Hard times in a ‘good’ economy – 1
The first in a series of posts on why, despite the fact that the U.S. economy is doing well by the usual measures of GDP growth and employment, the reality looks very different to many Americans:
On paper, Mr. Arias presents as an example of an improving economy. He is earning more than during the worst of the pandemic. He has health insurance, and is taking medication for his diabetes.
But he is earning less than half what he did before the unraveling began.
“It’s still hard,” he said. “You go to the store and buy $100 worth of groceries and there’s nothing in the car.”
Read more here.
The hacking of US foreign policy
Jeff Sachs writes:
American foreign policy is not at all about the interests of the American people. It is about the interests of the Washington insiders, as they chase campaign contributions and lucrative jobs for themselves, staff, and family members. In short, US foreign policy has been hacked by big money.
As a result, the American people are losing big. The failed wars since 2000 have cost them around $5 trillion in direct outlays, or around $40,000 per household. Another $2 trillion or so will be spent in the coming decades on veterans’ care. Beyond the costs directly incurred by Americans, we should also recognize the horrendously high costs suffered abroad, in millions of lives lost and trillions of dollars of destruction to property and nature in the war zones.
Read his opinion piece here.
Should we teach neoclassical economics?
Reflecting on this question, Louis-Philippe Rochon and Sergio Rossi quote Keynes:
“The master-economist must possess a rare combination of gifts… He must be mathematician, historian, statesman, philosopher — in some degree. He must understand symbols and speak in words. He must contemplate the particular, in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must be entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood, as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.”
Read more here.
CoP Flop
Econ4’s Jim Boyce breaks down the disappointment of the latest CoP (Conference of Parties) climate summit, and a path forward:
The climate crisis is not an all-or-nothing phenomenon. We have already entered an era of crisis, and this will intensify in the years ahead. The real question is how bad it will get. And that depends on what we do today. There is never a point where all is lost, because it can always get worse. Nothing could be more irresponsible than to throw up our hands and say, “Game over.”
Read more here.
It’s time to get prepared
Gus Speth of the Next System Project writes:
Perhaps sooner than most think, there should come a point when public demand in the United States for corrective action to free us from fossil fuels is sufficiently intense that, if Congress and a unified NGO community are prepared, then at that point decisive, major legislative action could finally be possible. That is the moment for which we must be ready, but for which we are not prepared today. Delay at that point could be tragic. Simultaneous with the demand for action, climate devastation will be rising steadily, and societies could eventually enter a new realm in which careful climate mitigation prescriptions and international cooperation are steadily foreclosed as societies struggle mainly with the consequences of the emerging climate chaos.
Read more here.
How plutocrats opt out of democracy
In a review of Crack-Up Capitalism by Quinn Slobodian, Daniel Immerwahr highlights the political consequences of tax havens and other capital-friendly enclaves – or loopholes – in the world economy:
For market radicals, it’s been a liberation. Although traditionally they’ve dreamed of a borderless world, now they’re seeking an intricately bordered one. “If we want to increase freedom,” the billionaire venture capitalist Peter Thiel has advised, “we want to increase the number of countries.” The more jurisdictions there are, the thought goes, the easier it is to go sovereignty shopping.
For Slobodian, however, this isn’t liberation but “secession.” Corporations and the rich, by channeling their activities into small, exceptional spaces, have escaped the reach of states. The result is a “radical form of capitalism” that evades public accountability—or even scrutiny. An economy of zones, islands, and enclaves also means, Slobodian contends, a “world without democracy.”
Read more here.
Private ughuity
Yes, as through this world I’ve wandered
– Woody Guthrie, The Ballad of Pretty Boy Floyd
I’ve seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.
The modern-day counterpart to plunder of Dust Bowl farmers goes by the anodyne name of “private equity.” Two new books rip off the veil to explain how it works. Reviewing them, Kim Phillips-Fein breaks it down:
Private equity firms create nothing and provide no meaningful services—on the contrary, they actively undermine functional companies. Far from creating jobs, companies owned by private equity see the number of people they employ shrink by an average of more than 4 percent within the first two years after purchase—if they survive at all…. one in five large companies taken private in a debt-financed deal declares bankruptcy within a decade.
The authors describe private equity funds running the companies they purchase into the ground. A common maneuver, for instance, is to mandate that a newly acquired hospital or factory sell off its buildings and land—even if the business has no reason to do so other than to pay back the debt the fund incurred to purchase it. In the long term, this means the company is left to pay rent on the same properties it once owned. Often it’s stuck paying property taxes, insurance, and upkeep despite no longer owning the property.
Other tactics include forcing acquired companies to pay “dividend recapitalizations,” in which they borrow to pay dividends to new owners, or myriad advisory and management fees…. The acquired companies find themselves weighed down by costs they had never borne before.
When the Carlyle Group purchased ManorCare, the second-largest nursing home chain in the United States, for example, the first thing it did was require ManorCare to sell its real estate. This allowed Carlyle to recoup the money it had borrowed to finance the deal, but forced the chain to pay nearly $500 million in rent annually to keep using its buildings. It was also saddled with $61 million in “transaction fees,” followed by an additional $27 million over nine years in advisory fees. To cover these new costs, ManorCare faced intense pressure to scrimp on patient care, laying off hundreds of workers. Its health code violations rose by more than 25 percent between 2013 and 2017. At the same time, it forced patients to undergo pointless therapies that Medicare would cover, sometimes with absurd consequences—as in the case of an eighty-four-year-old man who was brought to group therapy even after he became verbally unresponsive and his doctor had authorized end-of-life care. Nonetheless, ManorCare declared bankruptcy in 2018.
Private equity seeks out low-wage industries (food service, retail, health care, and security are its largest sectors) in which the consumers are unlikely to complain and in which it can economize brutally without fear of lawsuits. Many of the companies purchased by private equity funds are those that cater to the poor, sick, and vulnerable: payday loan companies, ambulance companies, hospitals, nursing homes, hospices. A slew of prison services (food, collect phone calls, health care, ankle monitors, even debit cards given to prisoners upon release) are provided by companies owned by private equity firms.
The books are Plunder: Private Equity’s Plan to Pillage America by Brendan Ballou and These are the Plunderers: How Private Equity Runs – and Wrecks – America by Gretchen Morgenson and Joshua Rosner. Read the review here.
Paradise paved
Reviewing a new book by Henry Grabar, Bill McKibben writes:
By square footage, there is more housing for each car in the US than there is housing for each person. This devotion to the storage of automobiles comes with many costs… in Grabar’s words,
in the rent, in the check at the restaurant…. It was hidden on your receipt from Foot Locker and buried in your local tax bill. You paid for parking with every breath of dirty air, in the flood damage from the rain that ran off the fields of asphalt, in the higher electricity bills from running an air conditioner through the urban heat-island effect.
All this amounts to a subsidy to drivers in the hundreds of billions of dollars.
Read more here.
Real people are complex
From an interesting Boston Review forum:
A large body of empirical and experimental work shows that moral and social considerations strongly shape economic and political preferences. These preferences often do not align with standard economic views about self-interest, incentives, and “rationality.” For example, many progressives have been stumped as to why so many of Donald Trump’s voters would take positions that appear to be against their so-called self-interest. Yet, to researchers studying moral psychology, Trumpian narratives on social spending, immigration, trade, and climate change all use a common frame of reciprocity violations that stimulates moral outrage and motivates collective behavior. The typical progressive strategy of appealing to self-interest (cuts in social spending will hurt you, immigration and trade are good for the economy, climate change is bad) is thus doomed to fail because people are not processing these issues in narrow self-interested cost-benefit terms, but rather as issues of moral fairness. Only when progressives begin addressing issues in those terms will they stand a chance of reconnecting with these voters.
Read more here.
A big win in Montana
A ruling in a lawsuit brought by young people in the state of Montana makes history:
A group of young people in Montana won a landmark lawsuit on Monday when a judge ruled that the state’s failure to consider climate change when approving fossil fuel projects was unconstitutional….
“As fires rage in the West, fueled by fossil fuel pollution, today’s ruling in Montana is a game-changer that marks a turning point in this generation’s efforts to save the planet from the devastating effects of human-caused climate chaos,” said Julia Olson, the founder of Our Children’s Trust, a legal nonprofit group that brought the case on behalf of the young people. “This is a huge win for Montana, for youth, for democracy, and for our climate. More rulings like this will certainly come.”
Read more here.
