Monthly Archives: July 2012

Ha-Joon Chang: Cutting Red Tape and Taxes Won't Create Growth

Posted on by
Reply

My blog seems to have been temporarily taken over by the Ha-Joon Chang Fan Club. Maybe it’s because he’s one of the few liberal economists who can knock back conservatives quickly and simply. Here’s another one from an April piece in the Guardian, on why the theory that “wealthy people and corporations need to be given more incentives to invest and create jobs by making it easier for them to do business (deregulation) and to keep more of the income they generate through their businesses (tax cuts)” is wrong.

On taxes:

Those who think taxes are hindrances to business do not realise that taxes do not just take but also give resources to the potential investors. With taxes, the government can (and does) provide benefits that all businesses need but are unable to provide individually, except at prohibitive costs – infrastructure, skilled workers, basic research and development, export marketing (for smaller firms) and so on. The fact that “wealth creators” do not rush to open business in Jamaica, with its 5% top personal income tax rate, or Albania, with a 10% corporate tax rate, shows that the crucial question is how a government spends its taxes, not how much it taxes.

On regulations:

Would-be red tape cutters believe that the more regulations there are, the less investment there will be. However, regulation is only a minor factor in investment decisions. Things like growth prospects, technological progress, quality of labour force and infrastructure are far more important. The truth is that, if there is money to be made, businessmen will invest regardless of the level of regulations. This is why the 299 permits that were needed to open a factory in South Korea in the early 1990s did not prevent the country from investing 35% of its income and growing at 10% per year at the time.

More importantly, many regulations are there to help business as a whole by restricting what individual firms can do. For example, in the 19th century regulation on child labour may have harmed those firms that used it, but benefited British business as a whole by ultimately making the labour force healthier and more educated. Likewise, regulations on environmental pollution or on excessive bank lending have long-term collective benefits, even if they may hurt individual firms or banks in the short run.

We could definitely use some more Ha-Joon Chang-style economists out there – and I could certainly learn a lot from him about how to do a quick takedown.

Small Businesses Create Most Jobs – If You Count a Gap Outlet As a Small Business

Posted on by
Reply

Do small businesses create most new jobs in the US? Jared Bernstein does a nice job of taking apart that myth. A long way, he tells us something I’ve never heard before: part of the answer depends on what you mean by “business.”

It turns out that there are 2 major ways to cut employment in businesses. When the Bureau of Labor Statistics is doing the counting, they count firms as businesses. But when ADP – the folks who handle payroll for a big chunk of the country – is doing the counting, they count establishments as businesses. What’s the difference?

establishments can be units of large firms, but a firm under 50 is truly a stand-alone small business. A Gap outlet with 40 employees is counted in the 1-49 size class in the ADP data — it’s a small establishment. But since Gap is a very large firm, in the BLS data, that 40-person outlet is assigned to the 500+ group.

So if someone tells you that small businesses create most of the jobs in the US, odds are that they are counting every Gap outlet as a “small business.”

Is Singapore a Capitalist or Socialist Country?

Posted on by
1

A few more fun facts from Ha-Joon Chang’s piece, for the next time somebody tells you the US should be more “pro-free-market” like Singapore:

Singapore is usually touted as the model student of free-market capitalism, given its free-trade policy and welcoming attitude towards multinational companies. Yet in other ways it is a very socialist country. All land is owned by the government, 85% of housing is supplied by the government-owned housing corporation, and a staggering 22% of national output is produced by state-owned enterprises. (The international average is around 10%.) Would you say that Singapore is capitalist or socialist?

When Is Socialism Capitalism? It Depends on What Year It Is

Posted on by
Reply

In a nice little piece by Ha-Joon Chang about Occupy London last year, Chang asks, “what does being anti-capitalist actually mean?”

Many Americans, for example, consider countries like France and Sweden to be socialist or anti-capitalist – yet, were their 19th-century ancestors able to time-travel to today, they would almost certainly have called today’s US socialist. They would have been shocked to find that their beloved country had decided to punish industry and enterprise with a progressive income tax. To their horror, they would also see that children had been deprived of the freedom to work and adults “the liberty of working as long as [they] wished”, as the US supreme court put it in 1905 when ruling unconstitutional a New York state act limiting the working hours of bakers to 10 hours a day. What is capitalist, and thus anti-capitalist, it seems, depends on who you are.

Many institutions that most of us regard as the foundation stones of capitalism were not introduced until the mid-19th century, because they had been seen as undermining capitalism. Adam Smith opposed limited liability companies and Herbert Spencer objected to the central bank, both on the grounds that these institutions dulled market incentives by putting upper limits to investment risk. The same argument was made against the bankruptcy law.

Since the mid-19th century, many measures that were widely regarded as anti-capitalist when first introduced – such as the progressive income tax, the welfare state, child labour regulation and the eight-hour day – have become integral parts of capitalism today.

So the next time tells you that Obamacare is Socialism, whack them upside the head with one of these facts.

Solidarity Upgrade

Posted on by
Reply

In reading about 99% Spring, I came across a site called Organizing Upgrade. Organizing Upgrade is a zine by left organizers who are trying to figure out how to take advantage of the Age of Obama.

It is dizzying to think about the political possibilities of this moment. There are real opportunities to make significant impact – regionally and nationally – in the context of the Obama administration. As we fall deeper into the recession, the broader public is beginning to discuss the limits of capitalism, the role of financial institutions, and the parameters of the “free market.” Obama’s election has given community organizing a new profile and broadened the number of people who might be willing to engage in organizing for social change. The mainstream is up for grabs in a way that we haven’t seen in decades. The possibilities are there, but the left and the community organizing sector need more clarity and intention to take advantage of them.

The challenges are just as vast. With the economy tanking, our communities are facing a new level of hardship. At the same time, philanthropic support for our work is shrinking. We are also seeing a rise in attacks on community organizing and intense red-baiting and race-baiting. From the forced resignation of Van Jones to the smearing of ACORN in the national media, community organizers and the left are seeing the rise of a militant and mobilized right wing. All the while, day-to-day demands of organizing work are not letting up, even as new crisis and needs surface. It can be difficult to take a moment to step back and reflect on the shifts in the broader political climate and how we need to reorient our work to meet the new climate.

Organizing Upgrade is an attempt to engage left leaders and innovators in the field of community organizing in a strategic dialogue. We hope that this project can bring the kind of inspiration, vision and strategic clarity we need to strengthen our political impact, both in our immediate fight and in our longer-term efforts to build the social justice movement and to revitalize a movement-rooted left in the United States. We hope that, by encouraging some of the leading innovators and leaders from the sphere of community organizing to put pen to paper and to speak their mind, we can develop unity and clarity about the key demands on left organizers in these times.

Over the past couple of years, they’ve had a number of sharp articles, both by organizers you might have heard about and up and comers. And now that we are heading into both Occupy Wall Street spring and the presidential election – and with it the looming question, if Obama wins what do progressives do next – Organizing Upgrade should be an especially interesting read.

Power in Coalition: Good Book on Building Union-Community Coalitions

Posted on by
Reply

If you’re interested in learning more about the nuts and bolts of what it takes to create a successful union-community coalition, you should definitely check out Power in Coalition. Written by Amanda Tattersall, the book is a detailed series of case studies of successful and unsuccessful union-community coalitions in Sydney Australia, Toronto, and Chicago. Tattersall has lots of real-world, on the ground experience in what it takes to build a union-community coalition, and it really shows in the book. Definitely worth a read.

If you want a sneak peek – or you’re feeling too lazy to read a whole book right now – you might also check out an interesting talk she gave that’s up on YouTube.

Transit Union: Building A Serious Union-Community Coalition

Posted on by
Reply

Lots of unions have built union-community coalitions – sometimes as part of organizing campaigns, other times as a temporary alliances to pass or stop particular bills. Most of these union-community coalitions haven’t lasted long as genuine coalitions. It’s not too hard to understand why: it’s pretty hard for an organization where its leaders are elected by the members & they have a real budget to consistently spend a serious amount of resources on other folks’ needs.

But in the last year, there’ve been signs that this may be changing. Caring Across Generations is bringing together home care workers and the people they care for, tying together the issues of healthcare reform, homecare workers’ rights, and immigration. And according to In These Times, the Amalgamated Transit Union (ATU) is also stepping up to the plate.

A year and a half ago, ATU began shifting resources into organizing coalitions with transit riders to support public transit. With the policy resource center Good Jobs First, ATU has held two rider organizing “boot camps” for activists and union leaders from 95 cities. Last month, those efforts entered a new phase with the launch of Americans for Transit, a new national organization backed by ATU and [Good Jobs First]. [ATU Pres. Larry] Hanley chairs Americans for Transit’s Board; GJF Executive Director Greg LeRoy is its secretary-treasurer. They tapped Andrew Austin, the former field director of Washington State’s Transportation Choices Coalition, as the organization’s founding executive director.

You might not find this that surprising. Considering the nonstop onslaught against unions with members who work for the public, its hard to imagine how they would survive without public support.

“No matter how much money we put into electoral politics,” said Hanley, “if we can’t change the attitudes of people…we’ll lose. It’s just a matter of when and how hard.”

What’s unique about this to approach is that ATU is making it a priority.

ATU’s new focus comes with a cost: a shift of resources away from organizing more drivers—public sector or private—into the union. While ATU has continued to do some new worker organizing, Hanley says, “I could go out and organize 100,000 people and spend a fortune trying to get them contracts, but what am I doing to change the overall picture by doing that? Not enough…we’re on a trajectory that has to be turned around too quickly.”

That’s not something you hear out of a union president very often.

Already, they’ve had some small victories.

Austin highlights his group’s success in getting a King County, WA Republican councilmember to back a tax increase in order to stave off a 20% service cut. He says aggressive turnout efforts, including leafleting on buses, paid off when riders formed a line “almost a mile out the door” to attend the first hearing on the issue. “The story in all the major media switched from about King County Council wants to raise your $20 car tabs to pissed-off bus riders angry about losing service…the story never went back.

It’ll be interesting to see if they can sustain this focus – and ensure that bus and other mass transit riders’ needs are taken as seriously as union member’ needs. It’s a hard balance to pull off, especially for an organization where if members don’t feel like their needs are being taken seriously, they can boot out their local president (I sometimes wonder what some of my progressive brethren who complain bitterly about union failings here would do if they faced the same pressure from the folks who write their checks). Here’s hoping for success on their new journey.

Exhibit #2346 That the Economy Isn't "Natural": Bankruptcy Law

Posted on by
Reply

Some forms of government action shape the market in ways that are slap you upside the head obvious – say bailing out the Big Three automakers. But with others, it’s easy to overlook how deeply and profoundly how politics shapes the market. In an interview about why growing inequality matters, Nobel prize-winning economist Joseph Stiglitz gives us a good example: bankruptcy law.

We care about inequality partly because we pay a high price in terms of our economic performance. We care about it also because of the impact that it has in every other aspect of our society — our democracy, our rule of law, our sense of identity or a land of opportunity — because we aren’t anymore.

The people at the top are not the people who made the most contributions to our society. Some of them are. But a very large proportion (is) simply people I describe as rent-seekers — people who have been successful in getting a larger share of the pie rather than increasing the size of the pie. …[W]e don’t understand the extent to which our economy has really become a rent-seeking economy…

Much of what goes on in the financial sector is this kind of rent-seeking… They pushed for laws like our bankruptcy laws that gave priority to derivatives. In bankruptcy, derivatives got protected and workers and everybody else has to swallow their losses. That encourages more risk-taking.

At the same time, they pushed for laws that made it more difficult for ordinary Americans to discharge their debt and (were) particularly bad for students who can’t discharge their debt no matter what happens, no matter how they have been deceived by the schools, even in the event of bankruptcy.

Sometime in the next year, I think we’re likely to see a student movement turn student loan debt into a major political issue (and my major, I don’t mean having the government not charge outrageous interest rates on education loans when interest rates are at an all-time low). When it happens, you’re going to hear plenty of Various Serious People – not to mention your uncle – saying students drowning in debt is just how it is and Very Bad Things will happen if we mess with the market. Hang onto this quote; you’re going to need it to show that bankruptcy law isn’t natural or inevitable, it’s political.

Three Weeks of Light or No Posting

Posted on by
Reply

A few years ago I came to the painful realization that it was time for me to take a sabbatical from grassroots politics and get my shit together. The first part was pretty straightforward. The second? Not so much. But after a long, tortuous path, it feels like I’m coming to a crossroads.

Going down the path I need to take is going to require all of my energy and focus. So for the next three weeks, I’m going to put aside my theory work. I’ll still post if anything grabs me. But for the next three weeks, I need to bang my head elsewhere.

Wall Street Is Even More Rotten Than I Thought

Posted on by
Reply

When it comes to Wall Street, I’m usually a the-problem-isn’t-illegal-behavior-it’s-what’s-legal kinda guy. But a recent article by Matt Taibbi blew me away. Taibbi reports on a court trial about a racket that is, as he says, right out of the Mafia playbook:

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from “virtually every state, district and territory in the United States,” according to one settlement. And they did it so cleverly that the victims never even knew they were being cheated.…

stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business.

The scam was based around corrupting the process that local government uses to borrow money. Continue reading →