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THE BUSINESS PAGES

April 2, 2017

THE BUSINESS PAGES

Though a lawyer with only one degree in economics, I like to think as an amateur economist that I am at least capable of being wary of business page propaganda and spin. My academic credentials are far below the caliber of brilliant economists such as Piketty and Stiglitz, my two favorite modern economists, but I can read and have a fair degree of understanding of business page chatter in re such topics as economic growth, inflation and the like, and I am growing weary of reading about how, for instance, a reduction in the corporate tax rate and a reduction in regulatory control as proposed by Trump would foster economic growth, increase employment etc. His proposal is nothing more than a front for a trickledown economics giveaway via government edict to those who don’t need it and (historically) has little to do with reinvestment of such corporate gifts in our economy (in view of tepid demand caused by wage inequality) or economic growth (also lagging due to wage inequality) and a lot to do with larger bank accounts in Switzerland or the Caymans beyond the prying eyes of the taxman. Indeed with such public largesse we know (because it has happened before) that the Dow can go up with such giveaways even when there little or even no economic growth since, after all, such increased money in the hands of the rich and corporate class did not come about through increased production of goods and services and the final arbiter of market – demand – it came about via a gift from you and me.

I have also noted that gushing headlines in the business press about a rocketing Dow or impressive dividend payouts are, grudgingly, sometimes given a paragraph at the end of such items pointing out that the real economy has not gained by virtue of such improvements in the Dow or by increased dividend payouts to shareholders, that there has been no growth or increases in production as a result etc. The headlines not only do not tell the whole story; they disguise the story with their moneyspeak tactics.

One is called upon when reading business page headlines to read (and carefully evaluate) all of such columns in the light of what one knows about other facets of the economy that are absent in such essays, like the effect of increasing inflation, for instance, which is now exceeding the Fed’s optimal forecast of 2% and which will push the Fed to continue to increase interest rates at an accelerated pace, thereby increasing the costs of loans, mortgages, credit cards and other forms of debt to consumers, which in turn will mean that ever so slight increases in median wages the business press has announced lately  will be gobbled up by inflation pricing with the result that working consumers gained nothing and non-working consumers are driven deeper into poverty.

In the real economy we make things and provide services; in the world of finance nothing is made and no services are rendered – just the provision of money, and perhaps borrowed money at that at interest by retail lenders. In theory money has no inherent value and in and of itself has no value until used; it is not value but a commonly agreed upon yardstick of value. Its ultimate value is decided by the application of labor, management and plant that make things and provide services in the world in which you and I live in a market economy which if properly managed will yield a lively demand for such goods and services.

Giving away money to the rich and corporate class is poor management of the economy since it distorts ordinary market forces and picks winners over losers not based on performance but on politics where you and I are the losers. Parenthetically, perhaps we should require that all corporate enterprises which are given tax and regulatory reductions must reduce their prices to consumers by a given percentage and thus let them share in the pain of funding such giveaways. Why should we be alone stuck with the costs? How about joint liability per some statutory formula where those who benefit are required to share the public costs of such gifts to their bottom lines? Why the “heads I win, tails you lose” treatment of taxpaying consumers? Ask that question of the senators and representatives you elected, the ones who have been and are facilitating the giveaways of your money to the rich and corporate class.

Another myth that has been pedaled by the business press is that all proposed mergers and acquisitions are good irrespective of whether monopolies are thus created which result in higher costs to consumers and lower value of the goods and services proffered to them in the absence of competition, a double whammy for consumers, i.e., less for more. The Sherman Anti-Trust Act of 1890 is now more known as an historical event rather than having any real application in these days of corporate purchasers of their competition. Big business has had a great deal of success in backing off government attempts to apply Sherman to their mergers and acquisitions via “campaign contributions” to their congressional toadies who now have a statute which gives Congress the power to override regulations and as a practical matter to themselves make a do-over of such regulations which, when added to the power to slash budgets, has virtually politicized the regulatory scheme. I personally prefer to have agency experts rather than insurance agents in Congress from some gerrymandered district in Nebraska or Kansas come up with regulations appropriate to a particular agency’s functions, whatever party is in power, since this is not a matter of political power but an exercise in housekeeping in which all of us should be interested.

Finally, and as mentioned above, most everyone dances around the real problem in this economy, a problem that we have had for some forty years, and that is wage inequality. Economists such as Piketty and Stiglitz are very aware of the problem and have written extensively about it. Corporate America doesn’t want us to talk about what our most severe problem in rescuing an underperforming economy is because if  the overall wage scale is raised by, say, 50%, and we redefine our so-called minimum wage scale as a living wage there would be increased costs which are drags on corporate bottom lines.

What they are not telling us is that aggregate demand is the final arbiter of a market economy’s health, and that it and it alone is what makes a market economy hum. As John Maynard Keynes wrote long ago, our problem in making market economies work at optimum levels has to do with under-consumption  (lack of demand), so why do we adopt policies under the guise of austerity economics that foster such lack when we know that greater demand leads to economic growth and prosperity for all?  In plain terms, it’s because corporate America doesn’t really care about economic growth; they’re doing just fine in this underperforming economy without risking increases in investment in building new plant and increasing employment in a market where not enough people currently have the money to buy their goods and services, especially since they can manage the political component with “campaign contributions” and get raises in their stock values and bottom lines via lower taxes and less regulation of their activities without assuming such risks, all at an ultimate and unshared cost to you and me as underpaid servants of the rich and corporate class.

In the final analysis, it is you and me who are giving the rich and corporate class periodic raises by way of so-called tax reform and reduced regulations, and I for one object. Can’t they or anyone see and understand that an end to wage inequality would trigger a much greater demand for their goods and services so that their relative profit margins (especially with increasingly automated efficiencies) would enhance rather than constitute a drag on their bottom lines? I can, and perhaps if they had a change of heart and campaigned for an end to wage inequality and their markets were booming they would not be always running to the politicians via their lobbyists with checkbooks in hand for tax cuts and other goodies. Meanwhile, I (and I hope you) agree that presently, and contrary to Trump’s proposal for tax cuts and business page propaganda, it is NOT better to give than receive. We have given enough.    GERALD       E

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