Banking on tax avoidance
When corporations avoid taxes, investment banks take their cut:
Investment banks are estimated to have collected, or will soon collect, nearly $1 billion in fees over the last three years advising and persuading American companies to move the address of their headquarters abroad (without actually moving). With seven- and eight-figure fees up for grabs, Wall Street bankers — and lawyers, consultants and accountants — have been promoting such deals, known as inversions, to some of the biggest companies in the country, including the American drug giant Pfizer.
Just last week, President Obama criticized these types of transactions, calling the companies engaged in them “corporate deserters.” “My attitude,” he said, “is I don’t care if it’s legal. It’s wrong.”
Read more here. Read President Obama’s remarks on “corporate deserters” here.
Sadomonetarism
Krugman on the political roots of sadistic monetary policy:
Before the financial crisis, many central bankers and economists were, it’s now clear, living in a fantasy world, imagining themselves to be technocrats insulated from the political fray. After all, their job was to steer the economy between the shoals of inflation and depression, and who could object to that?
It turns out, however, that using monetary policy to fight depression, while in the interest of the vast majority of Americans, isn’t in the interest of a small, wealthy minority. And, as a result, monetary policy is as bound up in class and ideological conflict as tax policy.
The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.
Read more here.
Inequality versus democracy
Quiz for the day: Who said this?
The 85 richest people in the world, who could fit into a single London double-decker, control as much wealth as the poorest half of the global population– that is 3.5 billion people….
A greater concentration of wealth could—if unchecked—even undermine the principles of meritocracy and democracy. It could undermine the principle of equal rights proclaimed in the 1948 Universal Declaration of Human Rights.
Pope Francis recently put this in stark terms when he called increasing inequality “the root of social evil”.
And this:
Some of the greatest problems, still outstanding today, lay with the so-called too-big-to-fail firms. In the decade prior to the crisis, the balance sheets of the world’s largest banks increased by two to four-fold. With rising size came rising risk—in the form of lower capital, less stable funding, greater complexity, and more trading.
This kind of capitalism was more extractive than inclusive. The size and complexity of the megabanks meant that, in some ways, they could hold policymakers to ransom. The implicit subsidy they derived from being too-big-too-fail came from their ability to borrow more cheaply than smaller banks—magnifying risk and undercutting competition.
Answer: IMF Managing Director Christine Lagarde, in a speech to a conference on “inclusive capitalism” on May 27. See the transcript of her speech here. For more on changing spirits of the times, see here.
Who rigs the “gig” economy?
Do freelance gigs liberate workers? Lynn Parramore interviews Econ4’s Gerald Friedman:
By removing any social protection, the gig economy returns us to the most oppressive type of cut-throat and hierarchical capitalism, a social order where the power to hire and fire has been restored to employers, giving them once again unfettered control over the workplace.
Read more here.
Maximum wage legislation
In testimony before the Rhode Island state legislature, Econ4’s Doug Smith lays out the rationale for capping the maximum annual compensation a firm pays its CEO – based on what it pays its lowest-paid workers:
This dangerous rise in top-to-bottom pay ratios fuels a cancerous spread of business strategies obsessed with cost reductions and short-term financial performance. The result: outsourcing, offshoring, tax avoidance, downsizing, and the substitution of good-paying permanent jobs with temporary, precarious employment.
Read his New York Times op-ed piece on maximum wages for government officials and top-paid government contractors here.
Learning from history
A new animation sums up the differences between the “Golden Age”of 1948-71 and the “Great Moderation” of 1985-2007:
Source: http://www.nakedcapitalism.com/2014/05/myth-great-moderation.html.
Students call for pluralism in economics education
There is growing demand from students around the world for profound changes in how economics is being taught:
We, 42 associations of economics students from 19 different countries, believe it is time to reconsider the way economics is taught. We are dissatisfied with the dramatic narrowing of the curriculum that has taken place over the last couple of decades. This lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability, to food security and climate change. The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods. This will help renew the discipline and ultimately create a space in which solutions to society’s problems can be generated.
Read more here.
And The Guardian‘s coverage here.
Post-crash economics
Students at Manchester University lay out the case for changes in economics education:
In short, we argue for pluralism of perspectives and the inclusion of ethics, history and politics. We advocate an approach that begins with economic phenomena and then gives students a toolkit to evaluate how well different perspectives can explain it. The discipline should be conceptualised as an ecosystem, as the importance of diversity and the cross-fertilisation of paradigms are key to success.
Read more here.
For some background on this initiative, see here.
Jobs, what jobs?
Movement Generation skewers pipeline “job creators”:
Source: http://www.movementgeneration.org/keystone-xl-has-a-job-for-you-video-resource-page
Hurricane name game
Why name hurricanes after innocent folks? Check out this video:
Source: http://climatenamechange.org/
