The rise of the corporate colossus is a giant problem
economist.com
economist.com
When big banks had problems, the solution was to make even bigger banks and giving them free money in order to look good.
They take savers money with negative interest rates and give it free to big banks and companies like Google, Microsoft or Deutsche Bank.
Given that if you(as a person or small company) ask a bank for money you will have to pay 20% interest rates or so, this is a tremendous advantage for them.
Big companies have free money because they can ask for a loan and give back later less that what they took after inflation!!!
This means big companies could buy the competition instead of competing with them , like facebook with wassapp, with stock, being cheaper than having their overvalued stock go down with competition.
It also means big companies could buy their own stock in the market and pump up their value, making the stock acquisition cheaper and increasing board bonus(from stock owners) look reasonable.
Central banks and politicians are obliterating middle class and business owners. This is a terrible thing because History teach us this always happens before a (violent)revolution.
But instead of giving temporary safety nets to protect those regular people - while weathering the storm of a recession and rebuilding the system into something better, an evolution of sorts - the US gov went head and gave safety nets to the big corps and maintained the status quo of the last generation.
Which allowed the type of behaviour your talking about to flourish.
Basically the government and financial power players kicked the can down the road for the next generation to experience the effects of competitionless financial exploitation. The priority was (and is) valuing the financial industries short-term health over the organic growth of business, the flow of capital to things that create jobs (aka small/medium businesses which employ 90% of people), and long term wealth generation.
I personally don't find it surprisingly that it took 8 years for median incomes to rise again while the top tier upper class has been doing absolutely fine since the crash. This was by design of a liberal democratic administration.
Yet regular people are in no better position to deal with the next recession (particularly economically and to a lesser extent socially as US health care is slightly better but still embarrassingly bad) and the same people who caused the last one have likely been given better jobs, raises, and positions of power from which to influence on the next political administration.
Here's what they sold in February 2016, for example (annual inflation was 1.0%):
- $500 million in 1.3% two-year notes issued at a spread of 60 basis points over similar-maturity Treasuries
- $500 million in three-year FRNs (floating rate notes) issued at three-month LIBOR + 82 basis points
- $1.0 billion in 1.3% three-year notes issued at a spread of 60 basis points over similar-maturity Treasuries
- $500 million in five-year FRNs issued at three-month LIBOR + 113 basis points
- $2.25 billion in 1.7% five-year notes issued at a spread of 80 basis points over similar-maturity Treasuries
- $1.5 billion in 2.25% seven-year green notes issued at a spread of 105 basis points over similar-maturity Treasuries
- $2.0 billion in 2.85% ten-year notes issued at a spread of 135 basis points over similar-maturity Treasuries
- $1.25 billion in 3.25% 20-year bonds issued at a spread of 150 basis points over similar-maturity Treasuries
- $2.5 billion in 4.5% 30-year bonds issued at a spread of 190 basis points over similar-maturity Treasuries
http://marketrealist.com/2016/02/investment-grade-corporate-...
In 2014 the top three firms in Silicon Valley, with a market capitalisation of over $1 trillion, had only 137,000 employees.
360 billion* divided by 1.2 million = 300000 "per employee". Typical salary to 40,000ish-100,00ish range for laborers/engineers. The disparity in those numbers isn't so bad at all.
Conversely, 1 trillion divided by 137000 = 7,299,270 "per employee". Typical salary of engineers in those firms is closer to 100,000 to 200,000, and that's just for the golden child software engineers. And without accounting for massive cost of living differences between 1990 Detroit and modern day SV.
Which wouldn't be so bad if there were some engineers earning close to or more than the "per employee" numbers, but I've never heard of anyone making even close to 7 figures as an engineer at a big firm...
* I think you meant 360 bn, not 36 bn, right?
"None of this helps the image of big business. Paying tax seems to be unavoidable for individuals but optional for firms. Rules are unbending for citizens, and up for negotiation when it comes to companies. Nor do profits translate into jobs as once they did. In 1990 the top three carmakers in Detroit had a market capitalisation of $36 billion and 1.2m employees. In 2014 the top three firms in Silicon Valley, with a market capitalisation of over $1 trillion, had only 137,000 employees."
Chrysler.
On the one hand, we had a few decades of unprecedented sharing of prosperity. Those times have ended.
On the other hand, the unions have become their own sclerotic system of oppression. The greater pity, they do not see it that way.
Especially once all this “deregulation” has finished. Actually, it was not deregulation, but divestiture of public services to the plutocrats. Barely any regulations have been removed.
Now we have basic services supposedly available on a free market, but in practice there are so many requirements that it’s all crony capitalism. And one of the major powers fighting for its share of the bureaucracy and waste is the unions. That’s one reason why it costs so much and takes so long to do anything in an industry controlled by unions.
Unions are nice, but tricky to do right, and currently there are a lot of bad examples.
Whether it’s teacher unions that make sure teachers can’t get promoted for their quality, or construction unions that make sure housing can’t be built without protracted negotiations and significant expense, or transportation unions that make sure automated subways always have an operator, multiple operators in New York, or dockworker unions that oppose new technology on the (correct) assumption that they would lose jobs. Union opposition to technology was one reason why the Port of San Francisco no longer is a major shipping port; rather than some losing their jobs, everybody lost their jobs.
It’s nice if labor can partner with capital. In practice, it’s often more like a squabble for scarce resources. Sometimes you have to accept that a role is no longer necessary, but that idea doesn’t fit the union ideology.
How anyone can argue that working-class people have too much economic power today is just bizarre to me. The decrease in the share of the productivity gains to the working class and the rise in inequality tracks almost exactly with the decrease in unionization.
http://www.epi.org/blog/union-decline-rising-inequality-char...
There is an ideological component. I suspect that unions have a blind spot regarding just how important labor is. Of course there is no value to humans unless humans get their fair share of benefits out of the process. The problem comes when labor for labor’s sake becomes the goal.
Then unions tend to reject labor-saving technologies, which would work if they had a captive market. That might contribute to why unions still have such a large share of government and geographically constrained markets. But a lot of the time, the union temporarily improves the worker’s conditions, and then the capitalist moves the job overseas, or a competitor who is already overseas rises out of obscurity, or the citizens flee to the suburbs; and the next generation has a harder time finding an entry-level position to escape from poverty.
Unions also tend to discount intellectual contribution. In the United States, teachers are constantly under attack regarding their professionalism. Well, maybe we could treat them as professionals more easily if their unions allowed us to treat them as professionals. But no, they are labor, and a long-serving crank has more status than an inspirational young teacher. (Inspirational old teachers also have more status, but inspirational young teachers rarely stick around that long.)
I’m not in principle opposed to unions. I just think in notable cases they have been harmful.
So many jobs now, over work and expect over 40 hours. With no additional compensation. A majority of my contracts are flat rate. I had one role that paid half of my rate for over time.
A lot of people only down vote when they disagree to some content or questions and leave the questions and discussions somewhere else.
https://www.google.com/finance?q=NASDAQ%3AAMZN&fstype=ii&ei=...
If I'm wrong and they are still plowing money back into everything and are still throwing off numbers like this (compared to the past) ~ that's simply amazing.
even after thinking through that defense - a 191 P/E is above my understanding. I think their technology and software revenues are seen a hyper growth
http://www.marketwatch.com/story/amazon-will-account-for-mor...
https://www.internetretailer.com/2016/01/29/online-sales-wil...
Which is why the problems associated are much more about the macro-economy than they are about silicon valley. The middle class is being gutted before our very eyes while the elite gobble up more and more of the "created value" through the power of technology.
edit: it depends really too what we mean by wealth. If we define wealth as being employed, good lord wealth is zero sum. The amount of jobs the modern tech sector has created has been pitiful, with poorer compensation than many unskilled fields. If it means by possessing things, its a mixed blessing.Plenty of free or low cost content, though large staple goods like houses or cars are climbing up there.
Also, Martin Ford mentions something called the lights in the tunnel problem. Imagine a tunnel full of lights that represent the wealth of people. In the modern world, a handful of lights shine intensely bright, while increasingly more are dark, dim, or low-intensity. But the tunnel is dark, because a handful of lights can't generate enough light to make it illuminated. He used it in context of automation, but this is modern wealth creation, and eventually it will reach the point where the ones controlling the wealth have done so by dimming so many people that the tunnel goes dark.
Take into account the increase in wealth of all the customers (as they get more for their money).
There’s the matter of supply and demand. Nothing comes out of nowhere. When you create a thing, you demand some resources, and then the next person has to pay more for the same resource. Even for a creative output from yourself, you need food and shelter. (And what a controversy shelter has become, in the San Francisco Bay Area.) In the ideal case, the resources you consume enable you to create more wealth than you cost to the rest of society, and thus society benefits. (Not the now homeless person in San Francisco, though.)
Technology is sort of weird in that consumption actually decreases costs, in some situations. The semiconductor companies are paying exponentially increasing costs for state of the art fabs, and they need to keep the fabs selling at peak capacity to make a profit. Also, software is merely knowledge, with very low reproduction costs, so a small production of software can be consumed on a vast scale across the planet, and facilitate the production of more software, enriching people’s lives. This does not make it easy to reward the creators fairly.
It is sometimes. The profits "earned" by Wall Street are nearly always zero sum, for instance. They are not making other people richer.
Ford has four times the debt that it has equity. Enterprise value (debt plus equity) is a better measure.
The other thing that gets lost is jobs in the supply chain.
This may not change the end conclusion, but the existing methodology is flawed.
The roll up of banking makes it impossible for smaller enterprises to get traditional capital. We moved away from the old, boom/bust distributed banking model towards a weird form of command economy with a cartel of mega-banks, which are really just proxies for the government.
People blame technology for the post-recession economy, but I think the billions/trillions of capital the flooded the market never made it into the economy. No wonder little is happening outside of businesses that work with a venture model.
A friend of mine ran a 4th generation, profitable manufacturing business and ended up shutting down not because of costs or competition, but because it was increasingly difficult to get working capital when the regional financial institutions were rolled up.
It's today's very low interest rates that fuel "private equity", which is usually debt at some level.
* The five largest banks account for 45% of banking assets, up from 25% in 2000.
* About 30% of global foreign direct investment (FDI) flows through tax havens; big companies routinely use “transfer pricing” to pretend that profits generated in one part of the world are in fact made in another.
Most of the regulations doesn't actually directly cost to comply with, but you'd need more staff or dedicate more time to things that are not your core business - that's money out of the pocket.
Uh, isn't that "move" enforcement of the results of multilateral negotiation (the EU and its rules)? What exactly will or should happen when parties of these multilateral negotiations and agreements the column champions violate the rules? I'm guessing it'll resemble a "retrospective tax" so closely that it'd be hard to tell the two apart.
Well in that case, shouldn't it actually be Ireland that got fined instead of retroactively taxing Apple?
(I didn't downvote you).
For example, when Real Madrid was found to have been unlawfully subsidized by a local Spanish government earlier this year (they were given €18.4m as compensation for a land transfer that fell through), they were ordered to repay the €18.4m [1].
In this context, multilateral means engaging at least a majority of the biggest economies on the planet. The EU solo-ing it is unilateral, just like the US solo-ing it would be unilateral, even if we described US law as agreed upon by 50 member states.
"In the Game of Crony Capitalism, you lobby or you die."
Moreover, there is a difference between a plausible theory and showing actual causation. How is lobbying helping Amazon and Wal-Mart to replace smaller retailers? Point to something concrete. Because it looks like the real explanation is the massive efficiency advantages those big firms possess.
Looking at other sectors of the economy: why are Apple and Samsung taking almost all of the profits in the smartphone industry? Are they better at lobbying the "Regulatory State" than HTC or Nokia?
Superficially, that appears to be a decrease in regulatory activity. But it's one that obviously favors consolidation, and probably has the support of a lot of big-company lobbyists.
So the reality is more complex, I think, than either you or BurningFrog are suggesting.
[0] http://washingtonmonthly.com/magazine/marchapril-2010/who-br...
Consider that the tax code[1] in 1984 was 26,000 pages long. By 1995 it was 40,000 pages. And by 2013 it was 70,000 pages.
1. http://finance.townhall.com/columnists/politicalcalculations...
Indeed, increased pages of regulations is as much evidence of decreased regulatory authority as the opposite. In the 1940s and 1950s, agencies regulated top-down pursuant to broad discretionary standards that could be summarized in a few pages. Today, agencies have to issue detailed regulations, justified by years of analysis and tens of thousands of pages of records, to change the lightbulbs.
I don't have time to put together a great convincing case, so I'll just say that this is very different from my view. Some high level regulations have been removed, sure, but meanwhile almost every corner of life now has regulations and regulators that have to be obeyed and asked for permission.
It would be nice to have some kind of objective measure(s) of the overall level of state regulation, rather than trade anecdotes/gut feels. Some economist has probably done that already.
I handle appeals in regulatory cases, so I have occasion to research historical regulatory treatment of different areas. It's really eye-opening to go read ICC, FCC, or FERC opinions from the 1940s and 1950s and compare them to ones from today. Agencies back then had vast powers: they could deny entry of a competitor into a market if they felt it would harm the revenues of incumbents. If you were an air carrier, you had to publish your prices, and if the agency did not like them it could impose prices on you. Those agencies are a shell of their former selves. Agencies used to have to power to structure industries top-down as they saw fit. Today, they might have thousands of pages more regulations covering various minutia, but nobody is going to build a "corporate colossus" lobbying to influence agency treatment of minutia.
We deal with hazardous chemicals, highly flammable gases and markedly unsafe working conditions.
Me and the rest of the people like me get an inspection once a year from the fire department to make sure minimum standards are kept (to ensure the safety of firefighters if they ever enter). tanks are tied up. flammables are kept in closed cabinets.
We pay the city around $100 a year in fees tied to volume of hazardous materials. Otherwise they leave us completely alone. We have to keep track of whether sales are retail or come with a resellers cert from the state.
When we have extra work, I bring in guys under the table. If I had real employees I would have to have additional insurance, and pay the city mandated minimum wage - which is a lot less than market value for a semi-skilled fabricator.
Its completely* anecdotal, but this boogeyman of massive regulatory burden doesn't seem to be universal. From my tiny little patch I'm free to fail or succeed without any state interference.
It's rarely/never that from the independent perspective of the advisor to the company...
Not to turn this into a political discussion, but these same small business owners share a similar political leaning and are mostly parroting the canned narrative they hear on their respective talk channels...
And of course the people who previously were favored see this as new and invasive interference, because they had grown so used to being the favored parties that they simply took for granted that "free market" = "system rigged in my favor".
If you honestly believe that about the US, you should visit Germany.
Without government don't you get the the same place faster?
A democratic republic is ruled by advertisers - the ones best able to persuade the public.
In reality there is really not that much difference between government and large enterprises. Funny enough that can also be reconciled with the libertarian dream, perhaps by simply viewing bits of the government as extensions or private enterprise. So FDA is a subsidiary of Monsanto, FCC of Verizon and so on.
So what is the fastest and easiest way to make a most profit - change regulatory environment, lobby, and so on.
This works for large companies and down to individuals as well. We just saw in latest DNC leaks, there is a price you pay and you get named ambassador in some picturesque European country.
That is not how I understand libertarianism. It is not that government is bad. But that government's role is to be the rule maker and referee. The government should not be playing the game.
Rather than "regulate" a large company, the government should make sure the rules don't hinder competitors. Ultimately, it is more competitors each trying something different that drives price down and quality up.
https://mises.org/sites/default/files/15_3_3.pdf
and Debt: The First 5000 Years by David Graeber
Conceiving of the government and private enterprise as separate entities really doesn't make sense. They both exist as a matter of energy and resource economy (in the sense of managing resources). They're adversarial and mutually beneficial, as is pretty much anything in any ecology.
My argument was that the non-regulatory/voluntary solution would be for customers to demand from manufacturers/sellers to provide nutritional data, else they'd contact/buy from another manufacturer/seller.
> But isn't the non-regulatory solution here to just not buy products
> without nutritional data if so?
So the race to the bottom and offering the lowest common denominator is what happens, not "competition ensures we get the best". Customer choice and competition between sellers are only two among many many more forces. It works in the simplistic model of how "capitalism" is supposed to work because - it's a model.
I unfortunately don't see how that changes anything I've said. My only contribution was to offer a supposedly non-regulatory solution could be, I have put no value in if it's a good or bad solution.
Given your feedback, I take it that you do not consider it to be a good solution - that is fine.
To discuss your feedback, I do agree that there can be and often are information shortages on both the buying and selling side, although we do seem to disagree on the influence individual and group choices (ie. power) can have or have, where I think they're more powerful and influential than what you might think. When it comes to group choices, there have been many successful purchasing associations and voluntary certification organizations through time.
I think this would be absolutely brilliant. The ability to readily move data from one service provider to another would provide a much-needed boost for competition in the digital space.
I don't know how common it is, but at least in Finland one can move their mortgage from one bank to another if they get a better deal elsewhere [1]. Or, one can move their mobile phone subscription and keep the old number. I find these kinds of service transfer entitlements essential for efficient competition.
[1] Or technically: one can always pay their Euribor bound mortgage off without extra cost, and take a new mortgage from another bank.
Basically, it should be clear that all data connected to a person is irrevocably theirs. Any provider can build services for taking advantage of the data -- but it'd be the user's right to migrate it at their pleasure.
We need something like what happened with OpenID and Oauth. OpenID may be gone, but one company made a few bucks on it and OAuth is largely inspired by it. Someone needs to find a way to make a buck moving profile data around in a meaningful way then that becomes a de-facto standard that gets copied and used all over.
Then the government can regulate something that already exists rather than regulate something shitty into existence.
Of course this wouldn't lead to any magical inter-operation of services, but that wouldn't be the point anyway.
This kind of grinds me. There are tons of tax breaks for individuals: mortgage interest deduction, tax-free health care, etc. In fact, the exclusion of health care benefits from taxation costs the government more than all corporate tax avoidance schemes put together.
Why do you consider the mortgage interest deduction an abomination?
EDIT: It's since been restored; thanks!
Centralization is a big problem whether you have a mainly cooperative system like communism or a competitive one as in capitalism.
Decentralizing technologies can help us get systems that are distributed, diverse, and free to evolve but also capable of holistic measurement and operation.
Such as bitcoin, ethereum, NDN, swarm, Namecoin, 3d printing, etc.
I'm not sure what the specific problems are. Which makes prescribing a fix impossible.
And the consumer can't always go elsewhere - there may be no viable competition, or that competition gets bought by the larger company for what is essentially pocket change.
Too big to fail = too big to control
You have to have significant resources to break free from local restraints, which is really unfortunate. It's also a lot of resources that gets spent, just so people or companies can do whatever they want with their own resources. In other words, it's possibly a loss of production - those resources could have gone elsewhere.
Please be gentle, I'm open for discussing these things.
but indeed that they are out of control: they can remove money from an arbitrary economy and not necessarily put it back (see apple that sitting in an incredible amount of cache) => (they dont need to hire people locally.. at least not as much) => they -at the moment are- making poor countries/people even poorer, rich ones even richer => they have more and more power in less and less hands
Starbucks is headquarted in the United States. Their research in Canada. Their beans from Columbia. European distribution is out of Germany. London finances new franchises. A location in France sells a latte for 4€.
How much of that 4€ is profit and how big of a slice does each country get? Because each country has a very fair claim to say that they deserve a slice of the profit pie.
It's impossible. There is no single answer. There is no moral system that precisely describe to which countries go which dollar.
It seems that every country that use them decide to apply them in addition to income taxes. And that means the VAT is never big enough, and there is no political climate to gradually replace one with the other.
In theory, a VAT, land taxes, and universal income should form the perfect taxation system together.