Tag Archives: Capital

How The OECD Wants To Make Globalization Work For All

By Ronald Janssen – In its key issues paper for the Ministerial Council, the OECD recognizes that the frictional costs of opening to world trade have been much higher than so far assumed.

Workers losing their job because of competition with low wage economies were supposed to find new jobs elsewhere and do so quickly because the same process of globalization would be pushing up overall national income.

The OECD now openly admits that this assumption was wrong.

A second critical stance is taken on what the OECD calls a ‘plausible’ link between globalization and rising inequalities. Here, it explicitly admits that globalization has weakened the bargaining power of labor in advanced economies, invoking the threat of cheap import competition from low wage countries as well as that of moving investment and production there.

Trade and investment deals are often rushed through parliaments when all details have been negotiated, thus providing big business the opportunity to weigh on decision-making by massive lobbying of governments in the preceding trade negotiations themselves. The OECD specifically adds that ‘the cost-benefit balance of provisions such as ISDS look increasingly questionable, especially when both sides are advanced economies with low risk of discriminatory treatment of foreign investors and reliable judicial systems.” more> https://goo.gl/TM76h7

Our illusory sense of agency has a deeply important social purpose

BOOK REVIEW

The Cognitive Neuropsychology of Schizophrenia, Author: Chris Frith.

By Chris Frith – We humans like to think of ourselves as mindful creatures. We have a vivid awareness of our subjective experience and a sense that we can choose how to act – in other words, that our conscious states are what cause our behavior. Afterwards, if we want to, we might explain what we’ve done and why. But the way we justify our actions is fundamentally different from deciding what to do in the first place.

Or is it? Most of the time our perception of conscious control is an illusion. Many neuroscientific and psychological studies confirm that the brain’s ‘automatic pilot’ is usually in the driving seat, with little or no need for ‘us’ to be aware of what’s going on. Strangely, though, in these situations we retain an intense feeling that we’re in control of what we’re doing, what can be called a sense of agency. So where does this feeling come from?

Humans are social animals, but we’d be unable to cooperate or get along in communities if we couldn’t agree on the kinds of creatures we are and the sort of world we inhabit. … more> https://goo.gl/yohWCj

The Next Crisis Will Start in Silicon Valley

By William Magnuson – It has been 10 years since the last financial crisis, and some have already started to predict that the next one is near. But when it comes, it will likely have its roots in Silicon Valley, not Wall Street.

Our banks are better capitalized than ever. Our regulators conduct regular stress tests of large institutions. And the Dodd-Frank Act imposes strict requirements on systemically important financial institutions.

But while these reforms have managed to reduce the risks that caused the last crisis, they have ignored, and in some cases exacerbated, the emerging risks that may cause the next one.

These financial technology (or “fintech”) markets are populated by small startup companies, the exact opposite of the large, concentrated Wall Street banks that have for so long dominated finance. And they have brought great benefits for investors and consumers. By automating decision-making and reducing the costs of transactions, fintech has greased the wheels of finance, making it faster and more efficient.

But revolutions often end in destruction. And the fintech revolution has created an environment ripe for instability and disruption. It does so in three ways. …

Wall Street is no longer the future of finance. Silicon Valley is. more> https://goo.gl/LK6CsY

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David Brooks Is Mistaken: The Economy Is Broken

By Steve Denning – Brooks concludes blithely that “the market is working more or less as it’s supposed to.” It is therefore wrong to conclude that the U.S. economy has “structural flaws.” That is “a story that is fundamentally untrue.”

The difficulty with the argument, as Brooks well knows, is that one or two good years don’t make an era. Two years of income growth don’t undo the trauma flowing from 50 years of wage stagnation, much less lead to the conclusion that there are “no structural flaws” in the economy.

The brute fact remains that median salaries have stagnated for some 50 years. That’s the real problem of the U.S. economy that economists ought to be talking about.

When moderates deny the obvious, the disaffected inevitably turn elsewhere.

If moderates want to be listened to, they will need to take a harder look at what is going on, come up with coherent explanations for what has gone wrong, and offer plausible remedial action. more> https://goo.gl/zuoJbQ

Return of the city-state

BOOK REVIEW

Radicals Chasing Utopia, Author: Jamie Bartlett.
The End of the Nation State, Author: Jean-Marie Guéhenno.
The End of the Nation State, Author: Kenichi Ohmae.
The New Localism: How Cities Can Thrive in the Age of Populism, Author: Bruce Katz.

Nation-states came late to history, and there’s plenty of evidence to suggest they won’t make it to the end of the century
By Jamie Bartlett – To the people living under the mighty empire, these events must have been unthinkable. Just as they must have been for those living through the collapse of the Pharaoh’s rule or Christendom or the Ancien Régime.

We are just as deluded that our model of living in ‘countries’ is inevitable and eternal.

Which is all rather odd, since they’re not really that old. Until the mid-19th century, most of the world was a sprawl of empires, unclaimed land, city-states and principalities, which travelers crossed without checks or passports. As industrialization made societies more complex, large centralized bureaucracies grew up to manage them.

Those governments best able to unify their regions, store records, and coordinate action (especially war) grew more powerful vis-à-vis their neighbors. Revolutions – especially in the United States (1776) and France (1789) – helped to create the idea of a commonly defined ‘national interest’, while improved communications unified language, culture and identity. Imperialistic expansion spread the nation-state model worldwide, and by the middle of the 20th century it was the only game in town.

There are now 193 nation-states ruling the world. more> https://goo.gl/2N1bGb

The Future Of Work And The Social Welfare State’s Survival

By Steven Hill – Europe, like the United States, has seen dramatic changes in how people work. Compared to 15 years ago, many more people have part-time, temp or mini-jobs, or are self-employed.

These shifts provide a hint about the ‘future of work’, and have enormous consequences for people’s well-being, as well as for the survival of the social welfare system.

In the latest phase of this trend, more people are finding work in the ‘digital economy’, via online Web- and app-based platforms. As self-employed freelancers, some work from home, others out of the dozens of co-working spaces that populate London, Berlin, Paris, Amsterdam, Copenhagen, Hamburg, Munich and Stockholm. They don’t report to a regular workplace or employer, and have flexible work schedules, which is an attractive feature for many.

Other occupations are being ‘disrupted’ too, including food delivery, house cleaning, apartment rentals and more. These industries use ‘platform workers’, who receive customers’ orders via their smart phones or over the Web.

Silicon Valley likes to call these workers the ‘CEOs of their own freelancing business’, but that’s just techno happy talk.

In reality, many of them spend more time (unpaid) constantly looking for work than actually finding it. They also don’t have any job security or much coverage from the social welfare system. Wages for these freelancers vary a lot by occupation – those in the tech industry are high, but other occupations barely earn minimum wage. more> https://goo.gl/nL6HTq

Digital platforms—the new commanding heights?

The jury is still out on if digital platforms tend towards monopoly—and hence whether they need to be regulated tightly, broken up or replaced by state-owned platforms
By Niranjan Rajadhyaksha – Is the internet a private good, a public good or a club good? This technical question strikes at the heart of the regulatory issues that are likely to grow in importance as the digital economy expands in the coming years.

The distinction between these three categories of goods depends on two core underlying issues. First, does the consumption of a good by one person reduce its availability to others?

Second, is anyone excluded from using a good?

Why does all this matter in the digital economy? Regulatory economists are now grappling with the challenge of analysing dominant players in various parts of the digital economy. Think Facebook or Amazon or Google.

Their market shares in their respective markets would qualify as markers of monopoly in the traditional economies. Also, these digital companies have emerged as multifaceted platforms on which other participants in the digital economy operate. Economic theory suggests that such platform markets tend towards monopoly. more> https://goo.gl/rcTuPG

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Where Friedman Was Wrong

A new paper by Oliver Hart and Luigi Zingales argues that a company’s objective should be the maximization of shareholders’ welfare, not value.
By Asher Schechter – In 1970, Milton Friedman famously argued that corporate managers should “conduct the business in accordance with [shareholders’] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”

Since then, Friedman’s view that the sole social responsibility of the firm is to maximize profits—leaving ethical questions to individuals and governments—has become dominant both in finance and law. It also laid the intellectual foundations for the “shareholder value” revolution of the 1980s.

Friedman’s position has been attacked by many critics on the grounds that corporate boards should consider other stakeholders in their decisions.

Yet, if the owner of a privately held firm is under no obligation to care about anybody’s interest but her own, why should it be different for a publicly traded company? more> https://goo.gl/8y3wWZ

Who Owns the Internet?

What Big Tech’s monopoly powers mean for our culture.
By Elizabeth Kolbert – Thirty years ago, almost no one used the Internet for anything. Today, just about everybody uses it for everything.

Even as the Web has grown, however, it has narrowed. Google now controls nearly ninety per cent of search advertising, Facebook almost eighty per cent of mobile social traffic, and Amazon about seventy-five per cent of e-book sales.

Such dominance, Jonathan Taplin argues, in “Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy” (Little, Brown), is essentially monopolistic.

Taplin draws extensively on this experience to illustrate the damage, both deliberate and collateral, that Big Tech is wreaking.

“I hope this book doesn’t come across as fueled by anger, but I don’t want to deny my anger either,” he writes. “The tech companies are destroying something precious. . . . They have eroded the integrity of institutions—media, publishing—that supply the intellectual material that provokes thought and guides democracy. Their most precious asset is our most precious asset, our attention, and they have abused it.” more> https://goo.gl/aEByLX

Updates from Chicago Booth

When making a profit was immoral
By John Paul Rollert – Take the system of beliefs we commonly associate with capitalism. However familiar they might seem to us, if we date capitalism’s founding moment to the publication of Adam Smith’s The Wealth of Nations in 1776, the free-market nostrums that shape our views of business today are not even 250 years old.

In Religion and the Rise of Capitalism, a magnificent book that deserves to be better remembered, the English social critic and economic historian R. H. Tawney describes how the work of Catholic theologians in the late Middle Ages provided the “fundamental assumptions” that shaped Robert Keayne’s world and that capitalism’s proponents would later have to reinterpret, if not displace outright. Tawney said there were two central precepts that guided commercial activity: “that economic interests are subordinate to the real business of life, which is salvation, and that economic conduct is one aspect of personal conduct upon which, as on other parts of it, the rules of morality are binding.”

Taken together, these precepts are directly at odds with the central organizational assumption of capitalism, namely, that we should be guided by self-interest in commercial pursuits. more> https://goo.gl/72gRfL

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