Dec 4, 2021

Climate resilience for whom?

Political economy isn’t only about the allocation of scarce resources among competing ends, but also among competing people and communities. Guess how it’s starting to play out in protection from the impacts of climate change:

The Biden administration has touted the program, called Building Resilient Infrastructure and Communities, or BRIC, as a model that should be expanded. The infrastructure bill provides billions more to the program.

But most of the first round winners were wealthy, predominantly white areas in a handful of coastal states, federal data show.

More than half the money went to California, New Jersey and Washington State. The largest single recipient was a $68 million flood-control project in Menlo Park, Calif., where the median household income is more than $160,000, the typical home costs more than $2 million and only one in five residents are Black or Hispanic. The project is in line to get $50 million from FEMA.

By contrast, FEMA rejected applications from places like Smithland, Ky., a town of just 240 people where the Cumberland and Ohio Rivers meet, halfway between St. Louis and Nashville. The town sought $1.4 million to build a levee along the riverbank, which has crested at flood levels three times in the past 10 years.

Read more here, and here.

Nov 13, 2021

Profit-led inflation

Robert Reich connects the dots:

The underlying problem isn’t inflation per se. It’s lack of competition. Corporations are using the excuse of inflation to raise prices and make fatter profits.

In April, Procter & Gamble announced it would start charging more for consumer staples ranging from diapers to toilet paper, citing “rising costs for raw materials, such as resin and pulp, and higher expenses to transport goods”.

But P&G is making huge profits. In the quarter ending 30 September, after some of its price increases went into effect, it reported a whopping 24.7% profit margin. It even spent $3bn during the quarter buying its own stock.

It could raise prices and rake in more money because P&G faces almost no competition. The lion’s share of the market for diapers, to take one example, is controlled by just two companies – P&G and Kimberly-Clark – which roughly coordinate their prices and production. It was hardly a coincidence that Kimberly-Clark announced price increases similar to P&Gs at the same time P&G announced its own price increases….

You can see a similar pattern in energy prices. If energy markets were competitive, producers would have quickly ramped up production to create more supply, once it became clear that demand was growing. But they didn’t.

Why not? Industry experts say oil and gas companies saw bigger money in letting prices run higher before producing more supply. They can get away with this because big oil and gas producers don’t operate in a competitive market. They can manipulate supply by coordinating among themselves.

In sum, inflation isn’t driving most of these price increases. Corporate power is driving them.

Read more here.

Nov 10, 2021

How the blues blew it

There’s a huge difference between talking the talk and walking the walk. The record of “blue” states on housing, taxation, and education is, well, enough to make you wanna sing the blues.

Watch this powerful video here.

Nov 9, 2021

How Democrats lost the working class

It’s not just a matter of “culture wars,” explains Robert Reich:

Both Clinton and Obama allowed the power of the working class to erode. Both ardently pushed for free trade agreements without providing the millions of blue-collar workers who thereby lost their jobs any means of getting new ones that paid at least as well.

They stood by as corporations hammered trade unions, the backbone of the working class. Both refused to reform labor laws to impose meaningful penalties on companies that violated them or enable workers to form unions with simple up-or-down votes. Union membership sank from 22% of all workers when Clinton was elected to fewer than 11% today, denying the working class the bargaining leverage it needs to get a better deal.

The Obama administration protected Wall Street from the consequences of its gambling addiction through a giant taxpayer-funded bailout but let millions of underwater homeowners drown.

Both Clinton and Obama allowed antitrust to ossify – allowing major industries to become more concentrated and hence more economically and politically powerful.

Finally, they turned their backs on campaign finance reform. In 2008, Obama was the first presidential nominee since Richard Nixon to reject public financing in his primary and general-election campaigns. He never followed up on his re-election campaign promise to pursue a constitutional amendment overturning Citizens United v FEC, the 2010 supreme court opinion that opened the floodgates to big money in politics.

What happens when you combine freer trade, shrinking unions, Wall Street bailouts, growing corporate power and the abandonment of campaign finance reform? You shift political and economic power to the wealthy and you shaft the working class.

Read more here.

Nov 7, 2021

Dietrich Boenhoeffer on the pandemic of his time

“The ultimate test of a moral society,” wrote Dietrich Boenhoffer before being executed in a Nazi concentration camp for plotting against Hitler, “is the kind of world that it leaves to its children.” Here’s what he had to say about the “stupidity” pandemic of his time:

Source: Sprouts Schools, https://sproutsschools.com/bonhoeffers-theory-of-stupidity/.

Oct 7, 2021

Revealed preferences on child care

A society’s spending tells us a lot about its priorities:

Source: New York Times. Read the story here.

Sep 27, 2021

Fed economist questions conventional wisdom

Check out this from senior Federal Reserve economist Jeremy Rudd:

Mainstream economics is replete with ideas that “everyone knows” to be true, but that are actually arrant nonsense. For example, “everyone knows” that:

• Aggregate production functions (and aggregate measures of the capital stock) provide a good way to characterize the economy’s supply side;

• Over a sufficiently long span—specifically, one that allows necessary price adjustments to be made—the economy will return to a state of full market clearing; and,

• The theory of household choice provides a solid justification for downward-sloping market demand curves.

None of these propositions has any sort of empirical foundation; moreover, each one turns out to be seriously deficient on theoretical grounds.

Read his paper here and the Bloomberg story here.

Sep 22, 2021

$2.3 trillion down the drain

On top of the human costs, the 20-year US war in Afghanistan came with a huge financial price tag:

Source: The Costs of War Project.

War, like famine, brings suffering to many, but to some it means profits. Read who lined their pockets here.

Sep 10, 2021

What would $163 billion a year buy us?

The U.S. Treasury Department reports that tax evasion by the top one percent amounts to $163 billion per year:

The wealthiest 1 percent of Americans are the nation’s most egregious tax evaders, failing to pay as much as $163 billion in owed taxes per year, according to a Treasury Department report released on Wednesday.

Read more here; Treasury report here.

Aug 20, 2021

A really big idea

In his new book, Ours, Peter Barnes lays out a really big idea:

Universal property is a birthright belonging equally to all. It is a complement to private property, not a replacement. In one form or another, it represents the interests of future generations and all living persons together.

We need universal property because markets today are grievously out of balance. They consistently over-reward a small minority of wealth owners at the expense of the majority of humans and nature. Universal property would correct that imbalance and transform the way markets behave.

Read more about it here.

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