
Bill Mitchell — Governments should not ‘cool’ an economy or cut deficits when there are millions unemployed still
Bill Mitchell [billy blog, via Mike Norman Economics 11-24-2021]
It seems that the mainstream economists are emerging again and making all sorts of claims that fiscal policy has to target lower deficits and monetary policy needs to tighten (interest rates rise) to stop our governments going broke and inflation going wild. It really is like a tired broken record, isn’t it. They have sort of gone underground during the crisis and more are thinking it is time to reassert the nonsense of the past. And so it goes....
Creating new economic potential - science and technology
A Power Struggle Over Cobalt Rattles the Clean Energy Revolution
[New York Times, via The Big Picture 11-27-2021]
The quest for Congo’s cobalt, which is vital for electric vehicles and the worldwide push against climate change, is caught in an international cycle of exploitation, greed and gamesmanship. With more than two-thirds of the world’s cobalt production coming from Congo, the country is once again taking center stage as major automakers commit to battling climate change by transitioning from gasoline-burning vehicles to battery-powered ones. The new automobiles rely on a host of minerals and metals often not abundant in the United States or the oil-rich Middle East, which sustained the last energy era.
Climate and environmental crises
The Elephant Who Could Be a Person
[The Atlantic, via The Daily Poster, November 21, 2021]]
“A ‘person’ is something of a legal fiction. Under U.S. law, a corporation can be a person. So can a ship… Some forms of artificial intelligence might one day become persons. But can an elephant be a person? No case like this has ever reached so high a court, anywhere in the English-speaking world. The elephant suit might be an edge case, but it is by no means a frivolous case. In an age of mass extinction and climate catastrophe, the questions it raises, about the relationship between humans, animals, and the natural world, concern the future of life on Earth, questions that much existing law is catastrophically ill-equipped to address.”
Disrupting mainstream economics
[Economics from the Top Down, via Mike Norman Economics 11-24-2021]
Why economists' talk about "inflation" is largely BS.
The Terror Of Electronic Money
Ian Welsh, November 24, 2021
Electronic money is inherently authoritarian. (Bitcoin is authoritarian and deflationary, and deflation rewards first movers and the rich far more than normal people.)
“Five Things You Need to Know to Start Your Day”
[Bloomberg, via Naked Capitalism Water Cooler 11-23-2021] Joe Weisenthal’s section:
“[T]he last 18 months have vindicated many of [MMT’s] core ideas. 1. Fiscal expansion is incredibly powerful. … 2. Inflation happens when we see real resources stretched to capacity…. 3. Bond vigilantes still MIA. As MMTers would anticipate, the spending boom and the major Fed balance sheet expansion have not dented the stability of the dollar or Treasuries. … 4. You can’t win playing by the CBO’s rules. … [O]ne of the arguments made by its proponents is that the deck is stacked against fiscal expansion, by arbitrary “scores” (by the likes of the CBO) that establish whether a spending plan adds to the deficit or not. Given the contortions that the Democrats have made to satisfy its members in the Senate, while also aiming to get a good score by the CBO (not add to the deficit too much), this is another point of vindication…. Obviously, elevated inflation has caused a drop in people’s perceptions of the economy. And it’s possible that this will sour consumer spending plans in the future. So that’s potentially something to be reckoned with. But for one thing, it seems awfully premature to look at random polls in November 2021 and pronounce anything big about how the future will go. And regardless, a number of core MMT concepts have been empirically vindicated over the last year and a half or so.”
Information Age Dystopia
How Facebook and Google fund global misinformation
[MIT Technology Review, via Naked Capitalism 11-21-2021]
“An MIT Technology Review investigation, based on expert interviews, data analyses, and documents that were not included in the Facebook Papers, has found that Facebook and Google are paying millions of ad dollars to bankroll clickbait actors, fueling the deterioration of information ecosystems around the world.”
“Why Amazon’s Higher Fulfillment Fees Could Generate $3.1B In Revenue” [Benzinga, via Naked Capitalism Water Cooler 11-23-2021]
“Amazon.com, Inc. has announced it will be raising its Fulfillment by Amazon (FBA) fees starting Jan. 18, 2022, a move that could generate $3.1 billion in incremental revenue. Amazon will be raising FBA fulfillment fees by an average of 5.2%. The fee changes will be based on package size and weight. FBA monthly storage fees will also increase from 75 cents to 83 cents in off-peak months of January through September…. Assuming Amazon’s claims that alternative fulfilment options are still far more expensive, sellers seemingly have no choice but to pay the higher fees. Given Amazon will be providing no additional services for those higher fees, almost all of the incremental revenue should be profit.” Because they can.
As Lambert Strether notes: “Because they can.”
Inside Amazon’s Failures to Protect Your Data: Internal Voyeurs, Bribery Scandals and Backdoor Schemes
[Reveal, via The Big Picture 11-21-2021]
For years, the retail giant has been keeping something from you: It’s handled your information much less carefully than it handles your packages.
Disrupting mainstream politics
“Alexandria Ocasio-Cortez on Why Democrats’ ‘Talking Points Are Not Enough’” (interview)
[New York Times, via Naked Capitalism Water Cooler 11-23-2021]
AOC: “We always try to tell people why they need to settle for less, instead of being able to harness the energy of our grass roots and take political risks in service of them, the same way that we take political risks in service of swing voters. We can do both…. You’ve got to give me something to work with, with my communities. And if you’re not, how can I make the argument that they should turn out again? And this notion that saying ‘We’re not Trump’ is enough — this is such a deeply demoralizing message. Democrats have a trifecta and have been unable to pass voting-rights protections. And so people can wring their hands and say ‘but Manchin’ all they want, or ‘but the filibuster’ all they want, but at the end of the day, what people see are the results of their actions and the results of investing their time.” And: “Before the Virginia elections, it was very clear that our help and our participation was not wanted or asked for, which is fine. I’m not here to tell people how to run their races. But at the same time, to consider the members here that have some of the tightest relationships to our political base as just a uniform liability — and not something that can be selectively deployed, or consulted, or anything — I think it’s just sad. I think it was a mistake. And we saw a big youth turnout collapse. Not a single person asked me to send an email, not even to my own list. And then they turn around and say, ‘It’s their fault.’ When I think it was communicated quite expressly that we were unwelcome to pitch in.”
“In Cities Around the US, Redistricting Is a Major Threat to Progressive Politics” [Jacobin, via Naked Capitalism Water Cooler 11-23-2021]
“Cities are crucial hubs for progressive politics. Places like Chicago, Illinois, and Buffalo, New York, are making historic advances by electing a record number of democratic socialists to the city council and winning mayoral primaries. Democratic socialists are on the front lines of efforts to reallocate police funds to mental health and social services, raise the minimum wage, implement rent control, and crack down on public utility monopolies. The advancement of democratic socialists and independent politics in cities, however, faces a looming threat: municipal redistricting. Redistricting is often seen as a competition between Democrats and Republicans, and gerrymandering in city councils (where Democrats dominate) receives less attention. The data, however, paint a different picture. To explore the consequences of municipal redistricting for independent politics, my research team digitized and analyzed ward maps from the cities of Chicago, St. Louis, and Milwaukee from their founding in the 1800s to the present. We tracked the movement of wards within each city over time, paying attention to instances when wards were redistricted from one end of a city to another, as well as instances when wards never moved. Our study’s findings are troubling for progressive elected officials. Municipal redistricting has been used by the Democratic Party to discipline and suppress elected officials advocating for racial and economic equality.” • See India Walton…
“Democrats are in denial about what they’re up against”
Ryan Cooper [The Week, via Naked Capitalism Water Cooler 11-24-2021]
“The developing strategy seems to go something like this: First, the Wisconsin legislature districts are gerrymandered so it’s nearly impossible for Democrats to win. Next, Republicans seize control of the state electoral process, as Sen. Ron Johnson (R-Wisc.) has already suggested doing, even over Democratic Gov. Tony Evers’ veto. Then, either they rig the voting process such that Democrats can’t win, or just award the state’s electoral votes to the Republican candidate directly. The basic idea here — handing out electoral votes through the legislature rather than after a vote — arguably wouldn’t even be ‘illegal,’ since the Electoral College clauses in the Constitution stipulate that electors are chosen “in such Manner as the Legislature thereof may direct.” Doing it over Evers’ veto, though, would definitely violate state law and Supreme Court precedent. More to the point, the tactic would be a grotesque violation of the very political principles of a democratic republic, as outlined in the Declaration of Independence and the preamble to the Constitution.”
Lambert Strether: “Not that I’m one to hold grudges, but I well remember the union-driven Wisconsin Capitol Occupation against Scott Walker in 2011 (well before Zucotti Park, too). Not a national Democrat lifted a finger to help. Nor did the national Democrats lift a finger to help during the 2012 recall election. And here we are! Cf. Gal 6:7. NOTE Not that a recall election was necessarily good strategy. But isn’t the Democrat Party supposed to be a big tent style-o-thing?”
“The Problem of Political Despair”
Michelle Goldberg [New York Times, via Naked Capitalism Water Cooler 11-24-2021]
“I look at the future and I see rule without recourse by people who either approve of terrorizing liberals or welcome those who do. Such an outcome isn’t inevitable; unforeseen events can reshape political coalitions. Something could happen to forestall the catastrophe bearing down on us. How much comfort you take from this depends on your disposition. Given the bleak trajectory of American politics, I worry about progressives retreating into private life to preserve their sanity, a retreat that will only hasten democracy’s decay. In order to get people to throw themselves into the fight to save this broken country, we need leaders who can convince them that they haven’t already lost.”
[The Atlantic, via The Big Picture 11-21-2021]
If the 20th century was the story of slow, uneven progress toward the victory of liberal democracy over other ideologies—communism, fascism, virulent nationalism—the 21st century is, so far, a story of the reverse.
JOE BIDEN’S PRIVATE EQUITY VACATION
[Twitter, via The Daily Poster, November 24, 2021]
President Joe Biden and his family will celebrate Thanksgiving at the Nantucket, Massachusetts, vacation home of David Rubenstein, the billionaire co-founder of the Washington private equity giant Carlyle Group. Carlyle has been lobbying on Biden’s Build Back Better reconciliation legislation, and belongs to corporate lobbying groups that have campaigned against the bill. The White House said the Bidens will “stay at the home of their friend, David Rubenstein, as they have done previously.”
In Memory of JFK: The First U.S. President to be Declared a Terrorist and Threat to National Security
[The Saker, via Naked Capitalism 11-23-2021]