The State of Inequality

January 16, 2020

The Pew Research Centre has published interesting results from a survey on inequality — or rather, attitudes to inequality — in the United States.

 

Views on the importance (or lack thereof) of tackling economic inequality tend to be a function of the respondent’s current economic situation:

 

“Asked about what contributes to economic inequality in this country, Democrats are more likely than Republicans to point to structural factors, such as the tax system (56% of Democrats vs. 30% of Republicans say this contributes a great deal) and problems with the U.S. educational system (49% vs. 38%). In turn, Republicans are more likely than Democrats to say that the different life choices people make (60% of Republicans vs. 27% of Democrats) and some people working harder than others (48% vs. 22%) contribute a great deal to economic inequality.”

I guess I shouldn’t be surprised that no-one seems to have mentioned it, but capitalism is inherently unequal. The tax and education systems, the choices and the effort one puts into work are almost irrelevant to the systemic inequality that capitalism requires for it to function.


A Photo Essay on The Collapse of Malls

January 4, 2020

I have been writing about malls and their economic problems since the summer of 2008.  Further discussion, most of it 10 years old, can be found here, here, here, and here.

Philip Beuhler now gives us a photographic essay on the decline of one particular mall in Wayne, New Jersey.

Artworld, Philip Beuhler (2019)

There are some fascinating images here and, as the article states they are “neither a nostalgia fest nor disaster porn, but an unsparing documentation of the decay that marks time and cultural change.”


Turn Corporate Taxes Into Licences

December 16, 2019

A recent story in the Washington Post and republished in Greenwich Times shows that, once again, major profitable US corporations are playing the tax code to their own advantage and to the cost of the rest of US taxpayers.

  • 91 of the Fortune 500 paid NO taxes at all on earnings of $101 billion;
  • Amazon made a profit in excess of $10 billion but received a tax rebate of $129 million;
  • Video game maker Activision Blizzard had $447 million in profits but received a tax rebate of $243 million, resulting in an effective tax rate of -54.4%.

The new Trump tax code,

“lowered the U.S. corporate tax rate from 35% to 21%, but in practice large companies often pay far less than that because of deductions, tax breaks and other loopholes. In the first year of the law, the amount corporations paid in federal taxes on their incomes – their “effective rate” – was 11.3% on average, possibly its lowest level in more than three decades … [T]he new law introduced many new breaks and loopholes.”

Corporations around the world play the same tricks. Often they reside in tax havens and levy enough “corporate service charges” on their overseas subsidiaries to ensure that no taxes are paid.

And this all comes at a cost to the rest of us.  As corporate taxes fall and government deficits grow, there is increasing pressure to reduce those deficits by reducing spending on welfare services, health, and education.

Centre-right politicians have suggested that lowering corporate tax rates will encourage more companies to stay in-house as it were.  That is just an excuse to make the rich richer as the new Trump tax code proves.  There is a simpler and much more efficient way.

I suggest that corporate income taxes be eliminated completely. They should be replaced by a “license to operate” fee equal to, say, 10% of revenues earned in the country no matter where the head office is based. Simple to understand, simple to manage, and, I suspect, very difficult to get around.

Country of ownership becomes immediately irrelevant, and transfers to an offshore HQ will be pointless for tax purposes. Indeed, they may well create a double taxation situation in which those transfers become taxable revenue in the home country. It also gives corporations the right to NOT operate in any particular country if they choose to forgo the revenues.

Finally, I would make this tax law bullet-proof by including a provision that, should some smart accountant or lawyer find a loophole, then that loophole is closed retroactively to the dater of the law’s passage.

We should give this a try. It is a commonsense approach, eliminates the need for accountants, lawyers, and an army of regulators. It will produce fairness across the board.


The Cannabis Stock Market

December 10, 2019

The legalization of marijuana in Canada and various US states has created a market for cannabis related stocks.  As the following graph from Visual Capitalist shows, it is an extremely volatile market.

 

Select image for a better view.


The Growth In Consumer Rentals

October 25, 2019

My wife and I are not part of the consumer rental economy. We have always rented our accommodation and since we gave up our car in 1991, we have rented cars and we recently joined Evo. But those don’t count as consumer rentals.  About fifty years ago in London, when I was first married, we rented our TV set, and I once rented a tuxedo for a weekend, but I can’t think of any other consumer goods that I have ever rented.

Not so the millennials, as a recent and highly informative infographic from Visual Capitalist shows.

 

“Although the current market for rentals is still in its early stages, the sheer momentum that the industry has gained in the last year is enough to threaten even the largest retailers—forcing them to reconsider their own business models … According to the research, very few millennials choose to rent consumer goods because it is better for the environment. However, Nielsen claim that 73% of millennials are willing to pay more money for sustainable offerings—impacting both retail and rental industries. As evidence of this, Ikea will test a range of subscription-based leasing offers in all 30 of its markets by 2020 in a bid to appeal to environmentally conscious consumers and boost its sustainability credentials.”

Other than tuxedos and, perhaps, wedding dresses, it never would have occurred to me to rent clothing. However:

“In the clothing rental space, brands like Rent the Runway pave the way, but there has also been an explosion of startups entering the market in the last year. One example is the monthly subscription service Nuuly. The company offers consumers access to over 100 third-party brands and vintage items. Consumers can borrow up to six items a month for $88. Similarly, American Eagle’s Style Drop program rents out the latest collections for a flat monthly fee of $49.95.”

It’s a brave new world out there.


Marijuana Has Gone To Pot

October 22, 2019

According to a fascinating feature in Forbes, the major legal marijuana companies are in terrible trouble — because they are growing more weed than anyone could smoke in several lifetimes.

“In just a year after Canada’s historic pot legalization, pot producers built up a massive surplus of pot. In fact, only 4% of pot produced in Canada in July has been sold!”

This has caused the business market to crash.  Aurora Cannabis is “Canada’s largest cannabis producer and one of the most popular pot stocks on earth. In fact, this stock has recently topped Apple as the favorite stock among American Millennials.” But that hasn’t saved the company stock price:

“If you look at Aurora Cannabis’s most recent financial report, you’ll see its revenue grew 52% in the last fiscal quarter, compared to the previous quarter. That sounds good… but it’s hiding a dirty secret.   Aurora Cannabis is actually dumping part of its harvest into “wholesale,” which means it is selling it for cheap… according to a line buried deep in the company’s Q4 financials.  Last fiscal quarter, the company dumped $20 million worth of pot, a 869% increase from the previous quarter. It is doing this because there’s not enough demand from consumers.”

 

The Forbes article likens this to the situation in American agriculture in the 1930s when an overabundance of product caused crops to be burned just to maintain prices at a floor level. They also suggest that the situation is likely to get worse as most large marijuana producers have invested heavily to increase production in the future.

No wonder then that in Canada, street (illegal) prices have fallen while legal dispensaries have to charge much more to meet regulatory stipulations, and thus the number of legal stores has not grown as expected and government revenues are not as they had hoped.


Democracy In Chains

October 8, 2019

There are plenty more libertarian role models available in our culture than there are anarchistic ones; and given the apparent similarities between the two concepts of individual liberty, I occasionally have to remind myself why I am an anarchist and not a libertarian. It’s the economy, stupid, and everything that flows from that.

  • Libertarians believe in the exploitation of the capitalist system (stripped of State-imposed rules and regulations) and the supreme sanctity of private property no matter how acquired; many have a tendency toward exclusionary -isms (racism, sexism, nationalism, fascism); they believe in no government other than that which protects their interests and assets (police, army, judiciary; jails);
  • Anarchists conceive of a non-exploitative production/consumption system and have a strong tendency toward inclusive community building; they believe in autonomous self-government by individuals and consensual groupings only.

We are currently living through an experiment in which the Libertarian fringe has taken control of the central government.  Earlier this year, I was read an article about how the GOP in Missouri were working to overturn a state constitutional amendment improving ethical governance that passed overwhelmingly by popular vote just a month ago. They noted:

“the Republican Party’s newfound disdain for democracy. Republican leaders across the country have tried to make voting more difficult; to keep some Americans from voting; to interrupt vote counts before they are complete; to gerrymander in the extreme; and now, in Missouri, to repudiate a constitutional amendment approved by 62 percent of the state’s voters.”

Everything in that paragraph is true, except that the Republican’s dislike for genuine democracy is hardly “newfound.” I have been reminded of this most recently through reading Nancy MacLean‘s vital Democracy In Chains: The Deep History of the Radical Right;s Stealth Plan For America. which is a book that every resister needs to read to understand what it is we are facing.  The thesis of the book is that current libertarian bent of the far rights financiers (a la Koch brothers and too many others) is fuelled and driven by the political-economic theories propounded by James M. Buchanan who was awarded the Nobel Prize for economics in 1986.  Buchanan developed his theories in the 1950s and 1960s when the current wave of capitalist barons were being educated.  [Page number references are to this volume).

“Buchanan believed that “majority rule, under modern conditions, had created … a risk to capitalism … The goal of the cause, Buchanan announced … must shift from who rules to changing the rules … the cause must figure out how to put [constitutional] shackles on public officials.”  [pages xxv-xxvi]  “A government based in the naked principle that the majority ought to govern, Calhoun [had] warned, was sure to filch other men’s property and violate their liberty.”  “The power to tax is the power to destroy,” wrote F.A. Harper. Democratic government was increasing “the power of certain persons to destroy other persons.” [6, 132]  Buchanan said modern rules fail to establish ironclad rules for “curbing the appetites of majority coalitions … There are relatively few effective limits on the fiscal exploitation of minorities through orderly democratic procedures.”  [150]  “The project must aim toward the practical ‘removal of the sacrosanct status assigned to majority rule’.”  [184]

Buchanan first made his name opposing taxes to pay for schools.  If a constitution enabled what Buchanan would call socialism — “which in Virginia’s case meant requiring a system of public schools — it would be nearly impossible [to achieve] his vision of radical transformation, without changing the constitution.” [72]  An important supporter, Oliver Hill, NAACP lawyer opposed to tax-paid vouchers for private schools, opined that: “No one in a democratic society has a right to have his private prejudices financed at public expense.” [69]  This group of thinkers were often opposed to educating the masses at all. As Gordon Tullock put it: “we may be producing a positively dangerous class situation” by raising their sights. [106]

More broadly, Buchanan criticised modern economics and its value system

“because the very idea that inequality was a bad thing led to looking for remedies, which in turn led the discipline toward an applied ‘mathematics of social engineering’.” [96-97].  He  “wanted not just to rein in taxation and regulation, but also to dethrone the dominant paradigm of Keynsian econonics that was the core of the mid-century social contract.”  [136]  A later disciple, Paul Ryan said “public provision for popular needs not only violates the liberty of the taxpayers whose earnings are transferred to others, but also violates the recipients’ spiritual need to earn their own sustenance.” [213]  Liberty Fund economist Gary M. Anderson alleges that public health is nothing more than “a device use by organized interest groups to redistribute wealth to themselves.”  [214]

And Buchanan’s theories began to enter the realm of social conservatism.  A Virginia petition of the early 1960s was very clear about its position:  “Individual liberty is a higher good than racial equality.”  [94]  The Goldwater campaign of 1964 openly attacked the Civil Rights Act on Buchananite-libertarian grounds, complaining

“that it used coercive means to make all conform to the values of the majority, in violation of the liberty of the white minority that opposed it.” [84]

Buchanan eventually came to believe that

despotism may be the only organizational alternative ... There was no glossing over it anymore: democracy was inimical to economic freedom” [151-152]  Charles Koch called Greenspan and others “sellouts”  because they sought “to make government work more efficiently when the true libertarian should be tearing it out at the root.” [135]  Buchanan “valued economic liberty so much more than political freedom that he simply did not care about the invitation to abuse inherent [as in Chile] in giving nearly unchecked power to an alliance of capital and the armed forces.”  [165]  He wrote in 2005 that those who fail to save for their future needs “are to be treated as subordinate members of the species, akin to … animals who are dependent’.”  [214]

Given the static two-party system in the US, it came as no surprise that Buchananite disciples discovered the Republican Party as a ready-made vehicle for political advancement.

“But while these radicals of the right operate within the Republican Party … the cadre’s loyalty is not to the Grand Old Party … Their loyalty is to their revolutionary cause … The Republican Party is now in the control of a group of true believers for whom compromise is a dirty word”  [xxvii-xxvii]

Political theorist S.M. Amadae says Buchanan “was mapping a social contract based on ‘unremitting coercive bargaining’ in which individuals treated one another as instruments towards their own ends, not fellow beings of intrinsic value.”  [151]

*****

This is a significant addition to our knowledge of how the elites run our lives and what they have in store for us.  Well worth the read.