Week-end Wrap – Political Economy – November 17, 2019

“Although the wealthy own most of the assets, the less well-off hold a disproportionate share of the liabilities. The top 10% have a relatively modest amount of debt ($633 billion for the top 1%, and the rest of the top 10% has $2.8 trillion). Meanwhile, the bottom 50% has $5.6 trillion in liabilities; the group between the top decile and the bottom half has more than $6 trillion in liabilities. In other words, the bottom 90% has total liabilities of almost $12 trillion.”

Big Business Is Overcharging You $5,000 a Year

[New York Times, via Naked Capitalism 11-11-19]

Today, his parents pay about 90 euros (or $100) a month in the Paris suburbs for a combination of broadband access, cable television and two mobile phones. A similar package in the United States usually costs more than twice as much.\

Figuring out why has become a core part of Philippon’s academic research, and he offers his answer in a fascinating new book, “The Great Reversal: How America Gave Up on Free Markets.” In one industry after another, he writes, a few companies have grown so large that they have the power to keep prices high and wages low….

Many Americans have a choice between only two internet providers. The airline industry is dominated by four large carriers. Amazon, Apple, Facebook and Google are growing ever larger. One or two hospital systems control many local markets. Home Depot and Lowe’s have displaced local hardware stores. Regional pharmacy chains like Eckerd and Happy Harry’s have been swallowed by national giants.

Other researchers have also documented rising corporate concentration. Philippon’s biggest contribution is to explain that it isn’t some natural result of globalization and technological innovation. If it were, the trends would be similar around the world. But they’re not.

Whirlpool’s 2006 purchase of Maytag is a good example. The Justice Department rationalized the deal partly by predicting that foreign appliance makers would keep the combined company from raising prices. But Whirlpool later successfully lobbied for tariffs to keep out foreign rivals. Washers, dryers and dishwashers have all become more expensive.

The consolidation of corporate America has become severe enough to have macroeconomic effects. Profits have surged, and wages have stagnated. Investment in new factories and products has also stagnated….

Wage Theft Is the Multibillion-Dollar Crime Almost No One Is Prosecuting

“But in America rent-seeking industries made one in five billionaires and explain a third of total billionaire wealth.”

This is what the net worth of the world’s elite would look like if Elizabeth Warren’s tax plan had been in effect since 1982
[MarketWatch 11-14-19]

Oligarchs are blinded by hubris, wealth and power. Their cloying sense of entitlement sees them outraged by even the most tepid reforms or mildest of criticisms. They lack empathy and compassion, along with remorse or guilt, for what is done to those outside of their tiny, elitist circles. Privilege does strange and unpleasant things to human beings…..

The repugnant characteristics of the rich are skillfully masked by armies of lawyers and publicists, a servile and intimidated press, good manners and the fig leaf of philanthropy….

As societies polarize, the attempts by reformers and moderates such as Sanders and Warren to halt the disorder, defuse the mounting hatreds and antagonisms that are increasingly expressed through violence and salvage democratic norms prove fruitless. The oligarchs do not respond to their appeals and eventually the disenfranchised lose patience with the impotence of the moderates… Extremists, no matter what their political platform, are remarkably similar once in power. And it is almost always extremists who inherit power in failed democracies….

They are no longer capitalists, if we define capitalists as those who make money from the means of production. They are a criminal class of financial speculators that rewrite the laws to steal from everyone, including their own shareholders. They are parasites that feed off the carcass of industrial capitalism. They produce nothing. They make nothing. They manipulate money. And this gaming of the system and seizure of political power by finance capital is why the wealthiest 1% of America’s families control 40% of the nation’s wealth….

Greed is bottomless. It is the disease of the rich. The more the oligarchs accumulate the more they want. This is the dark side of human nature. It has always been with us. All societies are plagued by social inequality, but when those on the bottom and in the middle of the social pyramid lose their voice and agency, when the society exists only to serve the greed of the rich, when income inequality reaches the levels it has reached in the United States, the social fabric is torn apart and the society destroys itself. Aristotle warned about the danger of oligarchies nearly 2,500 years ago.

Lambert Strether groups below story under the heading “Guillotine Watch”
“N.J. country club sues waiter over red wine spilled on member’s $30K purse” 

Lambert Strether adds:  “I wrote in comments after linking to an earlier story on Xtra, 2019-04-03:

I did a little research on XTRA Aerospace Inc., and couldn’t come up with anything. My suspicion, not founded, was that they were in fact brokers, and that (given their Latin America–adjacent Miramar location) they didn’t do anything in-house (whether repair or resale). Their owners, Wencor, are in turn owned by private equity, so I assume XTRA is crapified and looted in some way, but there’s no evidence how.”

Economics in the real world

Boeing abandons its failed fuselage robots on the 777X, handing the job back to machinists

Predatory Finance

McKinsey Faces Criminal Inquiry Over Bankruptcy Case Conduct

Do You Know Who Owns Your Debt? 

[GQ , via Naked Capitalism 11-14-19]

Many of these collectors are not the original creditors, who are required by law to “charge off” most debt—to designate it, for tax purposes, as unlikely to be repaid—after a couple of months. Nor are they debt collectors contracted to recover on the creditor’s behalf. Instead, they are debt buyers, who pay pennies on the dollar for the unpaid accounts of phone companies and gyms and hospitals, and specialize in the business of hounding people to pay them the full amount…. The average price, according to a 2013 Federal Trade Commission (FTC) report, is about 4 cents per dollar, which means a $200 credit card balance goes for $8 on the secondary market.

What consumers may not know when a debt collector calls is that many of these collection attempts are, more or less, glorified hustles. Typically, when buyers acquire a debt portfolio, what they actually get is a spreadsheet with names, addresses, Social Security numbers, and debt amounts; it might include the date of the last payment, and maybe a phone number. Portfolios are often sold “as-is,” which means the seller doesn’t guarantee the accuracy of the spreadsheet’s contents or the legitimacy of the debts. They rarely include documents like contracts or statements, either. For the most part, buyers have to pay extra for this paperwork—“media,” in industry parlance—and so decide not to bother with it. Put differently, when a collector calls someone like Maria and asserts that they definitely owe a certain sum of money, the collector is hoping to be right….

Thanks to stolen and mistaken identity cases, shoddy record-keeping, and occasional infusions of flat-out deception, consumers can get harassed for debt they paid off long ago—or debt they never incurred in the first place. The FTC estimates that each year, debt buyers try to collect more than one million debts that consumers say they don’t actually owe….

Buyers covet these default judgments because they can use them to obtain court orders to garnish wages, bypassing the middleman and drawing straight from the consumer’s paycheck to satisfy the judgment. At this point, consumers have little recourse; a bogus debt isn’t bogus if a court of law has blessed it. Collectors employing this strategy have monopolized dockets with rubber-stamped lawsuits, transforming state court systems into miniature judgment factories.

Information Age Dystopia

Google search results have more human help than you think, report finds

[ars technica, via Naked Capitalism 11-16-19]

Google relying on human intervention, and endless tweaks to its algorithms as the WSJ describes, isn’t an antitrust violation. When it uses its trove of data from one operation to make choices that may harm competitors to its other operations, though, that can draw attention.

All that human intervention and algorithmic tweaking also affects advertising and business results, according to the WSJ. Those tweaks “favor big businesses over smaller ones,” the paper writes, “contrary to [Google’s] public position that it never takes that type of action.”

The largest advertisers, including eBay, have received “direct advice” on how to improve their search results after seeing traffic from organic search drop, sources told the paper. Smaller businesses, however, have not been so lucky, being left instead to try to figure out the systems either bringing them traffic or denying them traffic on their own.

I Found Work on an Amazon Website. I Made 97 Cents an Hour.

[New York Times 11-16-19]Uber Hit With $650 Million Employment Tax Bill in New Jersey (3)

[Bloomberg Law, via Naked Capitalism 11-15-19]How Chilean Protesters Took Down a Drone With Standard Laser Pointers

Restoring balance to the economy

Copper Workers Strike to Stop Concessionary Trend

[Sidney Morning Herald, via Naked Capitalism 11-14-19]

[Researcher at the National Institute of Standards and Technology displayed an] example of advanced ultra-black technology: elaborately engineered arrays of tiny carbon cylinders, or nanotubes, designed to capture and muzzle any light they encounter….
The more fastidious and reliable the ultra-black, the more broadly useful it will prove to be — in solar power generators, radiometers, industrial baffles and telescopes primed to detect the faintest light fluxes as a distant planet traverses the face of its star.

Above left, a diamond, one of the most brilliant materials on Earth, is rendered virtually invisible after being covered with black carbon nanotubes, at right. The material created by scientists traps 99.995 percent of the light traveling to it.

Dr. Woods, right, giving a tour of his lab to Dr. Nathan Tomlin, who works in Boulder’s N.I.S.T. facility making carbon nanotubes for study.

New catalyst efficiently produces hydrogen from seawater

One way to expand the capacity of a transmission corridor is to string more or thicker wires, but it’s expensive. Power lines are heavy, and adding more wire would require building additional supports and acquiring the land on which to build those supports.

Simply sending more current through existing wires to increase the capacity of a corridor may not be an appealing way to increase capacity, either. The increased current causes additional heating within wires, which can make them sag too low, creating potential fire hazards as they droop nearer to the ground or treetops.

Building new corridors from scratch would also increase the grid’s overall carrying capacity, but this would require new land, towers, and wires, all of which are costly. For projects spanning hundreds of miles, it’s also a task fraught with political difficulties. For many people, transmission lines are unsightly and require siting structures on private property. High-profile transmission projects, such as the Plains & Eastern line that was designed to move thousands of megawatts of wind-generated electricity from the Oklahoma panhandle to the southeastern grid, have stalled in recent years due to political opposition and conflicts with landowners.

The researchers also looked into expanding capacity with technology, by switching from predominantly used alternating current (AC) to direct current (DC). The main finding of their work is that, for many corridors, converting from high-voltage AC (HVAC) to high-voltage DC (HVDC) can be the most cost-effective way to deliver more electricity. This is an option generally not considered by utility companies.

Politics

“Progressive wins in Virginia are limited as long as ‘Dillon’s Rule’ is on the books”

“‘Dillon’s Rule’ is named after a corporate railroad attorney and eventual judge named John F. Dillon. To this day, he is credited with pioneering a judicial attack on municipalities at the peak of post-Civil War Reconstruction—a time of heightened African American electoral participation following the emancipation of slaves and expansion of suffrage to African American men. His treatise argued—in reactionary fashion—that local governments only possess those powers which states explicitly grant them. This idea has morphed into a legal doctrine that blankets the nation. … Just as it was used in the late 1800s, Dillon’s Rule was a tool the State of Michigan used to successfully defend dissolving the power of half a dozen majority African American city governments after the financial crisis of 2008 (including Detroit and Flint). It has been used to defend the Alabama State Legislature’s restrictions on the governing powers of Birmingham, a majority-African American city, and other cities. Everywhere, it defines fundamental power dynamics. The rule is rigorously defended by the American Legislative Exchange Council, a conservative corporate-led, state-level policy network.”