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November 2002
Posted November 7, 2002
John M. Berry - Will cuts cure deflationary contraction? November 7, 2002 -
The Fed is worried about the economy. They should be. While Republicans celebrate their sweeping victories following yesterday's elections, the economic outlook is not good. So the Federal Reserve cut overnight interest rates to 1.25 percent:
"Those extraordinarily low rates are a sign of how seriously Fed Chairman Alan Greenspan and other Fed officials regard the failure of the U.S. economy to sustain a stronger recovery this year."
What scares them is that the economy could stall. Consumer spending is down, manufacturing declined, the labor market is at a standstill, unemployment is up and payroll is down. So everybody's hoping this latest cut will spur spending and kick start the economy. The question is, will these rate cuts pump liquidity back into the American economy? And if so, will it be enough?
Assuming that we are in a deflationary contraction, as appears to be the case, then the remedy is an infusion of liquidity. Unfortunately, this looks more like an IV drip.
America has been weakened by the loss of manufacturing and other jobs - the lifeblood of our economy - to countries with lower labor costs. Corporations and executives have amassed huge reservoirs of money while the American consumer is in more debt than ever before. Are more interest rate cuts really the right remedy?
- Washington Post.
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September 2002
Posted September 4, 2002
Bill Straub - American President, or Chairman of the Board? September 2, 2002 -
The American president is supposed to act on behalf of all American citizens. That's the theory, anyway. Historically, however, presidents have always favored certain key constituencies. But that all changed in 1980, when corporate interests started to take priority over individual interests.
The bias took root under Father Reagan, spread like a canopy of dust over Statesman Bush, and blossomed in the carefully tended patches of Administrator BJ. But now it is bearing fruit rich and ripe thanks to the decisive acts of Chairman George, who gives working stiffs a cold shoulder:
"For his part, the nation's first president with an MBA is doing his best to ignore (AFL-CIO president) Sweeney, McEntee (president of the American Federation of State, County and Municipal Employees) and the groups they lead."
But hasn't Bush assured us he cares about labor? Yes, frequently:
"A lot of people say, well, he's a Republican, obviously he doesn't care about the union. That's not true at all, for starters. I care about working people." - George W. Bush, President Discusses Energy Plan in West Virginia, January 28, 2002
So there must be some mistake. Bush cares about labor, he cares about unions, he wouldn't snub them. Would he? Sadly, he did:
"When Bush convened an economic forum in Waco, Texas, in early August to review the nation's fiscal woes, organized labor wasn't afforded a seat at the table."
If George W. Bush truly was the American President, such behavior would make no sense at all, because he sure does talk big about how concerned he is for the working people of America. But if we think of him not as president, but Chairman of the Board of the United Subsidiaries of America, then it makes all the sense in the world.
Corporate executives always talk a pretty line, but their heart belongs to the corporate bottom line.
- Seattle P-I.
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July 2002
Posted July 4, 2002
Jennifer Barrett - Will the stock market crash? July 3, 2002 -
The big question troubling tycoons these days is whether the financial markets are on the verge of a meltdown:
"As markets dip to their lowest level in years, some wonder whether the crisis in corporate confidence could trigger a far more serious downturn."
Given the many positive indicators, why the worry? Because fears and fools have changed the conditions of the game:
"The string of accounting scandals, along with corporate profit warnings and fears of more terrorist attacks, have made investors wary. ... The recent revelations from WorldCom, Xerox and, most recently, Vivendi, have made investors skittish."
Assuming terrorists are incapable of crippling, let alone destroying, the American economic juggernaut, that leaves only the crisis in confidence. But investors appear to be cautiously optimistic.
"A survey in May, taken after the collapse of Enron and the accounting probe into Global Crossing, shows that nearly three quarters of respondents still had at least a fair amount of confidence in our business leaders."
But the trouble is that the criminals at Enron and WorldCom didn't simply sidle out of the shadows to assume power: they represent a culture of short-sighted corporate executives who put personal profit above just about every other consideration.
Bluntly put, it's the Microsoft Mentality: "If we can get away with it, it's okay."
In service to this egregious ethic, they deploy battalions of accountants to hide the loot or pad the profits, legions of lobbyists to locate and destroy political landmines, and squadrons of lawyers to counter legal threats. Their weapons are predatory business practices to kill the competition, carnivorous contracts to keep the marketplace in line, eroding wages through exportation of jobs, and piles of sometimes good but more often nearly useless products which have as their sole purpose the momentary satisfaction of needs created, for the most part, by a stream of commercials propagandizing the public.
Their mindset virtually guarantees that, far from being a few bad apples in the bunch, Enron and WorldCom will prove to be the tip of the proverbial ice berg. Should the full extent of corporate corruption be revealed, then "meltdown" might seem too polite a term to describe the fate of the financial markets.
Given the weakened economic state in which most Americans find themselves, thanks to the odious efforts of corporations to export jobs and lower wages, such a revelation could lead to widespread boycotts and strikes, if not riot. But the outcome of such outrage would almost certainly be bleak.
So it would be far better were we simply to assume the worst of corporate America, and set about the task of cleaning house. Not a witch hunt led by the torch and pitchfork brigade, but a methodical, dispassionate exercise to set things right.
This would most effectively be done by suspending all penalties for certain classes of white collar crime, and prosecuting only those who seek to obstruct the process. And then, only for any crimes they try to cover up.
Utopian? Hell, yes! Unrealistic? Maybe. But compared to the eventual but nearly inevitable alternative, it is also the most reasonable thing we can do.
What about communist? Is this some socialist scheme to do in capitalism once and for all? Hell, no!
Apologists fuss much over every tax corporations must pay, and sometimes it seems they consider every legal constraint a personal affront to the libertarian principles upon which America was founded. But locked deep within the bowels of the corporate citadels, lurks a much despised and long neglected but enduring fact: Corporations are creatures of the state.
Corporations are a legal fiction created by contract to facilitate commerce. As such, they owe allegiance to the people in each nation with whom those contracts are made. And if they abandon allegiance, then they have broken their contract and should lose all the rights and privileges granted them by that contract.
This isn't communism or socialism, it isn't anti-capitalist; if anything, it resonates to the very core of capitalism. After all, cleaning house and preventing riot and revolution is in the best interests of everybody, from the executive suites to the rank and file.
- Newsweek.
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April 2002
Posted April 20, 2002
William Faloon - The American Drug Cartel? April 2002 issue -
Thanks to the partnership between the FDA and drug companies, Americans pay the highest prices in the world for medications:
"We knew 18 years ago that the drug regulatory system was riddled with corruption and launched a media blitz to expose it. ... Even after a drug goes off patent, it still costs too much money to obtain 'generic' approval from the FDA. These regulatory burdens strangle free market competitive forces and cause Americans to pay the highest prices in the world for their medications."
In his remarks at the Malcolm Baldrige National Quality Award Ceremony on March 7, 2002, President Bush touted the virtues of the American system of free enterprise. Yet, our economy is being sucked dry by powerful monopolies, not the least of which are the drug companies, whose vampiric bite gouges most those who can afford it least:
"Life Extension long-ago predicted that the exorbitant price of prescription drugs would bankrupt the U.S. health care system. A recent report from the Department of Health and Human Services says that health costs are continuing to climb faster, even though the economy has been weak.[4] As a result, it says, consumers will have to spend more of their own money on health care, and employers will be less able to afford health benefits."
Ironically, while the FDA colludes with drug companies to squeeze American consumers in the ever tightening grip of escalating drug costs, it rails against the relatively cheap nutritional supplements:
"The FDA tells consumers to beware of dietary supplements because they are not 'regulated,' yet regulated products kill over 100,000 Americans every year, and seriously injure over 2.1 million people."
Isn't this a little extreme? Doesn't the FDA protect us? Don't we pay such high prices because our prescription drugs are the best in the world? No. While certain departments within the FDA provide an invaluable service, the mark up on drugs in America is so huge as to go beyond mere price gouging.
For example, the cost of the active ingredient in 100 Celebrex 100 mg is 60 cents, but the average consumer price is $130.27. That's a mark up of almost 22 thousand percent. And it only gets worse from there:
"The astounding profit margin enjoyed by drug companies exposes several facts. First, it shows why the pharmaceutical industry is the most profitable of all businesses. But since large drug companies only make around 15% net profit margins, it also exposes the incredible cost drug companies bear to comply with today's burdensome drug approval system."
What can we do about this? First, we need to streamline the regulatory process. Consumers Against High Drug Prices is working toward that goal and needs your help. Second, we need to break the drug companies' monopoly. We can do that without filing a lawsuit or passing so much as one more law regulating the drug companies. All that is necessary is to allow Americans to freely fill prescriptions through pharmacies outside the United States.
But isn't it risky to buy drugs from a company that isn't regulated by our government? It can be, and the first rule in any purchase should be "buyer beware." But information is the best way to reduce the risk, and DrugBuyers.Com is a site that provides valuable information about online and overseas pharmacies. Ultimately, however, the answer is to actually put into practice the free enterprise system of which President Bush speaks so highly:
"Their objective is to mobilize millions of American citizens into a cohesive army that will force Congress to change the law so that a free market can emerge to obliterate the high cost of prescription drugs."
- Life Extension Foundation.
Posted April 2, 2002
Gretchen Morgenson, New York Times - Ride the blight? March 26, 2002 -
The recession is over. That's the buzz on the financial news programs. But how certain can a recovery be when the telecom industry is still in the midst of an implosion caused by the busted Internet bubble and hyper greedy robber barons fleecing hundreds of millions in raw deals that would make a Russian mobster's eyes glitter with envy.
"Since the telecom sector peaked in the spring of 2000, about $1.4 trillion in paper investor wealth has evaporated, according to one analyst. More than 15 companies have filed for bankruptcy reorganization in the past year or so... Many others in the industry are teetering."
And it's getting worse:
"Almost 400,000
jobs in the telecommunications sector have vanished as well, according
to Challenger, Gray & Christmas, the job-placement concern. And the
bloodletting is not slowing: Telecom companies cut about 61,000 jobs in
the first two months of 2002, up 42 percent from the toll during the comparable
period last year."
Despite this, at least some telecom executives are getting rich. Why? What makes them so special? In the best capitalistic sense of the word, what did they do to earn such wealth? Take Joe Nacchio, of Qwest, for example.
In 1999, US West was a stable but stodgy baby bell with a reputation for poor service and low customer satisfaction. On the theory that customer satisfaction can be raised without any real improvements in service, Chairman Sol Trujillo set out to lower customer expectations by increasing order delivery times. Promise less, deliver the same service, and complaints will go down.
Meanwhile, to make the company a technological leader, he went shopping for merger prospects, and settled on Global Crossing. To sweeten the deal, he increased profits by lowering the commissions while raising the quotas of the company sales force. But then Qwest, led by Joe Nacchio, entered with a successful hostile takeover bid that ultimately may ruin the now bankrupt Global Crossing.
Unfortunately, the story doesn't end, there. Following the takeover, Qwest immediately began laying off huge chunks of US West's customer service staff while placing such stringent demands on the sales force that the CWA had to threaten a lawsuit before a settlement was reached. While this may have afforded some protection to the US West sales consultants who hadn't already been laid off, it did nothing to protect Qwest's stockholders:
"Joseph Nacchio, chairman of Qwest, and Philip Anschutz, the co-chairman, have sold shares worth almost $2.3 billion since 1998."
And like the rank-and-file at Enron, former US West employees who hadn't been laid off saw their 401(k) all but evaporate:
"Workers and shareholders who did not get out were left without chairs when the music stopped. In the 401(k) at Qwest, for example, almost 40 percent of the assets were in Qwest stock at the end of 2000, the most recent filings available. Since then, the shares have lost almost 80 percent of their value."
With all this bad news, where is the buzz coming from about the end of the recession? During his March 7, 2002, testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Fed Chairman Greenspan said, "Recent evidence suggests that a recovery in at least some forms of high-tech investment could already be under way." He went on to speak in optimistic but typically vague terms about the outlook for our economy. And from this the chattering class concludes a recovery is at hand?
"The telecom turmoil isn't over. ... Bad as things have been in telecom, the worst may not be over."
- Seattle P-I.
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March 2002
Posted March 26, 2002
Patrick Thibodeau - Business as usual for Microsoft monopoly? March 25, 2002 -
More than 10 years ago, Microsoft issued its first "per processor" Windows license. These required PC makers to pay Microsoft a royalty for every computer they sold whether Windows was included or not.
The result: any customer using an alternate system, such as Linux or IBM's OS/2 Warp, was still forced to pay for Windows every time they bought a new computer made by any PC maker licensed by Microsoft.
According to Forbes on Fox anchor David Asman, this is good! On the March 23, 2002, segment, ignoring how this practice drives up the cost of PCs, he asserted Microsoft's monopolistic practices do not harm consumers, only competitors. Maybe he thinks everybody owns a lot of Microsoft stock and that we don't mind paying higher prices for computers.
The contents of your stock portfolio, or my lack thereof, aside, what about the hundreds of thousands of hours consumers have spent staring at the infamous Windows blue screen when they could have been using a more stable system made by one of Microsoft's crushed competitors? But that's all in the past. Or is it? Not according to Gateway general counsel Anthony Fama:
"Under (Microsoft's new uniform terms), Gateway would face problems if it shipped a PC to customer without an operating system, and every computer that Gateway ships must have an operating system or a license for an operating system."
The new terms require PC makers to pay a royalty to Microsoft for every PC they sell. Even PCs without any software on them. So, if you already have software and just want to buy a barebones computer, you'll still have to pay for the software.
"Microsoft's purported rationale for this provision is that it helps fight software piracy. This rationale, however, ignores the possibility that customers may have legitimate licenses for an operating system that they obtained from other sources."
And this doesn't harm consumers?
- ComputerWorld.
Posted March 24, 2002
Is society to blame for corporate misdeeds? March 24, 2002 -
Following the Great Depression and World War II, prudence and security became paramount in America. Americans built homes, raised families, and many reasonably expected to spend their entire career working for the same company.
Reflecting this, most Ameircan corporations ran relatively low debt loads, paid small dividends to stockholders, and stock prices were very nearly stagnant. Then came the corporate raiders, who, in the 1980s, made prudence a dirty word:
"In a wave of hostile takeovers, corporate raiders showed that huge fortunes could be made by buying up undervalued and undermanaged corporations and bringing in managers ruthlessly focused on the bottom line."
The "bottom line," in this case, meant stock price. And corporate executives, fearful of losing their jobs in a takeover, changed their focus:
"A new era of shareholder-focused capitalism was born, and with it a new favored instrument for getting executives to behave more like owners than bureaucrats -- the stock option."
The irony is that anybody is surprised by the fact this proved more beneficial to the people it was meant to motivate - executives - than to shareholders:
"(William T. Allen, director of the Center for Business and Law at New York University) and others argue that stock options are essentially a one-way bet for executives that encourages them to take more risk than would a real owner. If they take a risk and it works out, they gain as much as any stockholder. But if it doesn't work out, the worst that happens is the option becomes worthless. Stockholders, however, suffer a decline in wealth."
Consequently, executives have every incentive to sacrifice long-term profitability to short-term stock price inflation. Now here's the joke: we are to blame. Not the corporate raiders, who profited at the expense of prudent employers, not the executives who embraced it as an easy route to unearned riches, nor even the institutional investors, who dominate the stock market. No, according to Jeffrey Garten, dean of the Yale School of Management, it's society's fault because, when they who have the gold made these rules, millions of Americans, through their retirement funds, chose to play by those rules rather than to have no retirement at all:
"I don't blame it all on the CEOs or Wall Street. It's the broader society that has brought on this focus on money-in-the-pocket-now and forget the long term. The nature of capitalism has been transformed and the whole society is now complicit."
Sure, and we're to blame for the exportation of jobs, too, because we buy imported products.
- Washington Post.
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February 2002
Posted February 24, 2002
Jerry Flint - Corporate welfare: March 4, 2002 issue -
Contrary to popular propaganda, corporations gobble up a lot of government money. On the surface, they do it for good reasons, like improving existing technologies. The theory is that our investment in their programs will pay back in big advances for the nation. But, like Enron and the Internet bubble, or the real estate bubble in Japan, often the big investments are a big bust:
"A few weeks ago the Bush administration said it would stop funding a ten-year-old research program with the auto industry to build an 80-mile-per-gallon family-size car. Nothing of import was discovered during that time and a dumb program was halted with only $1.5 billion of our money wasted."
To make this waste even worse, there are already cars that get that kind of mileage. But they're not manufactured by big corporations, so they are consigned to the fringe. Yet, as Honda and Toyota proved, it doesn't take government charity to advance automotive technology to the next level:
"They say the research on the 80mpg dream car brought progress on hybrid (gas-and-electric) systems. Well, Toyota and Honda created hybrids without consuming $1.5 billion of your tax money."
Unfortunately, although Bush cut off this failed program, the government will continue to waste money on other similar programs:
"The bad news is that Washington is going to waste more on trying to develop cars powered by hydrogen fuel cells. Nothing will come out of this program, either."
Government programs to boost developments necessary to national security are one thing, but dumping money into big corporate bureaucracies is generally a bad idea. Moreover, it can actually hamper real innovation by crowding out innovations developed by small companies and independent inventors. It's time to stop corporate welfare. It's bad for business, and it's bad for America.
- Forbes.
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January 2002
Posted January 7, 2002
Ana Eiras - Lack of property rights at the root of Argentine problem: January 6, 2001 -
Argentina is in meltdown and pointy fingers are pinning blame on America:
"The new leaders, members of the Peronist political party, say they know what's to blame for their woes: free-market reforms. They claim that U.S.-backed capitalism, supposedly forced upon the developing world throughout the 1990s, has failed."
Representatives of the American multinational corporate state retort Argentina never gave capitalism a chance:
"Argentina's stubborn 18 percent unemployment rate is deeply rooted in the rigidity of its labor market. Everything that in the United States is a negotiable benefit - vacations, health coverage, bonuses - is a legal mandate in Argentina. In addition, all businesses, from large corporations to the street-side booths that sell ties, face high taxes and burdensome regulations. And by keeping trade barriers high, Argentina supports a few inefficient local industries at the expense of consumers."
Ironically, however, other nations with such policies fare just fine:
"Some observers may point out the fact that some countries, such as France, Sweden and Norway, have taxes and regulations just as burdensome (if not more so) than those afflicting Argentina."
Socialist-types often hail these nations as proof a socialist economy can work. But what they, and defenders of the interests of American multinational corporate leviathans, ignore, is that their success, and Argentina's failure, are all attributable to one thing: Property rights.
"None of the countries listed above has a problem protecting those rights - and Argentina does."
Property rights are and always have been the foundation of a functioning economy and a free society. It's just that simple.
- Washington Times.
Posted January 7, 2002
William Kaliher - Are we governed by corporate interests? December 6, 2001 -
America, as originally conceived, was never intended to be a nation of serfs. Our government was meant to govern of, by and for the people. That, however, is all but a distant memory:
"The government
doesn't react based on the needs of the nation, but on the needs of those
controlling super corporations. There are many sickening examples of corporate-owned
government. The recent Goldman-Sachs bailout by the Clinton administration,
the Savings and Loans banking scandals under both political parties (John
McCain and four Democrat Senators helped steal 3.4 billion from the taxpayer
in the Charles Keating S&L alone."
This renders the concept of free trade virtually irrelevant, as American multinational corporations hamstring any effort our government might make to enforce free trade abroad:
"Japan is relatively free to block the introduction of American goods into their economy. An American government laden with corporate special interests and involvement in personal schemes by a few businessmen is unable to force fair, much less free, trade with Japan."
If the American government actually worked for the American people, solutions to such situations would be simple. But our government is governed by corporate interests, and so the situation persists:
"The current situation could have never happened with a Congress loyal to the American people."
That's the problem. Our government is not loyal to us. Worse, multinational corporations have worked diligently to undermine our best interests, with disastrous consequences:
"The overt evil they've spawned among us has resulted in a multitude of social problems. They have increased crime, reduced the educational level of Americans, and perhaps worst of all, infected many citizens with the idea, they aren't responsible for their actions and all life is beyond their control."
A reasonable person will be inclined to doubt this. Twenty years ago, I did. As a college classmate remarked, "Corporations are run by people like us, and we wouldn't do that, so why would they?" Unfortunately, the reasons are many:
"They are in cahoots with government to ship American manufacturing overseas. They strive to lower hopes and expectations for the American citizen. Their profit and power is much higher if they can develop a serf class enslaved in a socialist system."
Ironically, it doesn't take evil intentions or some mad genius intent on world domination to drive corporations down the path of anti-American activity. All it takes is Adam Smith's "invisible hand" of self-interest to motivate corporate officers who are otherwise fine people to push policies that are good for their companies but bad for the rest of us. So what can we do? What should we do?
I don't know. It's a big question with a very complicated answer. But I do know this: it is entirely reasonable for Americans to demand a Congress that is loyal to Americans, and an American government that puts American interests first.
- EtherZone.
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