Tag Archives: financial crisis

CEOs should have been the fall guys; why are they still heroes?

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By Carl Rhodes

Source: aeon

On 15 September 2008, the giant financial services firm Lehman Brothers filed for bankruptcy, starting a chain reaction that saw the global economy spiralling toward total collapse. The global financial crisis that ensued revealed just how fragile and unstable the world economic order really was. If there was ever a time that neoliberal capitalism should have faced a legitimation crisis, this was it.

One only needs to think back to December 2008 when the then US president Barack Obama scolded the heads of the largest US auto firms for flying to Washington in private jets to ask for financial bailouts. As one Democratic Party representative added: ‘Couldn’t you all have downgraded to first class or jet-pooled or something to get here? It would have at least sent a message that you do get it.’

For a short time after the crash, those on the top of the corporate ladder seemed as powerless as those on the bottom. The failure demonstrated that neither chief executive officers (CEOs) nor their financial advisors had much of an idea of how the market worked or how to control it. All that was left for modern citizens was to brace themselves as a runaway global free market fell off the proverbial cliff. The CEO suddenly appeared like a fall guy for the crash rather than as a hero.

Fast-forward 10 years, and it’s hard to believe that the economic and political supremacy of the CEO could have even been put into radical question the way it was in 2008. CEOs never really lost their stride and, now more than ever, they are considered to be visionaries and idealised as leaders. Nor did they lose their corporate jets. Other than for a brief symbolic belt-tightening immediately after the crisis, CEOs were soon flying high again on company planes.

Today, business founders such as Elon Musk, Mark Zuckerberg or even Larry Fink epitomise a new class of celebrity CEOs, seen by so many as personal heroes who can save the world, and the same goes for the larger array of employee CEOs such as Jamie Dimon at JPMorgan Chase or Tim Cook at Apple. Yet all the while, CEOs participate in a world economy wracked by increasing inequality, as epitomised by the kind of obscene CEO remuneration that sees the likes of Amazon’s boss Jeff Bezos earning almost a million times that of the workers in his warehouses.

More ominously, millions of Americans voted for an ostentatiously super-rich CEO, electing Donald Trump as their president. In his acceptance speech, Trump praised his own business acumen as being key to his political success: ‘I’ve spent my entire life in business, looking at the untapped potential in projects and in people all over the world. That is now what I want to do for our country.’

The barely interrupted veneration of the CEO as a hero, marked most expressively by the Trump presidency, has brought us to a point today where CEOs are not just valued for their skills in business but have become role models in all walks of life. We now live in what we call a ‘CEO society’: a society where corporate leadership has become the model for transforming not just business, but all human activity, where everyone from politicians to jobseekers to even those seeking love are expected to imitate the qualities of the lionised corporate executive.

The contemporary adulation and admiration of CEOs raises the question of what enabled their continued idolisation, given what could well have been their fall from grace 10 years ago? At the time, many hoped that the sad devastation of the crisis might open the door for an economic and political paradigm shift that would usher in a fairer, more equal and just society. It’s not that this promise of change has not arrived, it’s that it seems farther away than ever.

After 2008, for a brief time, people clamoured for CEOs to be held accountable and be prosecuted. This was, not least, a practical matter. With jobs being lost, shop fronts being boarded up, and politicians crying austerity, what people wanted above all else was economic recovery. Yet with the world’s top executives in disgrace, who could lead such a dramatic economic revival?

What arose from peril was a novel fantasy of executive-led recovery that allowed the shattered reputation of the CEO to stage a prompt, if not miraculous, comeback. This played into an appealing crisis narrative. With such a narrative, all faith must be invested in the recuperation of an imaginary golden past that existed before the upheaval. Most recently, this has manifested in Brexit’s investment in the promise of a renewed British sovereignty, as well as in populist political rallying cries such as ‘Make America Great Again’.

These desires for recovery and return are of course perfectly understandable, and they clearly shed light on why ideologies of free-market heroism thrived again after crisis. But this still only scratches the surface of why CEOs continue to be idolised by so many. Whereas individual executives from Martin Shkreli of Turing Pharmaceuticals to Harvey Weinstein of Miramax might be reviled for their greed, corruption or abuse of power, the CEO – as an ideal – has been reinstated with a solid-gold allure.

The financial crisis pointed to a deep insecurity rested in the fear that it was futile for humans to control the economic world that we had created, and this reverberated with a more general fear that we lack agency more widely. Suddenly, people were pushed into facing the possibility that their lives were lost to the whims and unpredictable fate of a supernatural market. Where since the advent of the 20th century it had been righteously condemned that ‘money is the secular God of the world’, now it was feared that finance had become an even more reckless God, one who cared little for the humans who worshiped at his gilded altar.

The quick rehabilitation of the image of the CEO in the popular imagination was not just a practical matter of wanting to hold on to the material benefits afforded by neoliberal capitalism. It was a psychic measure needed to counteract the fear of dehumanisation at the hands of a runaway Frankenstein economy. In other words, we just wanted to pretend that someone was in control, even if all the facts and evidence were telling us that this wasn’t the case. Everything could be forgiven if hope could be returned.

The retention of the CEO myth was an assertion of the power of individuals to shape events and control their destiny. To achieve this meant holding on to the heroic character of the CEO such that people might regain a sense of control over their own lives too.

Maintaining faith in the CEO was less a matter of empirical fact and more a symptom of a human need to find something to believe in at the end of a hard-earned day; with the reality too hard to bear, the fantasy had to return. Held out was the promise that everyone could receive grace if only he accepted the modern CEO gospel. This is the very same faith that allows people to believe that the business acumen of an impetuous, loud-mouthed, misogynist bully is able to lead America to greatness. When Trump said that he would run the US like a business project, ‘under budget and ahead of schedule’, enough people believed him to pave his way to the White House.

CEOs represent the ability to be in control of a market that appears uncontrollable and uncaring of its profound human costs. This desire for control belies the reality for too many people of being on the wrong side of the rising tide of inequality, and of being subjected to the tyranny of a new singleminded political authoritarian intolerance. Let’s hope that with the next crisis we learn that we need to let go of the fantasy of the CEO.

How Globalists Plan To Use Technology And Poverty To Enslave The Masses

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By Brandon Smith

Source: Alt-Market.com

Tyranny is often seen as a sudden and inexplicable development in a society; the product of a singular despot that rockets to power for a limited window of time due to public fear or stupidity. This is one of the great lies of the modern era.

The truth is that for at least the past century almost every historically despised “tyrant” was merely a puppet of a larger managerial cabal, and the construction of each totalitarian state was accomplished slowly and quietly over the course of decades by those same financial elitists. From the Bolsheviks, to Hitler and the Third Reich, to Mao Zedong, to most tin-pot dictators across the Middle East and Africa, there has always been an organized group of money men and think tanks fueling the careers of the worst politicians and military juntas of the epoch.

The rise of a tyrannical system takes extensive time, planning and staging. Human beings do not simply jump right into the arms of a dystopian nightmare regime impulsively at a moment’s notice. We have been told by popular media that this is how it works; that during hard economic or social conditions men with charismatic personalities and evil intentions suddenly rise to the surface and take power by promising a better world in exchange for public fealty. But where did those economic and social crises come from to begin with? Were they a natural consequence of the era, or were they deliberately engineered?

The reality is that people must be psychologically conditioned to trade freedom for the illusion of safety. Sometimes this takes generations.  Every attempt at a totalitarian framework inevitably elicits a rebellion. Therefore, the most successful tyranny would be one that the public DEMANDS. They have to think it is their idea, otherwise they will eventually fight it.

Globalist financiers and power addicts need something more than mere military might or bureaucratic force to obtain their ideal slave society. They need 4th Generation warfare tactics. They need to con the masses into accepting their own servitude.

There are two tools that make this outcome possible: The first is controlled economic decline, the second is the integration of a technological gulag into every aspect of public life.

Economic Weapons Of Mass Distraction

It is no coincidence that dictatorial governments gain prominence as the global economy suffers; it is extremely difficult for people to remain vigilant to tyranny when they are completely distracted by their own survival. This is why my focus as an analyst has always been primarily on economics and solutions to fiscal disaster; it all begins and ends with the economy. If the public can be prepped to develop their own alternative economic systems before a crisis occurs, then they will be less distracted by the chaos and more apt to notice when the globalists offer tyranny as a fix-all.

Without alternative markets at the local level there is no redundancy, no protection from a crash. With most people dependent on the existing system for their livelihoods, the economy becomes a very useful weapon for the globalists.

Holding the economy hostage creates numerous advantages. Through deflationary pressure wages can be kept low while higher paying jobs disappear. Manufacturing can be phased out or outsourced overseas, as in the U.S. Small business ownership becomes difficult as taxes generally rise while financial conditions decline.

Through inflationary or stagflationary pressures, low wages and the inadequate job market are combined with exploding prices. This makes survival for many people untenable without government aid.

In this environment, the working public becomes reliant on the service sector, which provides no useful skill sets. Soon, you have entire generations of people with no production abilities whatsoever. They become drones working in meaningless office and retail jobs squandering away their days knowing that they are accomplishing nothing beyond a meager paycheck.

The lack of a greater purpose or mission in life and the nagging realization that the average person has no productive capacity creates a palpable atmosphere of desperation. They do not own their own work, and they have nothing much to show for their labor; nothing to point at and say, “I built that.” The public gets to the point that they may even welcome an economic collapse simply to escape the drudgery.

This is where movements to support totalitarianism come from — the subset of citizens that are fed up with fighting against the economy and have no sense of independence. These people do not know how to solve their own problems, they are always looking for someone else to do it for them. The globalists are happy to suggest their own predetermined solutions to the public once the financial structure hits a point of maximum pain.

However, after the economy is repaired in exchange for the submission of the citizenry, people might still decide one day that the trade was unfair. Thus, a deterrent is needed to keep them in line.

The Technological Fish Tank

It is important to understand that there is no major country in the western OR eastern world that is not building a digital control grid, and this helps to support my position that eastern nations are just as subservient to globalist demands as western nations. All the geopolitical drama surrounding events like the trade war, the Syrian war or various elections, etc.; none of this matters in the end. When determining if the strings of a particular government are being pulled by the globalist cabal, all you have to do is look at how quickly they are implementing oppressive systems that serve globalist interests.

For example, India’s government has been hitting the news feeds lately as their supreme court recently ruled that the controversial Aadhaar biometric program is legal. In a nation of 1.3 billion people, around 1 billion have already been biometrically profiled in a national database. This data can include fingerprints, iris scans and face scans.

I have heard it argued that India is a rather odd place to experiment with such a database, considering 60% of the population is under the poverty line and most people barely have basic amenities. But I would point out that this is why it is a PERFECT place for the globalists to start cataloging the world population on larger scale.

Again, financial desperation and a lack of productions skills tends to produce subservience. Hundreds of millions of poverty stricken people in India’s sprawling urban sewers are voluntarily giving up their biometric data in exchange for government aid programs.

For the people not anchored down by the poor economy India has instituted other measures, including requiring anyone accessing government services, opening a bank account or signing up for a mobile phone service also give up their biometrics to the government.  In nations not yet impoverished at India’s level, more subversive measures have been instituted for surveillance of the population. Data is simply taken rather than traded.

In Russia, Vladimir Putin has put the Yarovaya laws he signed in 2016 into effect. All digital data from phone conversations to emails is now recorded and stored by telecoms for government access for a minimum of six months, this includes Facebook and Twitter posts. The 2014 bloggers law also requires any blogger with over 3,000 followers be put on government file and they cannot remain anonymous. Any business operating a public Wi-Fi network is required by law to identify users by ID, which is also stored for at least six months.

Russia’s FISA-style surveillance grid is vast, yet, many people in the liberty movement seem to ignore this reality with misplaced Putin-worship. As I have noted in numerous articles, Russia is heavily influenced by international financiers.

Goldman Sachs and JP Morgan are the largest investment banks in the country. Their central bank works closely with the IMF and the BIS. The Kremlin has in the past called for a global currency controlled by the IMF. And Putin even admits in his own biography First Person that he has been friends with New World Order salesman Henry Kissinger since before he became president of Russia. In a latest show of how globalist Russia really is, the Russian Foreign Minister recently criticized the U.S. in a speech to the U.N. general assembly over its “attacks” on the “international order,” including undermining the World Trade Organization and global climate change agreements.

With the above in mind, it should come as no surprise to anyone that Russia is playing right along with globalist efforts to identify and track every single living person. It should also come as no surprise that Donald Trump, surrounded by globalists within his own cabinet, is continuing and expanding FISA surveillance under his administration.

At the beginning of 2018 Trump signed a bill renewing the National Security Agency’s warrantless FISA mass surveillance of the American population. Leading Democrats happily supported the action. Despite all of Trump’s rhetoric against FISA recently, it was Trump that made FISA’s continuation possible.

Major social media companies are cooperating wholeheartedly with mass surveillance efforts as they share personal data with governments around the world regularly.  Facebook alone saw an increase in government requests for data of over 33% in 2017, and the nature of most of this data sharing is not open to public scrutiny.

This is one reason why I’m rather bewildered by the recent conservative fury over social media discrimination – it’s as if personal liberty activists are being tricked with reverse psychology to DEMAND unhindered participation in media sites that spy on them.  Why does anyone still want to sign up for these websites?

But where is this all going? How does the combination of poverty and digital surveillance translate to tyranny? I believe China’s “social credit” program is the answer.  The system is based on the idea of “maintaining trust”, but whose trust?  Well, the government’s trust, of course.  Trust is measured using a social credit score that is tracked over a citizen’s life.  Punished behaviors include anything from smoking in a no smoking area to publishing internet content that the powers-that-be disapprove of.

China is representative of the end game for the globalist ideal for civilization. With mass economic struggle leading to dependency on government welfare programs and employment opportunities, few citizens can afford to be “blacklisted.” China’s social credit system creates an environment in which any and every action on the part of citizens is tracked and then “rated” for acceptance or consequence. This includes how people express attitudes toward the government itself. Obviously, this is the ultimate control mechanism, very similar to the Cheka established by Lenin and Stalin in Russia after the Bolshevik Revolution, but on a massive digital scale.

This is why mass surveillance is evil, regardless of whether someone is breaking the laws or not. It gives government the power to dictate and mold behavior by inspiring self-censorship rather than holding people directly at gun point. It is tyranny enforced in a less obvious way; a prison in which the prisoners maintain the locks and the chains and the bars.  Individuals do not dare do anything outside of collective norms for fear that it could be interpreted as socially negative. Punishment might include loss of access to the economy itself, and when most people are living from paycheck to paycheck, this could mean death.

Wealth of 400 richest Americans hits record $2.9 trillion

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These six men own as much wealth as half the world’s population

By Alec Anderson

Source: WSWS.org

On Wednesday, the US finance magazine Forbes released its annual “Forbes 400” list of wealthiest Americans, revealing an immense increase in wealth among the top social stratum in the United States.

The total net worth of the 400 people included on the list hit a record $2.9 trillion this year, up from $2.7 trillion last year. The most heavily represented sector was finance, from which 88 people on the list, including bank executives, hedge fund managers and investors, drew their wealth.

The next highest proportion comes from technology giants such as Google and Facebook. The CEO of Twitter and payments firm Square, Jack Dorsey, registered the greatest percentage growth in wealth from the previous year, an increase of 186 percent to $6.3 billion. This was due in large part to a jump in Square’s stock price.

The threshold necessary for inclusion on the list rose to $2.2 billion in 2018, up $100 billion from last year’s threshold. Fully one-third of billionaires in the United States, a record 204 individuals, failed to make this year’s Forbes 400 list.

The average net worth of billionaires on the list rose to $7.2 billion, an increase of a half-billion over last year’s average of $6.7 billion.

As Forbes notes, the vast increase in wealth among the very richest Americans is largely thanks to a continuing surge in US stock indexes. They have reached new record highs in part due to unprecedented levels of stock buybacks and dividend increases, which are parasitic diversions of wealth away from productive investment in areas that produce decent-paying jobs and to the detriment of pursuits such as research and development. The billionaires on the Forbes 400 list have also benefited immensely from the Trump tax cuts for corporations and the wealthy signed into law in December 2017.

Topping the list is Amazon CEO and world’s richest person Jeff Bezos, whose $160 billion is $63 billion more than the second-wealthiest person on the list, Bill Gates, and a full $78.5 billion more than last year. Bezos has made his fortune through the super-exploitation of warehouse workers around the world, enabling Amazon to move its products faster and at cheaper prices than its retail competitors.

The staggering increase in Bezos’s wealth over the past year has been due to the more than 100 percent increase in Amazon’s stock price. The $2,950 Jeff Bezos has earned per second in 2018 is more than the $2,796 a fulfillment center worker in India makes in an entire year.

Ironically, the Forbes report was published the same day that the press was full of praise for Bezos’s supposed generosity and humanitarian concern for his workers, occasioned by the announcement that he was raising the minimum wage of his US-based employees to the poverty-level wage of $15 an hour.

If the $160 billion fortune Bezos holds were divided among Amazon’s global workforce of 500,000, each worker would receive $320,000.

Coming in second on the list with a net worth of $97 billion is Microsoft co-founder and former CEO Bill Gates, who had topped the Forbes list since 1994. The top 10 wealthiest people on the list alone have a total net worth of $730 billion, up from $610 billion in 2018.

However, just the top 45 individuals out of the 400 on the list accounted for fully half of the total wealth, or $1.45 trillion. That amounts to an average fortune of more than $32 billion each, which is more than the estimated $30 billion required to end world hunger, according to a United Nations estimate.

The Forbes report illustrates that the barrier to resolving societal ills, such as poverty, hunger and disease, is the siphoning off and hoarding of a growing proportion of society’s resources by the wealthiest segment of society.

The $2.9 trillion in the hands of these 400 richest people in the United States is roughly three-quarters of the total federal budget. It represents nearly three times the 2018 budget for the Department of Health and Human Services, which was slashed from over $1.126 trillion in 2017 to $1.112 trillion this year, and 176 times the $16.4 billion budget for the Department of Education in 2018.

Rather than addressing these issues, the Democratic Party’s midterm election campaign has instead been centered on a right-wing effort to channel opposition to Supreme Court nominee Brett Kavanaugh and Donald Trump behind a #MeToo-style hysteria over alleged sexual abuse. This is accompanied by the ongoing campaign to demonize Russia and Vladimir Putin and brand Trump as a stooge of the Kremlin.

The timing of the release of the Forbes list is significant, coming as it does on the 10-year anniversary of the passage of the Troubled Asset Relief Program (TARP)—the $700 billion bank bailout that set the stage for the trillions that were essentially stolen from the working class to rescue the financial oligarchy and make it richer than ever. The result of the decade-long plundering of society since the crash, carried out by both Republican and Democratic administrations, is the ever-increasing concentration of wealth at the very top reflected in the new Forbes 400 list.

The USA Is Now a 3rd World Nation

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By Charles Hugh Smith

Source: Of Two Minds

I know it hurts, but the reality is painfully obvious: the USA is now a 3rd World nation.

Dividing the Earth’s nations into 1st, 2nd and 3rd world has fallen out of favor; apparently it offended sensibilities. It has been replaced by the politically correctdeveloped and developing nations, a terminology which suggests all developing nations are on the pathway to developed-nation status.

What’s been lost in jettisoning the 1st, 2nd and 3rd world categories is the distinction between developing (2nd world) and dysfunctional states (3rd world), states we now label “failed states.”

But 3rd World implied something quite different from “failed state”: failed state refers to a failed government of a nation-state, i.e. a government which no longer fulfills the minimum duties of a functional state: basic security, rule of law, etc.

3rd World referred to a nation-state which was dysfunctional and parasitic for the vast majority of its residents but that worked extremely well for entrenched elites who controlled most of the wealth and political power. Unlike failed states, which by definition are unstable, 3rd World nations are stable, for the reason that they work just fine for the elites who dominate the wealth, power and machinery of governance.

Here are the core characteristics of dysfunctional but stable states that benefit the entrenched few at the expense of the many, i.e. 3rd Worldnations:

1. Ownership of stocks and other assets is highly concentrated in entrenched elites. The average household is disconnected from the stock market and other measures of wealth; only a thin sliver of households own enough financial/speculative wealth to make an actual difference in their lives.

2. The infrastructure of the nation used by the many is poorly maintained and costly to operate as entrenched elites plunder the funding to pad their payrolls, pensions and sweetheart/insider contracts.

3. The financial/political elites have exclusive access to parallel systems of transport, healthcare, education, etc. The elites avoid trains, subways, lenders, coach-class air transport, standard healthcare and the rest of the decaying, dysfunctional systems they own that extract wealth from the debt-serfs.

They fly on private aircraft, have their own healthcare and legal services, use their privileges to get their offspring into elite universities and institutions and have access to elite banking and lending services that are unavailable to their technocrat lackeys and enforcers.

4. The elites fund lavish monuments to their own glory disguised as “civic or national pride.” These monuments take the form of stadiums, palatial art museums, immense government buildings, etc. Meanwhile the rest of the day-to-day infrastructure decays in various states of dysfunction.

5. There are two classes that only interact in strictly controlled ways: the wealthy, who live in gated, guarded communities and who rule all the institutions, public and private, and the debt-serfs, who are divided into well-paid factotums, technocrat lackeys and enforcers who serve the interests of the entrenched elites and rest of the populace who own virtually nothing and have zero power.

The elites make a PR show of being a commoner only to burnish the absurd illusion that debt-serf votes actually matter. (They don’t.)

6. Cartels and quasi-monopolies are parasitically extracting the wealth of the nation for their elite owners and managers. Google: quasi-monopoly. Facebook: quasi-monopoly. Healthcare: cartel. Banking: cartel. National defense: cartel. National Security: cartel. Corporate mainstream media: cartel. Higher education: cartel. Student loans: cartel. I think you get the point: every key institution or function is controlled by cartels or quasi-monopolies that serve the interests of the few via parasitic exploitation of the powerless.

7. The elites use the extreme violence and repressive powers of the government to suppress, marginalize and/or destroy any dissent. There are two systems of “law”: one for the elites ($10 million penalties for ripping off the public for $10 billion, no personal liability for outright fraud) and one for the unprotected-unprivileged: “tenners” (10-year prison sentences) for minor drug infractions, renditions or assassinations (all “legal,” of course) and institutional forces of violence (bust down your door on the rumor you’ve got drugs, confiscate your car because we caught you with cash, so you must be a drug dealer, and so on, in sickening profusion).

8. Dysfunctional institutions with unlimited power to extract money via junk fees, licensing fees, parking tickets, penalties, late fees, etc., all without recourse. Mess with the extractive, parasitic bureaucracy and you’ll regret it: there’s no recourse other than another layer of well-paid self-serving functionaries that would make Kafka weep.

9. The well-paid factotums, bureaucrats, technocrat lackeys and enforcers who fatten their own skims and pensions at the expense of the public and slavishly serve the interests of the entrenched elites embrace the delusion that they’re “wealthy” and “the system is working great.” These deluded servants of the elites will defend the dysfunctional system because it serves their interests to do so.

The more dysfunctional the institution, the greater their power, so they actively increase the dysfunction at every opportunity.

The USA is definitively a 3rd World nation. Read the list above and then try to argue the USA is not a 3rd World nation. Try arguing against the facts displayed in this chart:

I know it hurts, but the reality is painfully obvious: the USA is now a 3rd World nation.

 

Amazon and Apple: Wall Street’s Trillion Dollar Babies

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By Dean Baker

Source: CounterPunch

Last month Amazon joined Apple, becoming the second company in the world to have a $1 trillion market capitalization. Amazon’s accomplishment didn’t cause quite as much celebration as Apple’s – it pays to be number one – nonetheless this was treated as a milestone that all of us should view as good news.

Actually, the celebratory coverage of both events demonstrated the incredibly ill-informed nature of much economic reporting in the United States. A big run-up in share prices is good news for the people who own lots of stock in the company; it is not especially good news for anyone else.

In principle, the value of a stock is supposed to represent the expected future earnings of the company. I said “supposed” because stock prices fluctuate wildly in response to all sorts of things that are not obviously connected to future earnings, but in the textbook definition, it is the discounted value of future earnings that determine stock prices. To be clear, this is not the socialist textbook, this is the capitalist textbook that is taught in business schools.

What does it mean that Amazon and Apple have market valuations of more $1 trillion? Presumably, it means that investors are now more optimistic about the companies’ future profit potential. It’s difficult to see why the rest of us should celebrate this outcome.

Apple obviously makes products that consumers value, and in that sense, it is contributing to the economy and generating wealth. But, suppose instead of one huge company we had 10 little (or littler) Apples that sold iPhones, computers, and the other items that comprise Apple’s product line? Would we be any poorer as a society in that case, even if the market cap of our leading tech company was just $100 billion?

Or, even with Apple as our dominant tech company, suppose the surge over the $1 trillion barrier was due to a victory in an antitrust case, which would allow Apple to charge higher prices going forward. That’s great for Apple’s stockholders, but what exactly would the rest of us be celebrating? Paying more money for our iPhones?

In the same vein, in the past, Apple has been caught conspiring with other Silicon Valley companies, agreeing not to compete for workers. Apple, along with its co-conspirators, ended up paying a substantial settlement as a result.

Suppose Apple found a legal way to fix wages or bought a judge to make it legal. The prospect of a lower wage bill would also be good for Apple’s stock price, but not especially good news for those of us who are more likely to make our living from working than owning Apple stock. Again, there is not much in this story for most of us to celebrate.

The celebration for Amazon is even more peculiar. Amazon is clearly an innovative company that has sped the development of Internet retailing. It also has specialized in tax avoidance, eliciting investment incentives from state and local governments, and abusive labor practices.

Perhaps the crossing of the $1 trillion threshold was associated with investors’ confidence that Amazon’s CEO had developed a new and more effective tax avoidance scheme. Again, great news for Amazon stockholders, but pretty bad news for the folks who will have to make up the revenue shortfall.

What is notably different about Amazon is that, unlike Apple, the company does not have huge profits. While Apple earned $48.4 billion in after-tax profits in 2017, Amazon’s profit was just over $3 billion. That gives the company an incredible price-to-earnings ratio of more than 300-to-1.

There are two stories we can tell here. One is that investors expect Amazon’s profits to increase enormously. This would be a case where it takes advantage of its market power to increase its profit margins hugely. Ordinarily, this would be the basis for antitrust action, but given the corruption of the political system, it is certainly possible the company could get away with it. Again, is a future of higher prices something the rest of us should really be celebrating?

The other possibility is that Amazon’s stock price is driven by fantasy, like the Internet stocks of the late 1990s or Bitcoin today. Presumably, at some point reality will reassert itself, but should the rest of us celebrate ill-informed investors being taken for ride?

It is striking that so many would see economic or social progress as being in some way captured by stock valuations. In 1953 Jonas Salk developed the polio vaccine. This eventually led to the near eradication of a disease that had killed or crippled tens of millions of people.

Salk didn’t try to patent his invention. A private charity funded the research. But, what if there had been a Salk Inc. that had the patent on a vaccine that could save tens of millions of lives? Surely the market cap would be an order of magnitude larger than either Apple’s or Amazon’s. Was it a loss to society that the vaccine was made available for pennies rather than tens of thousands of dollars a shot?

If we want to talk about value to society, the anti-smoking crusaders of the last four decades have saved tens of thousands of lives and improved the health of millions more by reducing smoking in the United States and around the world. The people who led this fight, most of whom were women, won’t be featured on the covers of business magazines, but they did much more to enhance society’s wealth than Jeff Bezos.

Anyhow, congratulations to Apple and Amazon’s stockholders on their stock gains. They have been fortunate. The rest of us, not so much.

Taxpayers Are Footing the Bill for Sky-High CEO Salaries

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Billions in taxpayer funds go to CEOs who pay their workers peanuts. We can change that.

By Sam Pizzigati

Source: Other Words

Politicians often gab about the “private sector” and the “public sector,” as if these two categories of economic activity operated as two completely separate worlds.

In reality, these two sectors have always been deeply intertwined.

How deeply? Every year, the federal government spends about half a trillion dollars buying goods and services from the private sector. State and local government contracts with private-sector enterprises add hundreds of billions more.

And private-sector companies don’t just receive contracts from our governmental entities. They receive all sorts of subsidies — billions upon billions of dollars in “corporate welfare.”

Where do all these dollars come from? They come from us, America’s taxpayers. Without the tax dollars we provide, almost every major corporation in the United States would flounder. Some would simply cease to exist. The defense contractor Lockheed Martin, for instance, takes in almost all its revenue from government contracts.

This private sector reliance on public tax dollars gives us, as citizens, some leverage over the behavior of our largest and most powerful corporations. We could, if we so chose, deny those dollars to corporations that engage in behaviors that undermine the values we hold dear.

On other fronts, we already do this denying. For over a generation now, we’ve leveraged the power of the public purse against companies with employment practices that discriminate on the basis of race and gender. Companies that discriminate can’t get government contracts because we’ve come to a consensus, as a society, that we don’t want our tax dollars subsidizing racial and gender inequality.

Unfortunately, our tax dollars are still subsidizing — in a big way — economic inequality, as a new Institute for Policy Studies report on CEO pay details quite vividly. Billions of our tax dollars are annually going to corporations that pay their top executives more in a week, or even a day, than their typical employees can make over an entire year.

The late Peter Drucker, the founder of modern management science, believed that no corporate enterprise that pays its CEO over 25 times what its workers are earning could operate efficiently and effectively over the long haul. In 2017, every single one of the federal government’s 50 largest private contractors paid its chief executive over 25 times more than its most typical workers.

In fact, most paid their top execs well over 100 times more.

And at one, DXC Technology, the CEO pulled down over $32 million in 2017 pay — over 800 times the compensation of the firm’s typical employees.

Let’s add a little context here. The president of the United States earns $400,000 a year. The CEOs of the 50 private companies with the largest federal contracts last year averaged over $13.5 million. The CEOs of the 50 largest recipients of federal subsidies last year averaged over $12 million.

Our tax dollars, in other words, are helping a lucky few become fabulously rich.

We do live, as our politicians like to point out, in a “free country.” Corporations can pay their top execs whatever they want. But we taxpayers have freedom, too. We can freely deny our tax dollars to enterprises that are making our society ever more unequal.

Some lawmakers are starting to step in that direction. Five states have begun considering legislation that would make it harder for companies with wide CEO-worker pay gaps to get government contracts and tax breaks. And one city — Portland, Oregon — has already enacted legislation that taxes corporations with wide CEO-worker pay gaps at a higher rate than corporations with more modest gaps.

We need more Portlands.

For Economic Truth Turn To Michael Hudson

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By Paul Craig Roberts

Source: PaulCraigRoberts.org

Readers ask me how they can learn economics, what books to read, what university economics departments to trust. I receive so many requests that it is impossible to reply individually. Here is my answer.

There is only one way to learn economics, and that is to read Michael Hudson’s books. It is not an easy task. You will need a glossary of terms. In some of Hudson’s books, if memory serves, he provides a glossary, and his recent book “J Is for Junk Economics” defines the classical economic terms that he uses. You will also need patience, because Hudson sometimes forgets in his explanations that the rest of us don’t know what he knows.

The economics taught today is known as neoliberal. This economics differs fundamentally from classical economics that Hudson represents. For example, classical economics stresses taxing economic rent instead of labor and real investment, while neo-liberal economics does the opposite.

An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system.

Neoliberal economists redefined all income as earned. This enables the financial system to capitalize economic rents into mortgages that pay interest. The higher property values created by the road or transportation system boost the mortgage value of the properties. The financialization of the economy is the process of drawing income away from the purchases of goods and services into interest and fees to financial entities such as banks. Indebtedness and debt accumulate, drawing more income into their service until there is no purchasing power left to drive the economy.

For example, formerly in the US lenders would provide a home mortgage whose service required up to 25% of the family’s monthly income. That left 75% of the family’s income for other purchases. Today lenders will provide mortgages that eat up half of the monthly income in mortgage service, leaving only 50% of family income for other purchases. In other words, a financialized economy is one that diverts purchasing power away from productive enterprise into debt service.

Hudson shows that international trade and foreign debt also comprise a financialization process, only this time a country’s entire resources are capitalized into a mortgage. The West sells a country a development plan and a loan to pay for it. When the debt cannot be serviced, the country is forced to impose austerity on the population by cutbacks in education, health care, public support systems, and government employment and also to privatize public assets such as mineral rights, land, water systems and ports in order to raise the capital with which to pay off the loan. Effectively, the country passes into foreign ownership. This now happens even to European Community members such as Greece and Portugal.

Another defect of neoliberal economics is the doctrine’s denial that resources are finite and their exhaustion a heavy cost not born by those who exploit the resources. Many local and regional civilizations have collapsed from exhaustion of the surrounding resources. Entire books have been written about this, but it is not part of neoliberal economics. Supplement study of Hudson with study of ecological economists such as Herman Daly.

The neglect of external costs is a crippling failure of neoliberal economics. An external cost is a cost imposed on a party that does not share in the income from the activity that creates the cost. I recently wrote about the external costs of real estate speculators. https://www.paulcraigroberts.org/2018/04/26/capitalism-works-capitalists/ Fracking, mining, oil and gas exploration, pipelines, industries, manufacturing, waste disposal, and so on have heavy external costs associated with the activities.

Neoliberal economists treat external costs as a non-problem, because they theorize that the costs can be compensated, but they seldom are. Oil spills result in companies having to pay cleanup costs and compensation to those who suffered economically from the oil spill, but most external costs go unaddressed. If external costs had to be compensated, in many cases the costs would exceed the value of the projects. How, for example, do you compensate for a polluted river? If you think that is hard, how would the short-sighted destroyers of the Amazon rain forest go about compensating the rest of the world for the destruction of species and for the destructive climate changes that they are setting in motion? Herman Daly has pointed out that as Gross Domestic Product accounting does not take account of external costs and resource exhaustion, we have no idea if the value of output is greater than all of the costs associated with its production. The Soviet economy collapsed, because the value of outputs was less than the value of inputs.

Supply-side economics, with which I am associated, is not an alternative theory to neoliberal economics. Supply-side economics is a successful correction to neoliberal macroeconomic management. Keynesian demand management resulted in stagflation and worsening Phillips Curve trade-offs between employment and inflation. Supply-side economics cured stagflation by reversing the economic policy mix. I have told this story many times. You can find a concise explanation in my short book, “The Failure of Laissez Faire Capitalsim.” This book also offers insights into other failures of neoliberal economics and for that reason would serve as a background introduction to Hudson’s books.

I can make some suggestions, but the order in which you read Michael Hudson is up to you. “J is for Junk Economics” is a way to get information in short passages that will make you familiar with the terms of classical economic analysis. “Killing the Host” and “The Bubble and Beyond” will explain how an economy run to maximize debt is an economy that is self-destructing. “Super Imperialism” and “Trade, Development and Foreign Debt” will show you how dominant countries concentrate world economic power in their hands. “Debt and Economic Renewal in the Ancient Near East” is the story of how ancient economies dying from excessive debt renewed their lease on life via debt forgiveness.

Once you learn Hudson, you will know real economics, not the junk economics marketed by Nobel prize winners in economics, university economic departments, and Wall Street economists. Neoliberal economics is a shield for financialization, resource exhaustion, external costs, and capitalist exploitation.

Neoliberal economics is the world’s reigning economics. Russia is suffering much more from neoliberal economics than from Washington’s economic sanctions. China herself is overrun with US trained neoliberal economists whose policy advice is almost certain to put China on the same path to failure as all other neoliberal economies.

It is probably impossible to change anything for two main reasons. One is that so many greed-driven private economic activities are protected by neoliberal economics. So many exploitative institutions and laws are in place that to overturn them would require a more thorough revolution than Lenin’s. The other is that economists have their entire human capital invested in neoliberal economics. There is scant chance that they are going to start over with study of the classical economists.

Neoliberal economics is an essential part of The Matrix, the false reality in which Americans and Europeans live. Neoliberal economics permits an endless number of economic lies. For example, the US is said to be in a long economic recovery that began in June 2009, but the labor force participation rate has fallen continuously throughout the period of alleged recovery. In previous recoveries the participation rate has risen as people enter the work force to take advantage of the new jobs.

In April the unemployment rate is claimed to have fallen to 3.9 percent, but the participation rate fell also. Neoliberal economists explain away the contradiction by claiming that the falling participation rate is due to the retirement of the baby boom generation, but BLS jobs statistics indicate that those 55 and older account for a large percentage of the new jobs during the alleged recovery. This is the age class of people forced into the part time jobs available by the absence of interest income on their retirement savings. What is really happening is that the unemployment rate does not include discouraged workers, who have given up searching for jobs as there are none to be found. The true measure of the unemployment rate is the decline in the labor force participation rate, not a 3.9 percent rate concocted by not counting those millions of Americans who cannot find jobs. If the unemployment rate really was 3.9 percent, there would be labor shortages and rising wages, but wages are stagnant. These anomalies pass without comment from neoliberal economists.

The long expansion since June 2009 might simply be a statistical artifact due to the under-measurement of inflation, which inflates the GDP figure. Inflation is under-estimated, because goods and services that rise in price are taken out of the index and less costly substitutes are put in their place and because price increases are explained away as quality improvements. In other words, statistical manipulation produces the favorable picture required by The Matrix.

Since the financial collapse caused by the repeal of Glass-Steagall and by financial deregulation, the Federal Reserve has robbed tens of millions of American savers by driving real interest rates down to zero for the sole purpose of saving the “banks too big to fail” that financial deregulation created. A handful of banks has been provided with free money—in addition to the money that the Federal Reserve created in order to take the banks’ bad derivative investments off their hands—to put on deposit with the Fed from which to collect interest payments and with which to speculate and to drive up stock prices.

In other words, for a decade the economic policy of the United States has been run for the benefit of a few highly concentrated financial interests at the expense of the American people. The economic policy of the United States has been used to create economic rents for the mega-rich.

Neoliberal economists point out that during the 1950s the labor force participation rate was much lower than today and, thereby, they imply that the higher rates prior to the current “recovery” are an anomaly. Neoliberal economists have no historical knowledge as the past is of no interest to them. They do not even know the history of economic thought. Whether from ignorance or intentional deception, neoliberal economists ignore that the lower labor force participation rates of the 1950s reflect a time when married women were at home, not in the work force. In those halcyon days, one earner was all it took to sustain a family. I remember the days when the function of a married woman was to provide household services for the family.

But capitalists were not content to exploit only one member of a family. They wanted more, and by using economic policy to suppress pay while fomenting inflation, they drove married women into the work force, imposing huge external costs on the family, child-raising, relations between spouses, and on the children themselves. The divorce rate has exploded to 50 percent and single-parent households are common in America.

In effect, unleashed Capitalism has destroyed America. Privatization is now eating away Europe. Russia is on the same track as a result of its neoliberal brainwashing by American economists. China’s love of success and money could doom this rising Asian giant as well if the government opens China to foreign finance capital and privatizes public assets that end up in foreign hands.

Why do corporate boards so overpay US CEOs?

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By Sam Pizzigati

Source: Nation of Change

Back in 1999, near the dizzying height of the dot-com boom, no executive in Corporate America personified the soaring pay packages of America’s CEOs more than Jack Welch, the chief exec at General Electric. Welch took home $75 million that year.

What explained the enormity of that compensation? Welch didn’t claim any genius on his part. He credited his success, instead, to the genius of the free market.

“Is my salary too high?” mused Welch. “Somebody else will have to decide that, but this is a competitive marketplace.”

Translation: “I deserve every penny. The market says so.”

Top U.S. corporate execs today, on average, are doing even better than top execs in Welch’s heyday. In 1999, notes a just-released new report from the Economic Policy Institute, CEOs at the nation’s 350 biggest corporations pocketed 248 times the pay of average workers in their industries. Top execs last year averaged 312 times more.

What explains this growing generosity to America’s top corporate chiefs? Today’s apologists for over-the-top CEO compensation, like Jack Welch a generation ago, point to the market.

One leading critic of these apologists, the Dutch management scientist Manfred Kets de Vries, neatly summed up this market world view earlier this year: Big CEO pay packages “reflect market demands for a CEO’s unique skills and contribution to the bottom line.” Mega-million executive paychecks “merely represent the market forces of supply and demand.”

Or, as the University of Chicago’s Steven Kaplan puts it, “The market for talent puts pressure on boards to reward their top people at competitive pay levels in order to both attract and retain them.”

In the world that CEO cheerleaders like Kaplan inhabit, impartial, unbiased markets determine executive compensation. Corporate boards simply play by market rules. They pay their execs what the market says their execs deserve. If they don’t, they risk losing their executive talent.

American corporate leaders take scarcity – of CEO talent – as a given. How else, in a market economy, to explain rapidly rising CEO pay? If quality CEOs abounded, executive compensation would not be soaring. But that compensation is soaring, so qualified CEOs obviously must be few and far between – and totally deserving of whatever many millions they receive. Simple market logic.

And simply wrong. American corporations today confront no scarcity of executive talent. The numbers of people qualified to run multi-billion-dollar companies have never, in reality, been more plentiful. These numbers have been growing steadily over recent decades, in part because America’s graduate schools of business have been graduating, year after year, thousands of rigorously trained executives.

America’s first graduate school for executives, the Tuck School of Business at Dartmouth, currently boasts an alumni network over 10,000 strong. MBAs in the equally prestigious Harvard Business School alumni network total over 46,000. Add in the alumni from other widely acclaimed institutions and the available supply of executives trained at America’s top-notch business schools approaches several hundred thousand.

Just how many of these academically trained executives have the skills and experience really needed to run a Fortune 500 company? Let’s assume, conservatively, that only 1 percent of the alumni from the “best” business schools have enough skills and experience to run a big-time corporation.

That arithmetic would give Fortune 500 companies that go looking for a new CEO at least several thousand eminently qualified candidates. No supply shortage here.

Indeed, today’s business world is overflowing with eminently qualified CEO candidates, once you add in the grads from business schools abroad. INSEAD, perhaps the most prominent of these international schools, now has over 56,000 active alumni.

In the past, to be sure, American corporations seldom looked beyond the borders of the United States for executive talent. That tunnel vision made some sense. Executives inside the United States and executives outside worked in different business environments. Foreign executives could hardly be expected to succeed in an unfamiliar American marketplace, even if they did speak flawless English.

But today, in our celebrated “globalized” economy, that distinction between domestic and foreign executives no longer matters nearly as much. In dozens of foreign nations, in hundreds of foreign corporations, executives are competing in the same global marketplace as their American counterparts. They’re using the same technologies, studying the same market data, and strategizing toward the same business goals. Together, taken as a group, executives from elsewhere in the world constitute a huge new pool of talent for American corporations.

Pay consultants in the United States, for their part, do acknowledge the reality of this global marketplace for executive talent. In fact, they cite global competition as one important reason why executive pay in the United States is rising. American companies, the argument goes, now have to compete against foreign companies for executive talent, the argument goes. This competition is forcing up executive pay in the United States.

Really? What ever happened to market logic? If corporations all around the world paid their executives at comparable rates, market competition would certainly force up executive compensation worldwide. But corporations don’t all pay executives at comparable rates.

American executives take home far more compensation than their foreign counterparts, on average over triple the pay of execs in America’s peer nations. By classic market logic, any competition between highly paid American executives and equally qualified but more modestly paid international executives ought to end up lowering, not raising, the higher pay rates in the United States.

Why, after all, would an American corporation pay $50 million for an American CEO when a skilled international CEO could easily be had for one-fifth or even one-fiftieth that price?

We have here, in short, a situation that a deep, abiding faith in the “market” does not explain. In the executive talent marketplace, American corporations face plenty, not scarcity, yet the going rate for American executives keeps rising.

Has someone repealed the laws of supply and demand? How else could executive pay in the United States have ascended to such lofty levels?

Some analysts do have an alternate explanation to offer. Markets, they point out, still operate by supply and demand. But markets don’t set executive pay.

“CEOs who cheerlead for market forces wouldn’t think of having them actually applied to their own pay packages,” as commentator Matthew Miller has noted in the Los Angeles Times. “The reality is that CEO pay is set through a clubby, rigged system in which CEOs, their buddies on board compensation committees and a small cadre of lawyers and ‘compensation consultants’ are in cahoots to keep the millions coming.”

“CEO compensation,” agree Lawrence Michel and Jessica Schieder, the authors of the new Economic Policy Institute executive pay report, “appears to reflect not greater productivity of executives but the power of CEOs to extract concessions.”

If CEOs earned less, the pair add, we would see “no adverse impact on output or employment.” Instead, they go on, lower executive paychecks would mean higher rewards for corporate workers, since the huge paydays that go to CEOs today reflect “income that otherwise would have accrued to others.”

How could those “others,” the rest of us, best go about lowering CEO compensation? Michel and Schieder offer a variety of promising proposals, ranging from higher marginal income tax rates to higher corporate tax rates on companies with excessively wide CEO-to-worker compensation ratios.

And what might a reasonable CEO-to-worker pay ratio be? The new Economic Policy Institute research suggests one plausible goal. Back in 1965, Michel and Schieder calculate, America’s top execs only pulled down 20 times more pay than the nation’s average workers.