Goldman Sachs just completed an analysis of corporate payouts and found that dividend and stock buybacks were 103.8% of their free cash flow. Meaning that they were paying more out in cash than they had on hand! Free cash flow has dropped to – 15 %, while debt is up 8 %.
This squeeze is unprecedented, it is the worst cash flow crisis since 1980, and is unsustainable. Corporate executives have turned to extremely high borrowing levels to keep this financial merry-go-round going. While, turning to stock buybacks to hype the price of their stock and keep earnings per share high to the tune of $1.5 trillion by S & P 500 companies in the last year.
If sales and profits drop due to the trade war and consumer spending declines as it has in the last four months, corporations will default on their debt. A downward economic spiral will be triggered.
Maybe this is another reason the Fed announced a cut in interest rates and shift to an ‘inflation averaging framework’. JPMorgan recently commented to Marketwatch they believe Fed economists are shifting to a position of not worrying about inflation but instead on keeping money flowing to corporations at low interest rates possibly to zero. By keeping rates super low the Fed is enabling executives to waste profits on stock buybacks to hype their pay and stock price. We need strong companies making investments in research, development, innovation, productivity improvements and raising wages for workers. When the economy works for all then democracy is strengthened.
The financial music will stop when sales and profits decline, an already desperate cash flow position becomes untenable putting company viability in doubt. Looking out a year or two, we expect the Fed to come to the rescue after possible zero interest rates have panned out. Last March, former Fed Chair, Janet Yellen recommended that the Fed be authorized to purchase corporate stock and bonds to keep the economy going if a recession hits.
Technology is constantly pervasive in our lives. Let’s think for a moment about how one incredibly pervasive technology has changed the way we live twenty four hours a day. The Internet was built by the Defense Advanced Research Projects Agency (DARPA) contracting with universities and research centers to build a powerful internetworking protocol and network for the military research and communications beginning in 1969. The network evolved with more research centers and government organizations using the system for communication and joint projects. By the mid 1990s the Internet was opened to the public primarily for email, though soon websites and messaging systems were established. Commercial common carriers were offered government contracts to provide more communication network support and services. In 1993 the Internet provided 1 % of all two way communications, by 2000 51 % of all communications were over the Internet, then growth exploded to 97 % of all telecommunications information in 2007. As recently as 25 years ago there were no companies like Facebook, Netflix, Google, Twitter, eHarmony, LinkedIn, Instagram, Amazon, et al. Yet, these companies were allowed to grow into behemoths largely unregulated with young entrepreneurs maximizing profits not focused on the public trust.
Just
twenty-five years later just about everything in our daily life is changed,
from task assistants like Siri, dating with eHarmony, finding a job via Linked
In, searching for answers on Google, watching on demand movies in our homes via
Netflix, sharing photos via Instagram and taking a picture on our smartphones
and sharing it with our friends via Facebook.
Corporations embraced the Internet for new applications, channels of
distribution, low cost communications, outsourcing of work remotely and low cost
entry to new markets.
Along with all these applications, democracy pundits had visions of a more engaged electorate, citizen forums, exchanges of ideas, more facts based discussion, online referendums on key issues and more responsive government. It certainly has not worked out that way, corporations give hundreds of millions of dollars to congressmen and senators, there is certainly more dialog via blogs and websites in the millions – but do we see more heat than light? Plus, with technology gone wild; more fake videos (not the authentic video but edited words and pictures), more hate stories and posts from adversaries like Russia to influence our elections. The lowest common denominator has certainly been hit with the present POTUS and Congress in place largely not responding to the people’s opinions due to corporate and special interest group lobbying and influence from campaign financing. For instance Pew Research completed a recent poll on climate change, the existential issue of our time, where 56% of all voters view protecting our environment as a top priority for the President and Congress.
Source: Pew Research Center – 4/19/19
Instead,
we have an administration loosening targets for auto emissions to static
levels, EPA rolling back fossil fuel emission standards and wilderness preserves
being opened up to oil drilling.
We ask a fundamental question: is
technology in the instance of the Internet serving the needs of democracy or undermining
its very foundation? We will also look in this series of Saving Democracy
chapters on other technologies; automation and robots, AI and content platforms. First, we look at the backbone of the
Internet, its vast network built by the federal government, universities and
research agencies and now being subverted by corporations.
Net Neutrality – Corporations Undermine
the Common Good
Built by taxpayer money by DARPA
for military communications, next universities and research
centers, then open to the public and commercial enterprises. So, why do
companies like AT & T, Verizon, and Comcast think they should control how
Internet is offered to our people? We paid for it, as it evolved the
Internet was envisioned is new way to engage citizens in the political process
and to level the playing field for new companies.
We certainly, have seen how innovation with a
plethora of new services has emerged in the last 20 years, yet now a few giants
run the content side: Google, Facebook, Netflix, Disney and the network side
run by AT &T, Verizon, and Comcast. As the content companies merge
with networking companies we have huge companies deciding how to make more
money from a network entity that is actually a public trust built by taxpayer
money.
One way we see inequality growing is access to the Internet for many in poor, or rural regions of the country is limited in speed and services. Without Internet speedy Internet access or innovative services for universities, hospitals, and companies in these regions it is difficult for the working class to gain the skills to get a better job, or companies to compete with their high speed competitors. Investment is declining in some regions of the Midwest and South due to poor Internet infrastructure which means fewer jobs for people living in the area.
Source: ISSR – 12/20/17
An analysis in December, 2017 by the ISSR shows that over 177 million Americans would be left without protection if the net neutrality policy were reversed. Note all the light yellow regions of the country that have no broadband provider at all. Orange and red regions have providers who have violated net neutrality rules. Without high speed Internet access these mostly rural regions are left to declining investment, fewer jobs and poorer health care.
Next Step:
The Internet backbone network is really a Common Good. It is a utility, not a platform for companies to make profits and take control of access, speed and content which was the original purpose in designing the Internet as a peer to peer protocol rather than hierarchical.
The present GOP administration
installed a company lobbyist as chair of the FCC who immediately decided that
the network neutrality doctrine of the Obama administration should be
overturned, giving control to for profit entities to charge whatever they
wanted for speedy access or content. It
is as if we turned the interstate system of freeways over to GM, so GM could
give special lanes to GM cars and the others would have to go in slower lanes.
No, we don’t see the Common Good being
protected by a for profit doctrine, the profit policy just can’t do the
job. In July, 2018 when firefighters in the California Mendocino fire
went over their mobile data plan limit, Verizon throttled their data
transmission to 1/200 of the speed. After the outrage over such predatory
practices Verizon relented and will now offer all western state first
responders standard data plans without throttling. Why should they even
be able to throttle? If a user needs more data then just charge more over
a certain limit – but throttling their network speed is coercive.
Network neutrality for all content, all websites, all messaging is the just doctrine for a Common Good like the Internet built with public funds. An equal access Internet provides a critical column foundation for democracy to serve all the people not just the rich. The fact that corporations think they should be able to do whatever they want shows once again that corporations have control and power over the public interest. Their position needs to shift to supporting the public interest as priority one, not profits. We need to have the common carriers see they have a public trust, and social responsibility in operating a public Internet utility.
Worker pay continues to stagnant. Yet, companies are raising prices. The price increases are due to tariff based supplier cost increases and government tax credits juicing the economy. The Federal Reserve survey for July in the Philadelphia area showed that manufacturers plan on raising prices by 3 % versus 2 % last year.
Source: HIS Markit, Bloomberg – 8/28/18
How did companies get this pricing power? Corporations have received a $1 trillion tax cut, reduced regulations by the Trump administration, less oversight by the EPA, and less scrutiny on mergers. Companies are at the zenith of their power allowing them to raise prices, keep wages low – below inflation, while increasing profits and executive compensation.
Source Bureau of Labor Statistics, Bloomberg – 8/24/18
Worker economic power continues to wane, as real wages actually turned negative this past month. Worker share of income as a percentage of non-farm business income is at a 70-year low even in a strong economy.
Source: Bureau of Labor Statistics, Bloomberg Businessweek, The Wall Street Journal, The Daily Shot – 8/27/18
How are consumers handling the budget shortfall? By borrowing, the debt as a percentage of income of the bottom 80 % is 4 times the debt of the top 20 %.
Most of this debt is in the form of credit card, auto loans and home equity lines of credit. Home owners have done a better job keeping their first mortgages in line with incomes this year versus the housing bubble of 2008.
Next Steps:
Caught between high prices and flat real wages, consumers are filling the budget gap by piling on debt. Companies are getting even richer from both sides of making a profit – increasing income by raising prices and reduced costs by keeping worker wages low.
Why is this vise tightening on worker budgets? Corporations are accumulating power every day at an ever increasing rate; buying other companies, issuing stock backs to hype stock price, increasing lobbying budgets to get the federal government to make rules that tip their way, consolidating supply channels, distributing manufacturing world-wide and automating every job they can conceive be done by a robot. Prices are rising due to tariffs in many industries, the wide spread use of tariffs on some consumer goods, contagion of one product category to another (tit for tat) and shrinking channels of distribution reducing price competition.
Meantime, workers continue to lose power at even faster rate than corporations gain power. Wages have been stagnant for 20 years for the bottom 80 % in income. We have outlined in previous posts why wages have actually declined – rise of corporate power, fewer unions, automation, mergers in the same industry reduce the overall number of jobs, increased availability of candidates over the Internet, outsourcing, and the gig economy. Workers are getting some relief in the gig economy with lawsuits to recognize Uber drivers as employees, but it is a tough long slog through the courts. Overall, most court decisions are favoring companies in reducing union power, allowing companies to give millions to campaigns unchecked (Citizens United case) and overtime pay.
Eventually prices will rise too high for declining incomes causing consumer spending to fall. Consumer spending has been falling this year, with the most recent decline announced today, as a revised downward revision to 3.8 % in 2nd quarter.
Sources: BEA, Factset – 6/1/18
Remember, corporate executives are compensated handsomely for what? Making more profit by increasing income and reducing costs. Workers, after all the PR from executives are viewed as a cost when managers get into salary and compensation review meetings. Workers are being squeezed between low wages and increasing prices nationally to feed the ever increasing profit making systems of corporations. Until,we as a society start to see that workers need to be an equal partner in corporate management, sharing in profits and benefits things will not change. Without workers receiving a fair share of the economic pie, the common good will suffer and will lead to civil unrest and a contracting economy when consumer spending evaporates. The economic reality is that the U.S. economy is not working for the bottom 80 % and until it does we are faced with major disruptions in our economic life.
During the Mendocino fire in California last month, firefighters using the Verizon service went over their data plan limit. So, instead of helping to alleviate the problem, Verizon made it worse by throttling down their data rate to 1/200th until they switched to a new higher cost plan. Plus, they made the firefighters do the work to switch plans – doesn’t Verizon get the fact that the firefighters are a little busy saving lives and property?
Santa Clara County Fire Chief, Anthony Bowden explained, “Verizon representatives confirmed the throttling, but rather than restoring us to an essential data transfer speed, they indicated that County Fire would have to switch to a new data plan at more than twice the cost, and they would only remove throttling after we contacted the department that handles billing and switched to the new data plan,” Bowden wrote up the incident to support a law suit filed by 22 state attorney generals to stop the net-neutrality policy from being implemented by the FCC for the major carriers. Bowden noted that Verizon had throttled firefighter data rates in the past when fighting fires. A company spokesman said the throttling was a ‘customer service mistake’, and they would try to respond without throttling in future firefighting crisis situations.
Version is a huge wireless company with over 30 % of the wireless market:
Source: Statista – 2018
By size alone they command significant market power over users. With this market power comes community and public interest responsibility. When Verizon, Comcast, AT&T and others lobbied for a waiver of net neutrality provisions they said they could be trusted to protect the needs of the public and small internet users. Clearly, Verizon can’t be trusted to be a part of the community and put the Common Good over profits.
Next Steps:
First, Verizon needs to make restitution to the Santa Clara County firefighters and any other group involved in fighting the fire, by giving a credit for any increased costs and to make sure there is a hot line in place to an executive who can cut through all the bureaucracy and do the right thing. Verizon has demonstrated they are using people, even at the cost of lives and property to make a profit. Last year, the communications giant announced a $5.4 billion stock buyback program until 2020 to goose their stock price resulting in soaring executive compensation and shareholder returns. They could use some of this stock buyback money and help out all first responders!
Second, net neutrality provisions need to be restored so that common service providers are required by law to treat all users fairly no matter their size and not use predatory tactics like throttling to force users into upgrading plans. Verizon and and other common carries did not build the Internet, taxpayers did with DARPA (Defense Advanced Research Projects Agency) funds in the 1970s. DARPA built a breakthrough set of communication and HTML linking technologies with a number of universities to establish the Internet channel backbone in the United States. The government built it, it is a public service and we should not be turning control over to private companies that are not serving the public interest.
It is about time huge corporations started solving the major problems we face in protecting the security of people and build the Common Good rather than being a major obstacle when the community is facing a crisis.
Update: August 24, 2018 – Verizon announced that it would not throttle first responders to wildfires on the West Coast including Hawaii. The backlash was so strong from the Mendocino fire the firm had to respond. Too bad management did not take the opportunity to be proactive about supporting the Common Good. We appreciate the late data rate support move by the company.
The day after that EPA announces relaxation of coal burning regulations scientists announced the first time in all recorded history the ‘last ice sea’ north of Greenland has thawed twice! This assumption that ‘last ice sea’ would not thaw due to climate warming is no longer proving to be true. One scientist described the iconic ice thawing discovery as ‘scary’.
Sources: The Polar Science Center, The Guardian – 8/21/18
At the same time, global warming is causing the seas to rise by 8 inches since 1900 of which 3 inches was since 1993. Scientists predict the sea level will rise another 3 to 7 inches by 2030. Today, rising sea levels are sending property values in low tidal areas spiraling down. University of Colorado and Penn State University researchers found that homes within just one foot of being flooded from a sea level rise were selling at a 14.7 % discount compared to homes on higher ground. Analysts have totaled property price losses since 2005 for Charleston at $265 million and Miami- Dade County at $465 million. Of course this is just the tip of the iceberg when considering all the coastal properties in the U.S. – losses are in the billions of dollars.
California has experienced the highest number and most acreage of wildfires in its history. Japan sweltered under hot July summer temperatures making new records. During the summer large areas of heat pressure or heat domes scattered around the hemisphere led to the sweltering temperatures. The Canadian Broadcasting Corporation notes the heat is to blame for at least 54 deaths in southern Quebec, near Montreal, which sweated under record high temperatures. The worldwide list of new high temperatures goes on and on. The chart below shows extremely hot temperatures worldwide in a model at 2 meters above ground.
Sources: University of Maine, The Washington Post – 7/5/18
The relaxation of Obama administration clean air restrictions would possibly kill from 470 to 1,400 people per year the EPA admits. The policy shift would move enforcement responsibility to the states, and allow them to relax regulations on coal burning plants even when installing new equipment. Utilities would be allowed to use old standards when installing new equipment without having to meet higher air quality regulations. The Obama era policies were never enforced because the Supreme Court found in favor of the states who sued to overturn the tighter regulations.
Next Steps:
Enough is enough, the federal government is here to protect American lives not kill more people as a result of policy. The government’s position makes no sense, it’s time we as citizens take a stand.
As we have said in a previous post:
“we may need to look to how to make duty more of a core value in our culture and in particular business culture. As we have observed our country is essentially run by Corporate Nation States, they must change their attitude, behavior and operating practices focused on their duty to all the people not just their executives and customers. Everything a corporation does in some way impacts the Common Good. We are the people these corporations serve, and we should expect nothing less than socially responsible behavior from the executives running these huge Corporate Nation States.”
We would like the executives of these coal companies to think about the people that will get ill or die because they wanted to make more money and be ‘efficient and affordable’. What if their daughter died? How would they feel. It seems that we are back to the point we made in last week’s Common Good post we ‘use people, and love things (money)’. This policy is dead wrong, and should never be implemented. Instead, these corporations should be coming to us with proposals on how to save people’s lives and speed up the process of reducing climate warming. Maybe, these executives need to look themselves in the mirror and ask ‘who am I serving?’. Time is running out, people are being killed in the heat, economies are being destroyed. All these forces will cause civil conflict unless we act now to reverse the course of climate warming, before it is too late.
Two major steel companies, US Steel and Nucor, last March lobbied the Trump Administration to post tariffs on imported steel at 25 %. They are now pressuring the Administration to deny any requests for waivers from the tariffs. Over 1,600 applications have been filed for exclusion from the tariff provisions which blanketed the world including the European Union, Mexico, Canada, Japan and China. The two steel giants are in fact creating a monopoly for their steel products in the U.S.
Sources: U.S. Bureau of Labor Statistics, Bloomberg – 3/2/18
Nucor paid for a film by presidential advisor Peter Navarro, when he was a professor at UC Irvine on the threat of China imported steel being dumped onto U.S. markets. Certainly, there are issues related to China trade practices but is using 25 % tariffs on all imported steel even from allies going to force China to change their export practices?
Next Steps:
Companies that use steel in their products are reeling from soaring price increases in steel and sourcing issues because U.S. steel producers do not make the products they need. Elite corporate CEOs are running their companies via the U.S. government to pick winners (themselves) and losers over 1,600 companies being denied exemptions to run their businesses successfully and keep jobs here in the U.S. Now, many firms are planning on moving operations to countries closer to their customers to avoid the tariffs all together – thus moving jobs out of the U.S. It seems already the tariff plan has backfired, moving jobs out of the U.S. and jeopardizing millions of jobs. We should not be tolerating this state of oligarchy, where two major companies setup tariffs to their exclusive benefit in while damaging thousands of other companies businesses and threatening millions of U.S. jobs. It is the job of our federal government to not pick winners and losers but to establish fair markets for innovation and entrepreneurship to triumph. The tariffs need to be lifted and an intelligent trade strategy in collaboriation with our allies to end China steel dumping practices be implemented.
Place: The Lawn in Front of the Lincoln Memorial, Washington DC (It helps to have Honest Abe watching over the mixed group)
Date: Soon…before it’s too late.
Oli,
Ok, we recognize you and your team since Ronald Reagan have built an Oligarchy that stands out (not outstanding for the 90 %) as a model for the history books, based on government statistics:
1. President is a billionaire (first one) – and holds title to all his properties while in office, making money while in office (first time)
2. Cabinet of largest number of billionaires in history of U.S.
3. Corporate tax rate lowest in 50 years
4. Corporations have the most cash ever sitting in banks and offshore shelters at over $1 trillion
5. Top 1 % taxes are the lowest in 50 years
6. Top 1 % received 90 % of income gained since the Great Recession 7. The 80 % working class real wages have declined in the last 30 years – while CEO pay is 300 times the average worker’s
8. Home ownership is at lowest level in 40 yrs – renting at the highest level in 15 yrs (you’ll own more residential real estate than ever)
9. Student debt highest ever at $1.5 trillion – because:
10. Spending by state and federal government on public education secondary thru higher education is the lowest ever as per cent of GDP
12. Healthcare services costs more per person in US than anywhere in the world with life expectancy lowest of all developed countries – due to all the built in middle profit layers of insurance, drug price gauging and stock buybacks 13. Stock buy backs were at the highest level ever last quarter $431 billion, not one dime to employees or workers directly in wage increases
14. Last year had the highest average global temperature, yet the administration wants to end car emissions standards by California, drill for more oil on the coasts – fossil fuel executives are getting what they want and more 15. Tax receipts from U.S. corporations hit a 75 year low 16. The Top 1 % have 40 % of all U.S. wealth, the highest concentration since 1929
You’ve wrapped Congress around your little finger with the Tax Cut bill where 70 % of the tax cut proceeds went to executive salaries, stock buybacks, and dividends, very little into research and development, increasing productivity or job training. You promised to raise wages and very few companies did.
The American people care more about the environment and its stewardship then you’re team, 60 % in a recent Pew Research poll say that preserving the environment is more important, even if there is an economic cost. Oli, think about it, your profits won’t last long if your customers are unhealthy or dying due to pollution of the water, air or land.
Your 30 year old oligarchy has come at great cost, look at the debt increased by a magnitude from the Tax Cut you wanted and the public did not:
Sources: The Congressional Budget Office, The Wall Street Journal, The Daily Shot – 7/23/18
You’ve just mortgaged your children and our children’s future for good jobs, owning a home and good health care just to give you and your friends a huge tax cut. You and your team have the lowest corporate tax cut on record, but at great cost!
Oli, here is the issue for your team; without a thriving Working Class the value of your assets will go down. Consumer spending will spiral down unless the Working Class get a fair piece of the economic pie. When consumer spending goes down, your businesses begin losing money, their value drops and if the spiral keeps going like it did after 1929, you could lose everything.
The way to build a Working Class that you need is via a democracy – remember that from your textbooks. It looks like this: a government ‘by the people, for the people and of the people’ – Lincoln had it right.
How about lunch? How about our people meeting with your people? Our folks; Senators – Warren, Sanders, Booker and Harris, Representative Pramila Jayapal, Nick Hanauer, and Robert Reich.
Let me know who on your team you would like to invite, maybe the Koch Brothers, The Devos – as couple, Steve Mnuchin, Wilbur Ross, and five more would be a good size group.
Our luncheon wrap up takes place in the Jefferson Memorial where on the south east portico Jefferson observed we must make progress together:
“I am not an advocate for frequent changes in laws and constitutions, but laws and institutions must go hand in hand with the progress of the human mind.”
Please read our posts on the Common Good in a Democracy as a refresher on what it is and how we all need to build it again. Frankly, Oli, the Common Good seems lost right now, yet it provides the beacon to keep the ship of state on course for all the people. We need to work together to build the Common Good. Let’s – Make America A Democracy Again.
Today’s discussion of the Common Good is focused on a point that arose this week from a court case where the parents of children in Detroit sued the city school district for better teachers, classroom conditions and funding. The basis of the suit was that it was a ‘constitutional right’ that all children should have a fair and equal education regardless of income.
Unfortunately, as much as we would like to see education as a ‘right’ it is not mentioned in the U.S. Constitution or the Bill of Rights. The judge held that there was no ‘right’ to a quality education. The 14th Amendment does require states when they provide public education to offer equal access to all students – equal quality is not specifically defined. We see education as Madison and Jefferson did as a key pillar of the government where a well-informed citizenry will make wise choices about who would lead their government. We have outlined in an earlier post that we see Education as the Fifth Estate, after the Fourth Estate, The Press and the three main branches of federal government – The Executive, Congress and The Supreme Court. Then, it follows that as a country we have a duty and responsibility to ensure that all children have a equal opportunity for a high quality education and access to learning institutions.
We do not really talk much in our society anymore about duty to country – or duty at all. We are indoctrinated constantly about ‘my right’ to this and that. While it is important that we have key rights ensured by our Constitution and courts, duties need to be in balance and in many ways ensure that rights can be sustained.
What do we ask of our young people graduating from high school in regard to supporting the freedoms and rights they enjoy? Universal service for every 18 year old as they do in Switzerland, or universal military service as Israel requires? What sacrifices do we expect our people to take on at any age?
In WWII, the Korean War, Vietnam War, and Middle East Wars, American men and women fought alongside each other to ensure the freedoms we enjoy and to protect the freedom and welfare of others. The wealthy fought along with the poor as a team, to survive in a hostile environment against a common enemy. They shared this life changing experience, learned how to depend on each other to survive and discovered what they had in common. Today, young people serving in the armed forces are making sacrifices and sometimes putting their lives on the line, yet the vast majority of our forces are comprised of poor or working class men and women from rural regions of the country. We are not all sharing the duty of defense across classes.
Everyday there are citizens across classes serving our country, as many people do volunteer work in all types of ‘duty’ based work at churches, non- profits and relief groups. Some sacrifice themselves and time in environmental protection efforts that support good stewardship of the earth that we all live in and enjoy.
So, when we look to ‘get our rights’ in court, we may need to look to how to make duty more of a core value in our culture and in particular business culture. As we have observed our country is essentially run by Corporate Nation States, they must change their attitude, behavior and operating practices focused on their duty to all the people not just their executives and customers. Everything a corporation does in some way impacts the Common Good. We are the people these corporations serve, and we should expect nothing less than socially responsible behavior from the executives running these huge Corporate Nation States.
Eight-three percent of all workers are ‘non-supervisory’ workers in the Federal Reserve classification of types of workers, yet they have not seen a fair cut of the profits since 2000. Corporations have used financial engineering techniques like stock buybacks where funds are used to buy corporate stock and goose the price up. J.P. Morgan estimates that with dollars repatriated from the tax cut bill, that stock buybacks will hit a new record of $800 billion for 2018. This $800 billion is absolutely wasted on driving stock prices up while not investing in employee wages, capital expenditures, research and development, instead stock buy backs increase executive compensation tied to stock price.
Source; Real Investment Advice – 6/29/18
Since before the Great Recession wages have been stagnant for working class people, the 80 % of the workforce that make corporations prosper. The wages to profits ratio arc shows a continuing decline since the 1980s – interestingly when the GOP was telling us that ‘trickle down’ economics would bring economic prosperity to all. Instead working class families are having to take two or three jobs and borrow on their credit cards just to keep their household finances afloat.
Next Steps:
The country is run by Corporate Nation States who make the contributions, fund the campaigns and essentially buy off the legislative influence that counts in the U.S. Each year corporations spend hundreds of millions of dollars in Washington DC lobbying alone, i.e. Amazon has 94 lobbyists keeping DOJ anti-trust lawyers distracted, the FCC at bay on drones and lobby other interests to keep its juggernaut growing.
It is time we wake up to what is happening from Supreme Court decisions that favor American Express over merchants, to the GOP tax cut bill, to relaxing the Dodd-Frank rules on banking Corporate Nation States are running this country. Thebasic economic trends in America are not going to change unless we have corporate reform. Will this reform come in the form of legislation like Sen. Booker’s Dividend Reform Act or letters from investment banks to corporate CEOs like Blackrock CEO Larry Fink sent recently. We are not sure, but we need to take a path that takes on the dominant power of Corporate Nation States or we are going to see the middle class wiped out and our economy with it. After all, as we pointed out in a recent post on the Common Good, when the working class has little money to spend the rich will lose too. The working class has earned a fair share of the profits. Fair share means when profits go up by 5 % wages go up by at least 5 % otherwise the economy deteriorates like it is today deeply in public and corporate debt.
“in the end the rich will need to see that it is in their interest to build the Common Good, by contributing to our institutions of government and common people or they will lose what they already have and probably a lot more.”
(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab.)
Image: Your Little Planet
In the past week, American Express won a gag order over merchants when the Supreme Court handed down a decision that allowed the huge financial services company to require all their merchants not to tell their consumers other cards had cheaper swipe fees. Amazon announced the acquisition of Pill Pack a mail order pharmacy company, which sent financial shock waves through the drug store industry. So, it goes on, a Corporate Nation State (CNS) like American Express or Amazon have their way limiting consumers choices to reduce costs and to take over the drug marketplace with no fair market rules in place.
Corporations run our federal government by donating hundreds of millions of dollars (they have no campaign donation limits) each year to congressional campaigns through super PACs. Some CNS entities have large lobbying offices in Washington, like Amazon with 94 lobbyists knocking on Representative and Senator doors every day! Do we have an army of lobbyists twisting arms for our interests? No.
Where can we look for corporate reform to build the common good? Larry Fink, the CEO of Blackrock, a $6.3 trillion institutional investment corporation, sent a letter to 1000 CEOs of companies they invest in telling them that beyond profits they would be evaluated on how well they are taking care of the environment, responding to climate change, having a diverse workforce, and fairness with their employees. We applaud Mr. Fink’s move, and look to more investors to call upon corporate management to be held accountable for their social responsibilities.
There are corporate accountability frameworks that have been receiving widespread acceptance and government support. In the European Union a group called the Economy for the Common Good (ECG), has over 2400 corporate endorsers and almost 10,000 individuals support their effort to require corporations report on a Common Good Balance Sheet their social responsibility activities. The EU has adopted a non-binding directive requiring companies of 500 employees and ‘public interest’ to report on human rights, diversity, labor rights, the environment, health and anti-corruption measures. The report is not included with the corporate annual report and is therefore not audited.
The Common Good Balance Sheet is divided into four key accountability areas: human dignity, solidarity and social justice, environmental sustainability, and transparency and co-determination:
Source: Economy for the Common Good – 6/29/18
The ECG is now working to make actual changes in corporate behavior by focusing on gaining support for these eight issues:
universal (all values and relevant issues)
legally binding
measurable and comparable (e. g. using points)
externally audited
generally understandable (for the public)
public (on all products, websites, shop doors)
developed in a participatory process
linked to legal incentives (taxes, tariffs, …)
The first phase has been completed of their initiative to gain EU nonbinding support next they look for a binding EU directive by 2020 followed by integration financial reporting.
We need to find corporate leaders in the US that see the vision of an Economy for the Common Good, embrace it and implement its ideas in their day to day operations – while measuring the results to show it is a better way to run a business. A business can build an economy that works for all and still be a thriving profitable enterprise.
