Browsing articles in "Articles"
Sep 7, 2015

Labor Day – or Assets Day?

Econ4’s Doug Smith writes for Naked Capitalism on the hypocrisy of celebrating Labor Day while screwing workers:

You, my friends, are truly champion asset creators! Your long-suffering self-denial of working for crap wages contributes to massive corporate profits that executives tap to buy-back company stock in order to keep those asset values high. Your low-to-no wages give you as consumers the God-given freedom to borrow and, thereby, fund securitized assets. And, when those asset values get threatened, your taxes come to the rescue through bailouts and mumbo jumbo (“quantitative easing”).

Read his piece here.

Aug 18, 2015

Value creation v. value extraction

Bill Lazonick writes in the Harvard Business Review:

The debate over how to reverse ever-increasing income inequality has moved front and center in the Democratic presidential campaign. In speeches on July 13 and July 24, front-runner Hillary Clinton first outlined and then elaborated upon her policy agenda for combating what she calls “quarterly capitalism.” In emphasizing the need for value-creating business investment in an economy in which value-extracting financial interests are driving corporate resource-allocation decisions, the Clinton economic reform package is novel and refreshing for a Democratic presidential contender….

But perhaps the most elegant solution is one Clinton has not yet advocated: simply banning corporations from making open-market repurchases of their shares.

Read Lazonick’s piece here. See Econ4’s Jerry Epstein take on this issue here.

Jul 23, 2015

All-American socialism

Econ4’s Gar Alperovitz and Thomas Hanna write in the New York Times:

THE great 20th-century conservative economist Joseph Schumpeter thought the left had overlooked a major selling point in pressing the case for public — i.e., government — control over productive capital. “One of the most significant titles to superiority,” he suggested, was that public ownership produced profits, which means not having to depend on taxes to raise money.

The bulk of the left never took up Schumpeter’s argument. But in an oddly fitting twist, these days the mantra of public control in exchange for lower taxes has been embraced by a surprising quarter of the American political leadership: conservatives.

The most well-known case is Alaska. The Alaska Permanent Fund, established by a Republican governor in 1976, combines not one, but two socialist principles: public ownership and the provision of a basic income for all residents. The fund collects and invests proceeds from the extraction of oil and minerals in the state. Dividends are paid out annually to all state residents….

Read their oped piece here.

Jul 9, 2015

Grexit time?

It’s time for Greece to exit the euro, if not the EU, writes Simon Jenkins in the Guardian:

Sometimes the small voice of economics should rise above the shrieking hysterics of politics. The laws of bankruptcy were invented by the Victorians not to stick plaster over capitalism’s wounds. Insolvency and limited liability lay at the core of commercial enterprise. Borrower and lender alike had to accept risk for capitalism to thrive. Greece within the eurozone was allowed to borrow riskily and was lent to riskily. Any fool (except a eurofool) knew it would end in disaster.

The IMF last week admitted Greece’s debts were “unsustainable”. But such is the political arthritis now afflicting Europe’s “technocratic” rulers that they ignored the fact. They concentrate on their one concern: somehow extending Greece’s repayments so German, French and British banks could have even larger loans underpinned. It is bankers, not Greeks, who are being “bailed out”. They want Greek taxpayers to go on paying interest even if the principal is as beyond reach as a tsarist bond.

Read his piece here.

Also Eduardo Porter’s recent New York Times piece on Germany’s own debt write-down after World War II.

Jun 18, 2015

What’s in a trade agreement?

These days trade agreements are not just about imports and exports. They’re also about undermining the power of governments to protect public health and the environment by regulating corporate behavior – via provisions slipped into trade agreements in the guise of “Investor-State Dispute Settlement” (I.S.D.S.), as James Surowiecki explains in the New Yorker:

In the old days, aggrieved American investors would call on the Navy to protect their interests—thus the phrase “gunboat diplomacy.” How much better that now they just call their lawyers.

But these days signing such agreements is risky for countries. I.S.D.S. lawsuits used to be rare, but they’re becoming a growth industry. Nearly a hundred have been filed in the past two years, as against some five hundred in the quarter century before that. Investor protection, previously a sideshow in corporate law, is now a regular part of law-school curricula. “We’ve also seen an expansion in the types of claims that have been brought,” Lise Johnson, the head of investment law and policy at the Columbia Center on Sustainable Investment, told me. I.S.D.S. was originally meant to protect investors against seizure of their assets by foreign governments. Now I.S.D.S. lawsuits go after things like cancelled licenses, unapproved permits, and unwelcome regulations.

To learn more about what’s in a trade agreement, read his story here. For more, see blog entries on TripleCrisis here.

May 19, 2015

True cost of fossil fuels

A new IMF working paper estimates world spending on fossil fuel subsidies:

Fossil fuel companies are benefitting from global subsidies of $5.3tn (£3.4tn) a year, equivalent to $10m a minute every day, according to a startling new estimate by the International Monetary Fund.

The IMF calls the revelation “shocking” and says the figure is an “extremely robust” estimate of the true cost of fossil fuels. The $5.3tn subsidy estimated for 2015 is greater than the total health spending of all the world’s governments.

Read more here.

Apr 19, 2015

Divestment pressure mounts

This week’s student protests put the heat on Harvard:

“Throughout Harvard heat week, Harvard’s top decision-makers have been hiding from both their students and from the issue of climate justice,” protesters wrote in a statement on Wednesday. “They must face the broad, diverse, and growing coalition behind divestment from fossil fuels.”

Read more coverage here and here. And check out the Divest Harvard facebook page here.

Mar 31, 2015

Stranded asset denial

John Ashton, formerly Britain’s top climate diplomat, writes in an open letter to the president of Shell Oil:

You deny your assets will be stranded. True, first tier assets are cheap, and those that are heavily invested in tend to bear fruit quickly. But your case also assumes failure on 2C and rates of renewables deployment long surpassed by reality.

The Bank of England is watching the carbon bubble. Bloomberg screens include a carbon risk valuation tool. The divestment movement may still be small but it is rallying young people, has moral authority, and can now make a prudential case as well as an environmental one.

Writing on the wall. Story of the world.

You could accept squarely that the days of yesterday’s business model are numbered, that the challenge now is to manage its decline and build alongside it a new business fit for today.

Read his letter here. Read the story here.

Mar 11, 2015

Stranded fossil assets

Bill McKibben writing in The Guardian on the coming shift in the world energy economy:

What in 2013 was the rallying cry of a few student campaigners has by 2015 become the conventional wisdom: there’s a “carbon bubble,” composed of the trillions of dollars of coal and oil and gas that simply must be left underground. Here’s the president of World Bank speaking in Davos: “Use smart due diligence. Rethink what fiduciary responsibility means in this changing world. It’s simple self-interest. Every company, investor and bank that screens new and existing investments for climate risk is simply being pragmatic….”

Mark Carney, governor of the Bank of England, did his best to explain the unwelcome news to the industry at a conference last October: the “vast majority” of the planet’s carbon reserves “are unburnable,” he said. When Shell’s chief executive hit back last month, calling a rapid transition off fossil fuel “simply naïve,” it was Tory veteran and chair of parliament’s energy committee Tim Yeo who told him off: “I do believe the problem of stranded assets is a real one now. Investors are starting to think by 2030 the world will be in such a panic about climate change that either by law or by price it will be very hard to burn fossil fuels on anything like the scale we are doing at the moment.”

Read his analysis here.

Mar 9, 2015

Monopoly power v. solar power

The Washington Post reports from the electricity battleground in the clean energy transition, where surprising political realignments are emerging:

“Conservatives support solar — they support it even more than progressives do,” said Bryan Miller, co-chairman of the Alliance for Solar Choice and a vice president of public policy for Sunrun, a California solar provider. “It’s about competition in its most basic form. The idea that you should be forced to buy power from a state-sponsored monopoly and not have an option is about the least conservative thing you can imagine.”

Read more here.