Robert Reich: America’s Biggest Economic Problem Isn’t China

Xi Jinping might possibly agree this weekend when he meets Donald Trump on further steps to bring down China’s trade imbalance with the US, giving Trump a face-saving way of ending his trade war.

But Xi won’t agree to change China’s economic system. Why should he?

The American economic system is focused on maximizing shareholder returns. And it’s achieving that goal. Last Friday, the S&P 500 notched a new all-time high.

But average Americans have seen no significant gains in their incomes for four decades, adjusted for inflation.

China’s economic system, by contrast, is focused on maximizing China. And it’s achieving that goal. 

Forty years ago China was still backward and agrarian. Today it’s the world’s second-largest economy, home to the world’s biggest auto industry and some of the world’s most powerful technology companies. Over the last four decades, hundreds of millions of Chinese people have been lifted out of poverty.

The two systems are fundamentally different.

At the core of the American system are 500 giant companies headquartered in the US but making, buying and selling things all over the world. Half of their employees are non-American, located outside the US. A third of their shareholders are non-American.

These giant corporations have no particular allegiance to America. Their only allegiance and responsibility is to their shareholders.

They’ll do whatever is necessary to get their share prices as high as possible – including keeping wages down, fighting unions, reclassifying employees as independent contractors, outsourcing anywhere around world where parts are cheapest, shifting their profits around the world wherever taxes are lowest, and paying their top CEOs ludicrous sums.

At the core of China’s economy, by contrast, are state-owned companies that borrow from state banks at artificially low rates. These state firms balance the ups and downs of the economy, spending more when private companies are reluctant to do so.

China’s core planners and state-owned companies will do whatever is necessary both to improve the wellbeing of the Chinese people and become the world’s largest and most powerful economy.

Trump thinks that’s unfair. But it works. Since 1978, the Chinese economy has grown by an average of more than 9% per year. Growth has slowed recently, and American tariffs could bring it down to 6% or 7%, but that’s still faster than almost any other economy in the world, including the US.

The American system relies on taxes, subsidies and regulations to coax corporations to act in the interest of the American public. But these levers have proven weak relative to the overriding corporate goal of maximizing shareholder returns.

Last week, for example, Walmart, American’s largest employer, announced it would lay off 570 employees despite taking home more than $2bn courtesy of Trump and the Republican corporate tax cuts. Last year, the company closed dozens of Sam’s Club stores, leaving thousands of Americans out of work.

At the same time, Walmart has plowed more than $20 billion into buying back shares of its own stock, which boosts the pay of Walmart executives and enriches wealthy investors but does nothing for the economy.

It should be noted that Walmart is a global company, not adverse to bribing foreign officials to get its way. Last Thursday it agreed to pay $282m to settle federal allegations of overseas corruption, including channeling more than $500,000 to an intermediary in Brazil known as a “sorceress” for her ability to make construction permit problems disappear.

The Trump tax cut did squat for jobs and wages but did nicely for corporate executives and big investors. Instead of reinvesting the savings into their businesses, the International Monetary Fund reports that companies used it to buy back stock.

But wait. America is a democracy and China is a dictatorship, right?

True, but most Americans have little or no influence on public policy – which is why the Trump tax cut did so little for them.

That’s the conclusion of professors Martin Gilens of Princeton and Benjamin Page of Northwestern, who analyzed 1,799 policy issues before Congress and found that “the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy”.

Instead, American lawmakers respond to the demands of wealthy individuals (typically corporate executives and Wall Street moguls) and of big corporations, those with the most lobbying prowess and deepest pockets to bankroll campaigns.

Don’t blame American corporations. They’re in business to make profits and maximize their share prices, not to serve America.

But because of their dominance in American politics and their commitment to share prices instead of the wellbeing of Americans, it’s folly to count on them to create good American jobs or improve American competitiveness.

I’m not suggesting we emulate the Chinese economic system. I am suggesting that we not be smug about the American economic system.

Instead of trying to get China to change, we should lessen the dominance of big American corporations over American policy.

China isn’t the reason half of America hasn’t had a raise in four decades. The simple fact is Americans cannot thrive within a system run largely by big American corporations, organized to boost their share prices but not boost Americans.

Fascist Things My Friends Post On Facebook: North Carolina Edition

First of all, there has been no legislation passed in North Carolina this year regarding Sharia Law or any other foreign laws.

There is, however, a law from 2013 which bans state courts from applying “foreign law.”

The ban doesn’t make it illegal for individuals to personally practice any such law. Instead, it bars state courts and agencies from applying foreign law in divorce, child custody and family law disputes.

Essentially the law made it so only American and North Carolina laws would carry weight in the North Carolina judicial system.

Nowhere in the law does it explicitly mention Sharia Law, either, although “foreign law” would include Sharia Law and other religious and foreign laws.

Since the law doesn’t state practicing foreign laws is a criminal offense, nor does it explicitly single out Sharia Law, the law can’t have banned Sharia Law or made it a criminal offense.

As long as they don’t break any existing laws in doing so, a person could theoretically practice Sharia Law in North Carolina outside of the courts.

Therefore, this claim is FALSE.

via www.kgw.com

An Incomplete Thought

Last month, the Council on Foreign Relations hosted The Future of Democracy Symposium, the transcript of which is online. I was reading the transcript of the second session, Economics, Identity, and the Democratic Recession, and although there were several topics to ponder, a particular one caught my interest. An audience member, Matthias Matthijs, who had been on the previous panel, asked the following question:

"If we can believe demographers, by 2040 they predict about 70 percent of Americans are going to live in fifteen states and the other 30 (percent) are going to live in thirty-five states. So that’s—is that a problem for American democracy, going forward?" 

The question was answered by Brad DeLong, an economist whose blog I follow.

"You might well say that the thirty-five states that will elect seventy senators and yet have a decreasing share of the population, that these are overwhelming communities in states that are being left behind by the economic engine of American world globalizing value chain whatsit and that for a political logic to over represent those people to offset the fact that the economic logic is grossly under representing them might be something that is not totally unfair... 

"But this requires—this requires that the senator from Nebraska, say, actually be interested in policies that tend to bring money and wealth into the state of Nebraska rather than the senator from Nebraska cheering the nominations of Herman Cain and Steve Moore to the Federal Reserve Board on the grounds that it owns the establishment...

"It could well be a problem. If we had normal politics, if we had normal interest group Theodore Lowi polyarchy politics, it could be fine. But if it, indeed, becomes some kind of identity politics in which Ben Sasse wins reelection by owning the libs, in which whoever the current governor of Kentucky is—I forget—wins reelection by taking Medicaid away from his own voters, then it will be a serious problem.

This caught my interest because Oklahoma would be one of those 35 states, and the 2018 elections, in which we reelected our economically ignorant Senators (James Lankford actually gave credence to the idea that the Trump Tax cuts would pay for themselves,) also included the race for the Governor of Oklahoma.

Our two Republican candidates in the primary runoff were the Mayor of Oklahoma City, Mick Cornett, who had a strong economic record, having shared responsibility for changing Oklahoma City from a near ghost town to a thriving community, and Kevin Stitt, whose ads before the runoff were primarily about Mr Cornett not being fascist enough.
Naturally, Stitt won both the runoff and the general election because that's what Oklahomans care about.
I don't know what conclusions to draw from this (hence the title.) I wonder often when candidates run on populist positions whether they are true believers or just cynical.  During the general election, Stitt did not accept Mary Fallin's endorsement because he said his approach to solving the state's problems was going to be different than hers. (She, along with much of our legislature, believed that tax cuts create growth, which is why our schools and hospitals are are closing or struggling.)  Stitt's "different" approach was not to raise revenue, but to make government more efficient -- because, after all, if you're starving, the problem is not that you don't have enough food; it's that your pantry is badly organized. This appeals to the populists in our state, because taxes are worse than illness or ignorance.  Also, we gotta stick it to the libs.

Now, I don't have a real reason to doubt that Governor Stitt has Oklahoma's economic interests at heart, though I disagree with his stated philosophy.  The history is still unwritten, so we'll just have to see how it goes. But that one hyper-partsan moment of his campaign really bugs me.

First Reaction: Cuba

The caption on Facebook reads, "Communist Cuba sure looks a lot like Democrats in 2019!"

...unlike the Republicans, who are actively opposed to all of that.

Nate White's Magnificent Response

Snagged from Facebook:

Someone asked "Why do some British people not like Donald Trump?"

Nate White, an articulate and witty writer from England, wrote this magnificent response:

"A few things spring to mind.

Trump lacks certain qualities which the British traditionally esteem.

For instance, he has no class, no charm, no coolness, no credibility, no compassion, no wit, no warmth, no wisdom, no subtlety, no sensitivity, no self-awareness, no humility, no honour and no grace - all qualities, funnily enough, with which his predecessor Mr. Obama was generously blessed.

So for us, the stark contrast does rather throw Trump’s limitations into embarrassingly sharp relief.

Plus, we like a laugh. And while Trump may be laughable, he has never once said anything wry, witty or even faintly amusing - not once, ever.

I don’t say that rhetorically, I mean it quite literally: not once, not ever. And that fact is particularly disturbing to the British sensibility - for us, to lack humour is almost inhuman.

But with Trump, it’s a fact. He doesn’t even seem to understand what a joke is - his idea of a joke is a crass comment, an illiterate insult, a casual act of cruelty.

Trump is a troll. And like all trolls, he is never funny and he never laughs; he only crows or jeers.

And scarily, he doesn’t just talk in crude, witless insults - he actually thinks in them. His mind is a simple bot-like algorithm of petty prejudices and knee-jerk nastiness.

There is never any under-layer of irony, complexity, nuance or depth. It’s all surface.

Some Americans might see this as refreshingly upfront.

Well, we don’t. We see it as having no inner world, no soul.

And in Britain we traditionally side with David, not Goliath. All our heroes are plucky underdogs: Robin Hood, Dick Whittington, Oliver Twist.

Trump is neither plucky, nor an underdog. He is the exact opposite of that.

He’s not even a spoiled rich-boy, or a greedy fat-cat.

He’s more a fat white slug. A Jabba the Hutt of privilege.

And worse, he is that most unforgivable of all things to the British: a bully.

That is, except when he is among bullies; then he suddenly transforms into a snivelling sidekick instead.

There are unspoken rules to this stuff - the Queensberry rules of basic decency - and he breaks them all. He punches downwards - which a gentleman should, would, could never do - and every blow he aims is below the belt. He particularly likes to kick the vulnerable or voiceless - and he kicks them when they are down.

So the fact that a significant minority - perhaps a third - of Americans look at what he does, listen to what he says, and then think 'Yeah, he seems like my kind of guy’ is a matter of some confusion and no little distress to British people, given that:
* Americans are supposed to be nicer than us, and mostly are.
* You don't need a particularly keen eye for detail to spot a few flaws in the man.

This last point is what especially confuses and dismays British people, and many other people too; his faults seem pretty bloody hard to miss.

After all, it’s impossible to read a single tweet, or hear him speak a sentence or two, without staring deep into the abyss. He turns being artless into an art form; he is a Picasso of pettiness; a Shakespeare of shit. His faults are fractal: even his flaws have flaws, and so on ad infinitum.

God knows there have always been stupid people in the world, and plenty of nasty people too. But rarely has stupidity been so nasty, or nastiness so stupid.

He makes Nixon look trustworthy and George W look smart.

In fact, if Frankenstein decided to make a monster assembled entirely from human flaws - he would make a Trump.

And a remorseful Doctor Frankenstein would clutch out big clumpfuls of hair and scream in anguish:

'My God… what… have… I… created?

If being a twat was a TV show, Trump would be the boxed set

Unions: A tumblr Grab

rowantheexplorer 

Unions are why you have 5 day, 40 hour full-time work weeks. Unions are why they have to pay you in actual dollars instead of “company credits” that you can only spend at the company-owned stores. Unions are why there are f-- fire exits at your place of work. Unions are why it’s not okay for your supermarket ground beef to be any percentage human.

You think your company pays you out of the goodness of their hearts? Or even out of “market pressure?” The “job market” is a myth perpetuated by the capitalists. Corporations would pay you nothing if they could get away with it. And you argue “oh, but if they paid me nothing I’d just go to another one.” Wrong. Because to maximize profits, they all want to pay you nothing. Corporations exist to maximize profits while reducing risk for investors. It’s part of their entire function to find ways to cut costs as much as possible, and that includes finding ways to pay you nothing.

Unions are your defense against that. You think all a union does is strike? If you pay union dues, a lot of that is spent on lobbyists in various governments reminding your lawmakers that you have rights as a living human being that a corporation should not be able to stomp all over. Unions hire lawyers so that if you’re fired for bullshit reasons, the union can stand up for you against your boss. They’re called unions because workers are uniting to pool resources so that they can stand up to these corporate overlords with more money than God. Unions exist because you might not have the words, resources, or time to fight workplace injustices all by yourself. That’s the whole fucking point.

And if a business shuts down because a union is striking, it’s because the business was abusing people and didn’t deserve to be in business anyway. Don’t make excuses for the corporations. They already have trillions of dollars and a couple million lawyers to do that for themselves. They don’t need your help.

starfleet-louvelune 

All that and also, the idea that unions go to war whenever anything is done to any employee even for good reason, is: a lie.
It’s the same PR scam as the “old lady sued McDonald’s for millions because her coffee was hot” shit.

The *company* is the one that wants you to believe, just because they said so, that the firing was legit and the employee’s fault. But guess what? Doesn’t happen. When someone is fired for refusing or failing to do their job, the other employees are *relieved*, because they’ve been the ones catching the consequences.
Look a bit closer, and you find the union’s strike responds to OUTRAGEOUS moves, either “she got cancer and it would have been a drag on the company to finance her sick leave”, or “we made profit this year but not enough to our liking, so we’re cutting off 10% of the workers to pocket more."