Idle Thoughts
The shocking revelations about the banking industry are not shocking. It is a failed industry. It deserves to be known as a cesspit – a term used by a British regulator. The collapse of banking morality and the total absence of ethical standards within the largest banks is hardly news. But to see so many hopeless instances in such short order still defies belief.
The banks are too big. Too complex. Too corrupt. And too incompetent to be allowed to continue. Yet continue they will. They will buy off enough politicians, bully enough regulators, and employ enough lawyers to avoid being punished proportionately to the damage they have inflicted on society.
I read this morning that in the opinions of the ‘wise’ and the ‘serious’ – basically anyone who inhabits the darker corners of the media, regulation, and politics – Jamie Dimon’s job at JP Morgan Chase is safe. Why? Because the bank he runs ‘only’ lost $5.5 billion on its latest bout of stupidity. This is small enough that Dimon can survive as the chief. Such losses are too small for the regulators and shareholders to worry about. Apparently.
He should have been kicked out, but he will carry on. He gets paid a vast amount to be chief, but manages to avoid paying the price for the errors, incompetence, and outright foolishness of his team. He is a chief only when it comes to paychecks. The rest of the time he is an ignorant fool who takes no responsibility and hides from the truth.
Then again, he’s a modern banker.
How about this?
In today’s Financial Times is an op-ed written by David Cote, the CEO of Honeywell. He is calling on his fellow CEO’s to lobby hard and call on Congress to make progress on reducing the national debt. He has a five step program to that end. He tosses around all sorts of numbers, but appears to pin the blame for the debt, and the levels it will reach over the next decade, on two sources: our convoluted and messy tax code, and our entitlement programs. The latter, he says, will “crush the system as the baby boomers retire”. He makes no mention of unsustainable defense spending. I wonder if this is because Honeywell is a defense contractor? Anyway: the debt is, according to Cote, a major source of uncertainty for business and thus inhibits investment and hiring.
This is rubbish. Pure garbage.
Business investment is rising. Perhaps not sharply, but it is rising. In fact corporate investment is now back above its 2007 level. Besides, if anything is holding back corporate investment it is the lack of demand, which is a totally different argument – one that would disrupt the neat anti-debt point Cote want to make.
One of Cote’s five points is that he wants us all to support the Bowles-Simpson committee and its budget cutting proposals. No thank you. Hyperventilating about the debt-to-GDP ratio, as both Cote and the Bowles-Simpson committee do, is a waste of time. Especially when they only focus on one part of that ratio. There would be no need to reduce debt much at all if we focused on the other part: getting growth going again at historical levels would suffice to get things under control. Not that they are out of control.
Oh. And he wants his fellow CEO’s to use their power to educate employees about the dangers of the debt. These are the same folks who will bear the brunt of austerity – cutting those entitlements they are looking forward to is paramount according to Cote – so they need lots of education. Preferably education that omits any growth oriented fixes to the debt ‘issue’.
While I’m tossing out idle thoughts, here’s another FT induced temper tantrum:
A couple of days ago Andrew Hill wrote a column defending outsourcing. His message was that the Obama camp’s attacks on Mitt Romney’s record as an outsourcer/off-shorer are misguided and risk undermining the public’s confidence in outsourcing. Umm. What confidence? This is one case of the public getting it right, while the ‘serious’ folk get it wrong. I think this is because the public is generally on the receiving end of outsourcing. The sharp end so to speak.
The problem for Hill and all the business school and economics professors who line up to defend outsourcing, is that it is a technique designed to reduce costs. Usually, if not always, wage and benefit costs. The euphemism is ‘cost efficiency’. The actuality is the replacement of high wage and benefit jobs by low wage and benefit jobs. Sometimes within the US – thus outsourcing. Sometimes overseas – thus off-shoring. It is always fun to watch the business press, corporate CEO’s, and free market economists twitter on about the need for greater cost efficiency. They prattle on in their own language devoid of humanity. They emphasis the numbers. They laud the profits. They argue that cost efficiency is essential to the survival of American business. It isn’t. Cost efficiency is a way of maintaining, or increasing profit, and then ensuring that the extra wealth thus created is channelled to the benefit of capital holders away from wage earners. And since the average Joe Q. Public is a wage earner they rightly see through the entire charade and respond to populist attacks on outsourcing.
Textbooks tell us that long run improvements in productivity are the basic driving force of long run increases in standards of living. True. I agree. But capitalists don’t surrender such gains easily. It takes a lot of effort to force them to share with everyday folk via good wage increases. In the years of the Reagan/Clinton/Bush deregulatory attack on workers, capitalists have been able to avoid sharing. Big time. This is why wages have been stagnant for decades. This is why corporate profits are booming – indeed they are at almost all time highs. The Reagan/Clinton/Bush era has been a bonanza for holders of capital. It has sucked for wage earners.
No wonder people are skeptical of outsourcing and all the other neat tricks people like Romney inflict on the economy to extract wealth for themselves. The spoils run up rather than down hill.
Which brings me to one last point:
Is the upcoming election the last democratic one? Or is it the first of our new ‘plutonomy’? The oligarchs are out in force pumping money – courtesy of the Supreme Court – into the election in order to buy a result that accords them privileges in the future. The only hope that average wage earners have of carving out a decent slice of our national income is to use democracy as a weapon to force equable distribution of that income. As I said capitalists don’t give it up willingly. Their attempt to destroy our democracy is an example of that. Have we reached the end of the road for the middle class? The capitalists sure hope so.
Or maybe its all this heat addling my mind.
Yes. That must be it. Our problems will all be resolved by that nice Mr Romney. He’s going to cut taxes for the rich, gut our entitlements, and do all sorts of other essential things to get our debt down. We can look forward to a wonderful debt free existence as we eke out a living on the edges of the economy. Don’t forget: that marginal income job was created for you by one of Mr Romney’s co-job creators. You should be grateful. And show some respect. It’s hard being a plutocrat. Think of all those jobs you have to cut create.
I must have missed the point.
Because it couldn’t be about wages could it?
