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The Myth of Capitalism-Book Review

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Many people have labeled communism as but a myth: an unattainable fantasy.  Jonathan Tepper and Denise Hearn (T&H) have, by contrast, written a new book called The myth of capitalism: Monopolies and the death of competition.  It contains a series of liberal and conservative critiques of the economic system of the US in particular and the West more generally.

T&H chronicle the decline of competitiveness in almost every sector of the US economy.  Most people in the mainstream media are drooling over the record highs being recorded on the stock market, but the book notes,  “Between 1996-2016, the number of stocks in the US fell by roughly 50%, from more than 7300 to fewer than 3600, while rising 50% in other developed nations.”  As T&H painstakingly explain by citing studies and charts, the US economy has been stagnant by most truly relevant metrics since the Reaganomics of the 1980s, such as R&D spending, company longevity, competitive consumer product prices and the number of annual startups.

The superficiality of the recent Wall St gains is enabled via trickery such as stock buybacks, oligopolistic mergers & lobbyist-sponsored deregulation and tax exemptions.  Such corruption used to be illegal, in pre- Reagan and Buckley v. Valeo America.  Teddy and Franklin Roosevelt both cracked down on monopolies like Standard Oil and the New York Central Railroad by enforcing the Sherman and Clayton Antitrust Acts.  Every president since Teddy, both Democrat and Republican, cracked down on potential monopolies until Reagan.  This helped prevent a market crash akin to those of 1907 and 1929, which were the direct result of laissez-faire capitalism.

Wide-scale mergers started occurring during the Reagan Administration and have only picked up steam ever since. Concerning our last president, T&H note that, “Obama talked tough on big business and Wall Street, but he raised as much money from them as possible and was arguably even more pro-merger than Bush.  His DOJ approved all the airline mergers, creating an oligopoly of four airlines… He allowed Google’s major acquisitions that vertically integrated parts of the ad industry… The FTC prevented Comcast from buying Time Warner in 2015 and AT&T from acquiring T-Mobile in 2011.  These were the only notable mergers Obama’s DOJ blocked.”

The book lists all of the industries that have effectively become oligopolies or even monopolies: search engines, beer, beverages, glasses, weapons, banks, telecommunications, social media, cell phone manufacturing, agriculture, airlines, pharmaceuticals, credit rating, tobacco, railroads, etc.  The consolidation of market share to a handful of billion-dollar companies has throttled the entry of new companies in our so-called Age of the Startup.  T&H write how Facebook has (after buying out Instagram) been able to devastate upstart platform Snapchat by mimicking all of Snapchat’s features.  Such treachery, combined with Facebook’s 2B+ user base, ensured Snapchat would end up in the financial spiral that’s it’s currently in.   This is but one example of how the post-merger era has sabotaged fresh competition.  The book relays this sobering stat: “In 1995, the top 100 companies accounted for 53% of all income from publicly traded firms, but by 2015, they captured a whopping 84% of all profits.”  After decades of decline, the number of new firm entries fell below the number of firm exits in 2013.  This decline in the number of startup innovators inevitably ends up hurting technological innovations.

The merger bonanza may be great for Wall St, but it’s horrible for Middle America.  For instance, T&H write, “When workers have fewer employers to choose from in their line of work, their bargaining power disappears.  Corporate giants can squeeze their suppliers, but the main thing companies buy is labor, and they have been squeezing workers.”  Thus, wages have struggled to keep up with inflation for decades.  Benefits are cut, while stock buybacks soar.  Unhappy workers in all but 3 states can be shackled to soul-sucking jobs via non-compete clauses.  Furthermore, “56% of private sector non-unionized workers are forced into mandatory arbitration and of those, 23% were also denied any access to class-action lawsuits. This means that nearly a quarter of working Americans in the private sector don’t have the basic right to sue their employer.”

Mergers aren’t good for consumers either, despite what the corporatist rhetoric will tell you.  T&Hgive countless examples of how industries became less innovative after drinking the Oligopoly Kool-Aid.  The lack of competition this environment leads to complacency and, thus, a lack of product innovation or even concern for customer service.  The book also reports that, “in mergers that led to 6 or fewer significant competitors, prices rose in nearly 95% of cases… On average, post-merger prices increased 4.3%.”  Industries from beer to pharmaceuticals are infamous for fixing prices, due to high barriers of entry for startups and tacit (and sometimes explicit) collusion.  According to the book’s data, the average specialty pharmaceutical medication cost jumped 217% from 2011-2015.  Unsurprising, when you consider that, “In 2017, drug makers paid for 882 lobbyists and spent more than $171.5M in an effort to oppose lower prescription drug prices.”

Ironically, lobbyists will argue that mergers lead to lower prices and greater innovation.  They make the dishonest argument that the goal of the antitrust acts was solely to help consumers.  In fact, the legislation never even mentioned consumer efficiency; the bills were all about breaking up the power of the trusts.  People like Teddy Roosevelt and Woodrow Wilson saw how monopolies exceeded government authority in many cases; a lack of government enforcement of industry ultimately led to the Great Depression and the resulting New Deal reformations.

In the era of the Too-Big-to-Fail banks and corporations, the lessons of The myth of capitalism are more important than ever. They expose the façade of the post-recession “economic recovery” for what it is: stock buybacks and mergers puffing up the economy.  Everyone and everything from workers, consumers, people with medical conditions, startups and the IRS suffer from the corruption of American capitalism.  Tepper and Hearn frame their central thesis with liberal ideals and arguments (protecting the consumer, income inequality, maintaining government independence from corporate influence), as well as conservative (market competitiveness, cutting red tape for small business, low consumer prices).  A lot is written about the thoughts of Hayek and Friedman, but also leftists like FDR and Marx.  The final chapter offers some solutions to the problems of our times, but they’re pretty predictable if you’ve been reading along the whole way.  Page after page of charts succinctly illustrate the points T&H make about trust-busting, the corrosiveness of the lobbyist class, the benefits of competitive markets, and livings standards for people on Main Street.  The myth of capitalism is a very readable, even-handed and informative primer for anyone questioning whether or not they’re being gas lighted by the nonstop barrage of praise for the economy by the oligopolistic mainstream media.

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Economy

Radical Markets- Workable Ideas

Osama Rizvi

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We are living in a very interesting age. Call it a phase. A phase; where long cherished ideas of globalization is coming under threat, where Xenophobic attitudes are taking hold, where the right-wing has gained a lot of wind under them and seems ready to fly. Trump’s election, Brexit and anti-immigrant hysteria, all point towards a disturbing trend which looks as if gaining popularity and acceptance. In such a phase the ideas and concepts, utterly novel in their nature and perfectly workable if implemented, presented in the book Radical Markets gives us a hope.

Let’s start with the monopoly problem of property. Private ownership of a property while have certain advantage still cause many problems. For instance, the example, that any single person can sabotage a project if he decides to value his property at exorbitant prices after knowing it comes under a government project, for instance Hyperloop, is very common. Commenting on the “allocative” and “investment” efficiencies of a property the writers present an elaborative system to optimize both of the above mentioned functions. Surprisingly abbreviating into a very apt name, COST, the Common Ownership Self-assessed Tax, provides us with an alternative to the normal, usual taxation system. Moreover, possessing a self-regulating mechanism COST assures that the person uses the property for the best purpose. Avoiding the intricate details here, one can consider it as a system where-in one’s property would be listed on a national/international database with its price along with the option of anyone able to buy it at a click. If the property is very important for a person he might keep the price at such a level so that nobody can easily buy it however, at the same time he will be paying a handsome amount of tax on the declared value (a detailed description regarding the basis of the taxation is given in the book) which should bring in the most optimal level of pricing. Too much of a price and he ends up paying a lot of tax, too little and someone else might get it.

Not only this but the above concept can also be applied to personal skills such as for doctors, engineers and others.

Other ideas include Visa for Individual Program (VIP) which might prove to be very useful to curb xenophobic attitudes. The proposal includes setting up such a system where-in an individual, for example from U.S., invites a computer scientist here in Pakistan, and vouchsafe for these immigrant while he works at the company that the person in U.S. was able to find and share his salary with this man. Such a win-win situation might help to address many questions and grievances of people from both side of the world.

One of my most favorite and a truly radical idea is that of Quadratic Voting. Democracy, of-late, is under threat all over the world. Populism is gaining momentum and rabble-rousers are seizing the opportunities. One of the major reasons is that somehow, at some point, like globalization, democracy has failed to deliver. Problems like “majoritarian cycling” make matters worse. At times, majority can trespass on the rights of minorities. To quote the example from the book let’s suppose there is a society that has a certain plant due to which the utility bills have reduced. However, there are some in that society who due to certain health problems suffer due to that very plant. In case of a traditional voting process i.e. 1 person, 1 vote (1p1v) the majority would easily win however, for that particular class of society it is a matter of life and hence immensely significant. Quadratic Voting focuses preference and intensity of preference instead of a for and against approach. In such cases a minority can win over a majority.

To conclude, all of us, especially policy-makers around the world should consider, brainstorm and try to implement these ideas, albeit, at smaller scale, for the sake of experimentation, deducing results, suggesting improvements and omitting errors, if any.

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Closing the Loop: Meet the Pioneers Turning our Global Economy Circular

MD Staff

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A remarkable transformation is taking place in the global economy, with more and more established and start-up businesses generating value from waste products that otherwise would end up in landfill or our oceans, rivers and lakes. This is the finding from the fifth annual Circulars award, which recognizes businesses, governments and individuals that use innovation and disruptive technologies to reduce waste, emissions and the use of harmful materials.

With the circular economy estimated to represent a potential $4.5 trillion growth opportunity for the global economy, this year’s awards saw an expansion in the scope and scale of successful circular solutions. In total, close to 450 applications were received from over 45 countries, a 50% increase on last year.

“More and more businesses understand that Closing the Loop isn’t just about stewardship of our natural resources, it’s about gaining a competitive edge. Companies that lack a circular strategy risk being left behind in the new economy of the Fourth Industrial Revolution, said Terri Toyota, Deputy Head of the Centre for Global Public Goods, World Economic Forum.

The winners received their awards at the World Economic Forum Annual Meeting in Davos. They are:

Award for Circular Economy Multinational: Schneider Electric (France) for integrating circular concepts throughout its business including prolonging product lifespan through leasing and pay-per-use; introducing take-back schemes into the supply chain and using recycled content and recyclable materials in their products; 12% of the firm’s revenues now come from circular activities and, between 2018 and 2020, about 100,000 tonnes of primary resource consumption will be avoided.

Award for Circular Economy SME: Lehigh Technologies (Atlanta, USA) for extracting resources from end-of-life tyres into new tyres and other materials. To date, the company has manufactured more than 500 million new tyres using its circular model.

People’s Choice Award: TriCiclos (Chile) for building and operating South America’s largest network of recycling stations. To date, the company has diverted 33,000 tons of recyclable material from landfills and saved over 140,000 tons of CO2 emissions.

Circular Economy Public Sector: The European Commission for their strategic leadership through the development and implementation of their international circular economy framework, ‘The Circular Economy Action Plan.’ This framework has assisted 24% of all EU SMEs in delivering circular products or services and has guided many Member State national governments to create their own circular economy strategies..

Circular Economy Investor: Impax Asset Management (United Kingdom) for encouraging circular investments by mainstream investors. Impax’s environmental markets classification system was adopted by the FTSE in 2007. Today, it invests around $8 billion in more than 100 listed companies.

Circular Economy Tech Disruptor: Winnow (United Kingdom) for helping the food industry cut waste. Winnow’s smart meters analyse what is put in bins, which in turn helps inform production processes. Winnow cut waste in half in thousands of kitchens globally and saved customers $25 million per year, the equivalent of 18 million meals per year or preventing one meal from going to waste every seven seconds.

Circular Economy Leadership: Flemming Besenbacher, Chairman of the Danish Government’s Advisory Board for Circular Economy, for leadership in driving the circular economy in Denmark and beyond including in his role as Chairman of the Supervisory Board of Carlsberg.

In addition to the winners above, shortlisted companies include:

AB InBev (Belgium): For circular activities including upcycling spent grains into protein-rich drinks and working with customers and suppliers to improve recovery and return of packaging; 43% of the company’s volume is now packaged in returnable glass bottles

Cambrian Innovation (USA): For its EcoVolt technology, which allows the conversion of waste water from industrial processes into clean water and energy; with nine plants across the US, the company has treated more than 320 million litres of wastewater, recycling almost 95 million litres

Close the Loop (Australia): For keeping plastic out of landfill; by developing an asphalt additive, the company is able to use soft plastic and used printer toner cartridges to make high-performance road surfaces; every kilometre of road uses the equivalent of 530,000 plastic shopping bags and 12,500 printer cartridges

DyeCoo Textile Systems (Netherlands): For bringing the circular economy to the textile industry; its CO2-based technology eliminates the use of water and chemicals in the dyeing process; the impact of one dyeing machine eliminates the need for 32 million litres of water and 160,000 kilogrammes of processing chemicals per year

Enerkem (Canada): For making biofuels and renewable chemicals from waste; the company’s technology allows the carbon in non-recyclable waste to be recycled in five minutes and converted into biofuels and bio-renewable chemicals

HYLA (USA): For extending the lives of mobile phones and other devices; through its repurposing model, more than 50 million devices have been given a second life, creating $4 billion in value for their owners, keeping 6,500 tons of e-waste from landfills

Miniwiz (Taiwan, China): For turning consumer waste into high-quality building materials; its “Trashpresso” mobile upcycling plant enables recycling without shipping waste long distances; the company has saved 17 million kilogrammes of CO2 in construction projects alone

Tianjin Citymine (China): For pioneering the concept of “urban mining” using mobile recycling stations at waste sites to produce a reverse-logistics system of urban waste

“Consumers, employees, stakeholders and policymakers alike expect companies to lead with purpose around sustainability and are holding them accountable. Inaction or idleness can severely harm competitiveness, with a drop in stakeholder trust costing businesses globally $180 billion in potential revenues,” said Peter Lacy, Senior Managing Director, Accenture Strategy. “Moving to a circular economy delivers the disruptive change needed to secure a sustainable future, while enabling businesses to unlock innovation and growth. We are proud to recognize the individuals and organizations that are leading the circular movement, creating a thriving global economy.”

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Former African Envoys advocate for more economic engagements with Russia

Kester Kenn Klomegah

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Former Ambassadors have strongly urged African leaders and business entrepreneurs to prioritize the most sustainable development needs as the best approach to seeking Russian investors in fixing their economies in Africa when they converge this October for the first Russia-African summit planned in Russia’s southern coastal city of Sochi.

In separate interviews, they believed what was abundantly clear how to stimulate African governments into exploring investment opportunities in Russia and Russian investors into Africa within some framework of mutual-cooperation.

Former South African Ambassador, (H.E.) Mandisi Mpahlwa, said that Sub-Saharan Africa has understandably been low on post-Soviet Russia’s list of priorities, given that Russia is not as dependent on Africa’s natural resources as most other major economies. It is important to point out that Soviet and African relations, anchored as they were on the fight to push back the frontiers of colonialism, did not necessarily translate into trade, investment and economic ties, which would have continued seamlessly with post-Soviet Russia.

“Of course, Russia’s objective of taking the bilateral relationship with Africa to the next level cannot be realized without close partnership with the private sector. Africa and Russia are close politically, but they are also geographically distant and the people-to-people ties are still far under-developed. This translates into a low level of knowledge on both sides of what the other has to offer. There is perhaps also a measure of fear of the unknown or the unfamiliar in both countries,” according to Mpahlawa.

Former Ethiopian Ambassador, Professor (Dr) Teketel Forssido, said that one of the biggest problems has been keen competition from the United States, Europe, China and India as more developed countries with more advanced technological and development oriented solutions, and have become, for the past decades, ” investment patrons” in African countries. These are what Africa need, – foreign policy directed towards the development needs of Africa.

Former Nigerian Ambassador, Air Commodore Dan Suleiman, told me that Africa’s drive for sustainable democratic governance backed by an enhanced economically viable environment is of paramount importance. Many African leaders are emphasizing the quest to eradicate poverty and give people a sustainable environment for budding democracy.

“It is Africa’s hope that foreign authorities will back us in this direction. It is important to remind foreign investors that investment opportunities for developing large and medium scale enterprises are abound in Africa. The importance of the informal sector in generating employment and promoting self-reliance through higher productivity. We implore Russian investors to take advantage of these new potentials,” Air Commodore Dan Suleiman stressed in his discussion.

Undoubtedly, the Russian government stance on supporting the policy of Africa to employ plausible solutions to resolve their infinite problems should be extolled assertively, wrote former Tanzanian Ambassador, Dr Jaka Mgwabi Mwambi.

He said, for instance, “Tanzania is currently on the verge of a bitter wrangle with iniquitous restraints, in order to redress all government systems, for the bright future of its wrath citizens. Thanks, it is discernible that the country is proactively moving steadfastly in a middle-income economy.”

Former Kenyan Ambassador to the Russian Federation, H.E. (Dr) Paul Kibiwott Kurgat explained in a recent interview discussion that any platform created for African leaders has to address thoroughly development-oriented questions, Kenya’s diplomacy has mostly focused on strengthening economic cooperation with foreign countries.

“Looking at the global development, Kenya would always like to build on this long history of strong and comprehensive engagement, first and for most, through developing closer ties with Russia in trade, investment and economic cooperation. So, my advice is that African leaders have to think objectively, first about effective ways how to improve the economy,” he said.

The Government of Kenya’s priority sectors range from infrastructure and energy development, industrialization and agriculture, manufacturing, tourism and among others. The development opens a myriad of investment opportunities to all potential foreign investors across the globe including Russia, Paul Kurgat added in his emailed comments from Nairobi, Kenya.

Former Mozambican Ambassador to Russia, Dr. Bernardo Marcelino Cherinda, emphasized that the changes in Russia have provided a greater impetus for forging new diversified relations, especially in the economic sectors, in Africa.

By this measure, African leaders have to relentlessly work towards a more effective cooperation and use political dialogue to remove obstacles that might hinder smooth progress and development. Whether they like it or not, African leaders have to make rational decisions to align their efforts and policies with this key goal of developing or building their economies, according to him.

Both Russia and Africa have to facilitate participation in the private sectors, to get also involved in medium-sized economic partnership, joint ventures, agro-processing industries, health and education. African leaders do not have to, in the least, doubt the enormous potentials that exist for these, according to the former envoy.

“And, I think it’s equally important Russia and Africa focus seriously on cultural aspects in their activities in order to bridge the widening information gap between the two countries. Russia has made the mark and it’s respected for its indelible historical achievements, literature and for the human values. The use of soft power as an instrument for new image-making initiatives has to be intensified,” Cherinda concluded.

Stergomena Lawrence Tax, Executive Secretary of the Southern African Development Community (SADC), assertively stressed in discussion with Russian authorities that strengthening ties in a broad range of economic fields would show that SADC truly remains as one of Russia’s key partners in Africa. SADC is an inter-governmental organization with its primary goal of deepening socio-economic cooperation and integration in the southern region.

Foreign Minister Sergey Lavrov and H.E. Dr. Nkosazana Dlamini-Zuma, the first woman to lead the bloc of 54 states, had discussed several times about Russian companies or industries participation in major infrastructure projects on the continent. Currently, Chad’s Moussa Faki Mahamat has also held discussion on Africa’s Fourth Industrial Revolution and has made efforts at enlisting Russia’s effective support for the Agenda 2063 of the African Union (AU).

For the past one and half decades (since his appointment in 2004), Foreign Minister Lavrov has held in-depth discussions on the current situation in Africa and always pointed to the possibility of continuing to promote effective bilateral cooperation in many spheres and to work together towards using fully the existing potentials. He always reminds that Moscow firmly supports the principle “African solutions to African problems” within a framework of achieving the Sustainable Development Goals (SDGs) formulated by the African countries.

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