Category Archives: capitalism

Greenwald sells movie rights of Snowden story to Sony Pictures

The New York Times reports: After a long, slow haul, the film rights to Glenn Greenwald’s book about Edward J. Snowden and his revelations about electronic surveillance by United States security officials have found a home, at Sony Pictures Entertainment.

Sony said on Wednesday that it had acquired rights to Mr. Greenwald’s book, “No Place to Hide: Edward Snowden, the NSA and the U. S. Surveillance State,” for the producers Michael G. Wilson and Barbara Broccoli. Mr. Wilson and Ms. Broccoli are known for their work on James Bond films like “Skyfall” and “Quantum of Solace,” both of which were released by Sony and Metro-Goldwyn-Mayer.

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Mapping a new economy

Scott Carlson writes: David Harvey would implore you to imagine life without capitalism—that is, if you can. Chances are, even if you’re puzzled by the manipulation of phantom money on Wall Street, troubled by society’s growing inequality, or disgusted with the platinum parachutes of corporate executives, you probably still conceive the world in terms of profits, private property, and free markets, the invisible hand always on the tiller.

To Harvey, a professor of anthropology and geography at the Graduate Center of the City University of New York, that world is coming to an end. In Seventeen Contradictions and the End of Capitalism (Oxford University Press), Harvey examines what he sees as the untenable elements of capital, and he analyzes how they can produce an unequal, destructive, crisis-prone system. The book represents a distillation of Harvey’s 40-year study of Karl Marx, and in its own way a bid to change the conversation about what’s not working and what’s possible—especially when many have consigned Marx to history’s dustbin.

“I was tired of hearing Marx quoted in ways that struck me as completely wrong,” Harvey says in his office at CUNY, around the corner from the Empire State Building. “Who I am writing for is, in a sense, anybody who says, Who is this guy Marx? I wanted to make it simple enough so that people could get into it, without being simplistic.” [Continue reading…]

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Averting planetary disaster will mean forcing Big Oil to give up at least $10 trillion in wealth

Chris Hayes writes: In 2012, the writer and activist Bill McKibben published a heart-stopping essay in Rolling Stone titled “Global Warming’s Terrifying New Math.” I’ve read hundreds of thousands of words about climate change over the last decade, but that essay haunts me the most.

The piece walks through a fairly straightforward bit of arithmetic that goes as follows. The scientific consensus is that human civilization cannot survive in any recognizable form a temperature increase this century more than 2 degrees Celsius (3.6 degrees Fahrenheit). Given that we’ve already warmed the earth about 0.8 degrees Celsius, that means we have 1.2 degrees left — and some of that warming is already in motion. Given the relationship between carbon emissions and global average temperatures, that means we can release about 565 gigatons of carbon into the atmosphere by mid-century. Total. That’s all we get to emit if we hope to keep inhabiting the planet in a manner that resembles current conditions.

Now here’s the terrifying part. The Carbon Tracker Initiative, a consortium of financial analysts and environmentalists, set out to tally the amount of carbon contained in the proven fossil fuel reserves of the world’s energy companies and major fossil fuel–producing countries. That is, the total amount of carbon we know is in the ground that we can, with present technology, extract, burn and put into the atmosphere. The number that the Carbon Tracker Initiative came up with is… 2,795 gigatons. Which means the total amount of known, proven extractable fossil fuel in the ground at this very moment is almost five times the amount we can safely burn.

Proceeding from this fact, McKibben leads us inexorably to the staggering conclusion that the work of the climate movement is to find a way to force the powers that be, from the government of Saudi Arabia to the board and shareholders of ExxonMobil, to leave 80 percent of the carbon they have claims on in the ground. That stuff you own, that property you’re counting on and pricing into your stocks? You can’t have it.

Given the fluctuations of fuel prices, it’s a bit tricky to put an exact price tag on how much money all that unexcavated carbon would be worth, but one financial analyst puts the price at somewhere in the ballpark of $20 trillion. So in order to preserve a roughly habitable planet, we somehow need to convince or coerce the world’s most profitable corporations and the nations that partner with them to walk away from $20 trillion of wealth. Since all of these numbers are fairly complex estimates, let’s just say, for the sake of argument, that we’ve overestimated the total amount of carbon and attendant cost by a factor of 2. Let’s say that it’s just $10 trillion.

The last time in American history that some powerful set of interests relinquished its claim on $10 trillion of wealth was in 1865 — and then only after four years and more than 600,000 lives lost in the bloodiest, most horrific war we’ve ever fought.

It is almost always foolish to compare a modern political issue to slavery, because there’s nothing in American history that is slavery’s proper analogue. So before anyone misunderstands my point, let me be clear and state the obvious: there is absolutely no conceivable moral comparison between the enslavement of Africans and African-Americans and the burning of carbon to power our devices. Humans are humans; molecules are molecules. The comparison I’m making is a comparison between the political economy of slavery and the political economy of fossil fuel.

More acutely, when you consider the math that McKibben, the Carbon Tracker Initiative and the Intergovernmental Panel on Climate Change (IPCC) all lay out, you must confront the fact that the climate justice movement is demanding that an existing set of political and economic interests be forced to say goodbye to trillions of dollars of wealth. It is impossible to point to any precedent other than abolition. [Continue reading…]

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The overwhelming power of money in American politics

Al Jazeera reports: It’s not just your imagination: The influence of money in politics has indeed drowned out the voices of American voters, a new analysis shows, with runaway corporate lobbying and a lack of campaign finance reform to blame for giving much more political weight to the wealthy.

Researchers at Princeton University and Northwestern University compared the public’s influence on 1,779 policy issues between 1981 and 2002, finding that more often than not, the interests of wealthy groups and individuals won out over the demands of the general public. For instance, when 80 percent of the public asked for a change of some sort, they got their way only about 43 percent of the time.

The study, its authors say, points to the overwhelming power of wealthy lobbying groups and individuals backing certain interests in American politics, and the marginalization of voters and public advocacy groups.

“I expected to find that ordinary Americans had a modest degree of influence over government policy and that mass-based interest groups would serve to promote those interests,” Martin Gilens, a political scientist at Princeton and a co-author of the study, wrote in an email to Al Jazeera.

“What we found instead was that ordinary Americans have virtually no influence over government policy and that mass-based interest groups as a whole do not reliably side with the wishes of the average citizen.” [Continue reading…]

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Killing of environmental activists rises globally

The Associated Press reports: As head of his village, Prajob Naowa-opas battled to save his community in central Thailand from the illegal dumping of toxic waste by filing petitions and leading villagers to block trucks carrying the stuff — until a gunman in broad daylight fired four shots into him.

A year later, his three alleged killers, including a senior government official, are on trial for murder. The dumping has been halted and villagers are erecting a statue to their slain hero.

But the prosecution of Prajob’s murder is a rare exception. A survey released Tuesday — the first comprehensive one of its kind – says that only 10 killers of 908 environmental activists slain around the world over the past decade have been convicted.

The report by the London-based Global Witness, a group that seeks to shed light on the links between environmental exploitation and human rights abuses, says murders of those protecting land rights and the environment have soared dramatically. It noted that its toll of victims in 35 countries is probably far higher since field investigations in a number of African and Asian nations are difficult or impossible. [Continue reading…]

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Occupy was right: Capitalism has failed the world

Andrew Hussey writes: The École d’économie de Paris (the Paris School of Economics) is actually situated in the most un-Parisian part of the city. It is on the boulevard Jourdan in the lower end of the 14th arrondissement, bordered on one side by the Parc Montsouris. Unlike most French parks, there is a distinct lack of Gallic order here; in fact, with lakes, open spaces, and its greedy and inquisitive ducks, you could very easily be in a park in any British city. The campus of the Paris School of Economics, however, looks unmistakably and reassuringly like nearly all French university campuses. That is to say, it is grey, dull and broken down, the corridors smelling vaguely of cabbage. This is where I have arranged an interview with Professor Thomas Piketty, a modest young Frenchman (he is in his early 40s), who has spent most of his career in archives and collecting data, but is just about to emerge as the most important thinker of his generation – as the Yale academic Jacob Hacker put it, a free thinker and a democrat who is no less than “an Alexis de Tocqueville for the 21st century”.

This is on account of his latest work, which is called Capital in the Twenty-First Century. This is a huge book, more than 700 pages long, dense with footnotes, graphs and mathematical formulae. At first sight it is unashamedly an academic tome and seems both daunting and incomprehensible. In recent weeks and months the book has however set off fierce debates in the United States about the dynamics of capitalism, and especially the apparently unstoppable rise of the tiny elite that controls more and more of the world’s wealth. In non-specialist blogs and websites across America, it has ignited arguments about power and money, questioning the myth at the very heart of American life – that capitalism improves the quality of life for everyone. This is just not so, says Piketty, and he makes his case in a clear and rigorous manner that debunks everything that capitalists believe about the ethical status of making money.

The groundbreaking status of the book was recognised by a recent long essay in the New Yorker in which Branko Milanovic, a former senior economist at the World Bank, was quoted as describing Piketty’s volume as “one of the watershed books in economic thinking”. In the same vein, a writer in the Economist reported that Piketty’s work fundamentally rewrote 200 years of economic thinking on inequality. In short, the arguments have centred on two poles: the first is a tradition that begins with Karl Marx, who believed that capitalism would self-destruct in the endless pursuit of diminishing profit returns. At the opposite end of the spectrum is the work of Simon Kuznets, who won a Nobel prize in 1971 and who made the case that the inequality gap inevitably grows smaller as economies develop and become sophisticated.

Piketty says that neither of these arguments stand up to the evidence he has accumulated. More to the point, he demonstrates that there is no reason to believe that capitalism can ever solve the problem of inequality, which he insists is getting worse rather than better. From the banking crisis of 2008 to the Occupy movement of 2011, this much has been intuited by ordinary people. The singular significance of his book is that it proves “scientifically” that this intuition is correct. This is why his book has crossed over into the mainstream – it says what many people have already been thinking. [Continue reading…]

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Laura Gottesdiener: Fantasy, greed, and housing, the prequel

One simple phrase electrified the financial world this past week: high-frequency trading.

With the publication of his new book, Flash Boys, author Michael Lewis almost singlehandedly transformed the growing practice of high-frequency trading from an obscure form of financial wizardry cooked up in Wall Street’s mad laboratories into a fledgling scandal. What’s high-frequency trading? It’s when lightning-quick computers running complex algorithms race ahead of ordinary human investors — you know, those guys with the funny jackets waving and yelling on the floor of the New York Stock Exchange — to gain the slightest advantage in the trading of stocks. For high-frequency traders, speed means getting valuable market information a few hundredths or millionths of a second early, which in turn can mean millions in profit simply by beating the regular guys to the trade. If it sounds complicated, well, that’s the point. “The insiders are able to move faster than you,” Lewis said on 60 Minutes. “They’re able to see your order and play it against other orders in ways that you don’t understand. They’re able to front run your order.”

Lewis’s Flash Boys tells the story of a Canadian banker and do-gooder named Brad Katsuyama who, outraged over this “rigged” market, did something about it. Judging by the reaction in some corners of the financial world, you’d think Lewis had declared war on Wall Street itself. (See, for instance, this verbal slug-fest on CNBC involving Lewis, Katsuyama, and the CEO of one of the exchanges Lewis takes to task in his book.)

The opprobrium greeting Flash Boys wouldn’t be quite as ridiculous if we didn’t already know how dangerous high-frequency trading can be. As Nick Baumann wrote in Mother Jones magazine, high-frequency trading gone haywire can inflict huge damage, as was the case in the so-called flash crash of 2010, which wiped out almost $1 trillion in shareholder value in a few hours. If several flash crashes occur at the same time, former bank regulator Bill Black told Baumann, “financial institutions can begin to fail, even very large ones.”

If Wall Street’s need for speed doesn’t cause the next Great Crash, TomDispatch regular Laura Gottesdiener knows what might. As she wrote in November, massive investment firms are building a “rental empire,” buying up foreclosed properties by the thousands, renting them back to working people, and bundling up those properties to sell to Wall Street. It’s an ingenious scheme reminiscent of the subprime mortgage machine — and this scheme, too, has the potential to plunge us back into a crisis. Today, Gottesidener turns her sights to New York City, where the rental racket has been underway for years and the results have been instructively grim. Andy Kroll

When predatory equity hit the Big Apple
How private equity came to New York’s rental market — and what that tells us about the future
By Laura Gottesdiener

Things are heating up inside Wall Street’s new rental empire.

Over the last few years, giant private equity firms have bet big on the housing market, buying up more than 200,000 cheap homes across the country. Their plan is to rent the houses back to families — sometimes the very same people who were displaced during the foreclosure crisis — while waiting for the home values to rise. But it wouldn’t be Wall Street not to have a short-term trick up its sleeve, so the private equity firms are partnering with big banks to bundle the mortgages on these rental homes into a new financial product known as “rental-backed securities.” (Remember that toxic “mortgage-backed securities” are widely blamed for crashing the global economy in 2007-2008.)

All this got me thinking: Have private equity firms gambled with rental housing somewhere else before? If so, what happened?

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Crimes against humanity: The genocidal campaign of the climate change contrarians

Robert L. Nadeau and Donald A. Brown write: When scientists make presentations at meetings or conferences on the existing and projected impacts of climate change, they describe in jargon laden language and in emotionally neutral terms what their research has revealed about these impacts. But during informal conversations over a few beers during the evening or late at night, these scientists no longer feel obliged to divorce their scientific heads from their human hearts. On these occasions, they use colorful and often profane language to express their disdain and contempt for the small number of scientists known as global warming skeptics who are well compensated by conservative think tanks for misinterpreting and abusing scientific knowledge.

The scientists involved in these conversations also vent their anger toward the oil and energy companies that sponsor massive disinformation campaigns on radio and television designed to convince Americans that their security, peace and economic well-being are utterly dependent on the consumption of increasing amounts of “clean and plentiful” fossil fuels. They say unkind things about the mangers of the American news media for running endless stories about the human suffering and financial losses caused by extreme weather events and saying nothing about the fact that climate change is contributing to the frequency and intensity of these events. But if the conversation goes on long enough and the hour is late, one or more of these scientists will say what the others firmly believe but are reluctant to admit—the fate of the Earth is sealed by the ignorance, lack of compassion, and inexhaustible greed of its human inhabitants and life on this planet for our children and grandchildren will be little more than a brutal struggle for survival.

The reasons why these empirically oriented rational thinkers have come to this dire conclusion are abundantly obvious in recent scientific research on the existing and projected impacts of climate change. This research has not only shown that massive reductions in worldwide emissions of greenhouse gases over the next two decades will be required to prevent the most disastrous impacts of climate change. It has also revealed that if we fail, as now seems likely, to accomplish this feat, there is a high probability that life on this planet for our children and grandchildren will be little more than a brutal struggle for survival. (Hansen et al. 2013) But as the scientists involved in the late night conversations know all too well, this research is largely ignored by the mainstream media, rarely discussed by political leaders and economic planners, and conspicuously missing in the rancorous public debate about climate change.

The usual explanation why this insane situation exists, as climate scientist Michael Mann put it in a recent article in the New York Times, is that there is a “violent strain of anti-science” in this country which “infects the halls of Congress, the pages of leading newspapers and what we see on television.” (Mann, 2014) What Mann did not say in this article but knows very well is that the primary source of this infection is the well-financed, highly coordinated, and very effective campaign of the climate change contrarians.

This campaign began in the 1980s when some of the same scientists that had been paid by the tobacco industry to challenge the scientific evidence that smoking is harmful to human health were hired by oil and energy companies to challenge the scientific evidence about climate change. [Continue reading…]

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Supreme Court delivers another blow to American democracy

The New York Times reports: The Supreme Court on Wednesday issued a major campaign finance decision, striking down some limits on federal campaign contributions for the first time. The ruling, issued near the start of a campaign season, will change and most likely increase the already large role money plays in American politics.

The decision, by a 5-to-4 vote along ideological lines, with the Court’s more conservative justices in the majority, was a sequel of sorts to Citizens United, the 2010 decision that struck down limits on independent campaign spending by corporations and unions. But that ruling did nothing to affect the other main form of campaign finance regulation: caps on direct contributions to candidates and political parties.

Wednesday’s decision in McCutcheon v. Federal Election Commission, No. 12-536, addressed that second kind of regulation.

It did not affect familiar base limits on contributions from individuals to candidates, currently $2,600 per candidate in primary and general elections. But it said that overall limits of $48,600 by individuals every two years for contributions to all federal candidates violated the First Amendment, as did separate aggregate limits on contributions to political party committees, currently $74,600.

Chief Justice John G. Roberts Jr., writing for four justices in the controlling opinion, said the First Amendment required striking down the limits. “There is no right in our democracy more basic,” he wrote, “than the right to participate in electing our political leaders.”

Dissenting from the bench, Justice Stephen G. Breyer called the decision a blow to the First Amendment and American democracy. “If the court in Citizens United opened a door,” he said, “today’s decision may well open a floodgate.” [Continue reading…]

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The gospel of consumption

Jeffrey Kaplan writes: Private cars were relatively scarce in 1919 and horse-drawn conveyances were still common. In residential districts, electric streetlights had not yet replaced many of the old gaslights. And within the home, electricity remained largely a luxury item for the wealthy.

Just ten years later things looked very different. Cars dominated the streets and most urban homes had electric lights, electric flat irons, and vacuum cleaners. In upper-middle-class houses, washing machines, refrigerators, toasters, curling irons, percolators, heating pads, and popcorn poppers were becoming commonplace. And although the first commercial radio station didn’t begin broadcasting until 1920, the American public, with an adult population of about 122 million people, bought 4,438,000 radios in the year 1929 alone.

But despite the apparent tidal wave of new consumer goods and what appeared to be a healthy appetite for their consumption among the well-to-do, industrialists were worried. They feared that the frugal habits maintained by most American families would be difficult to break. Perhaps even more threatening was the fact that the industrial capacity for turning out goods seemed to be increasing at a pace greater than people’s sense that they needed them.

It was this latter concern that led Charles Kettering, director of General Motors Research, to write a 1929 magazine article called “Keep the Consumer Dissatisfied.” He wasn’t suggesting that manufacturers produce shoddy products. Along with many of his corporate cohorts, he was defining a strategic shift for American industry—from fulfilling basic human needs to creating new ones.

In a 1927 interview with the magazine Nation’s Business, Secretary of Labor James J. Davis provided some numbers to illustrate a problem that the New York Times called “need saturation.” Davis noted that “the textile mills of this country can produce all the cloth needed in six months’ operation each year” and that 14 percent of the American shoe factories could produce a year’s supply of footwear. The magazine went on to suggest, “It may be that the world’s needs ultimately will be produced by three days’ work a week.”

Business leaders were less than enthusiastic about the prospect of a society no longer centered on the production of goods. For them, the new “labor-saving” machinery presented not a vision of liberation but a threat to their position at the center of power. John E. Edgerton, president of the National Association of Manufacturers, typified their response when he declared: “I am for everything that will make work happier but against everything that will further subordinate its importance. The emphasis should be put on work — more work and better work.” “Nothing,” he claimed, “breeds radicalism more than unhappiness unless it is leisure.”

By the late 1920s, America’s business and political elite had found a way to defuse the dual threat of stagnating economic growth and a radicalized working class in what one industrial consultant called “the gospel of consumption” — the notion that people could be convinced that however much they have, it isn’t enough. [Continue reading…]

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How climate pain is being spun into corporate gain

Fred Pearce writes: Windfall: The Booming Business of Global Warming by journalist McKenzie Funk tells the story of the people and corporations trying to profit from climate change. Many of them don’t want to halt its progress, they want to bring it on.

Here we meet private fire-fighters in drought-hit Los Angeles, selling their services to insurance companies, Russian shipping lines eyeing new routes opened up by the melting Arctic, Dutchmen rebuilding flooded islands in the Maldives, and manufacturers of snow-making machines selling their products to distressed winter resorts.

They all have an interest in global warming’s destructive progress. Funk lays bare their vanities and insanities while also exposing the magic of markets that can profit from anything.”I’m interested in climate change as a driver of human behaviour,” says Funk. “It’s a window into our collective state of mind.”

Many environmentalists have been gratified recently to discover that corporations feature climate change in their annual reports, and entrepreneurs make pitches to bankers and hedge-fund managers that read like back-issues of the environmentalists’ own doomsday scenarios.

The case seems to be won that climate change, rising population, and declining resources – from metals to water and land – are brewing up an environmental apocalypse. Gordon Gekko and the wolves of Wall Street have finally got climate change.

But not so fast. While greens fear the collapsing ecosystems, rising tides, climate migrations and mega-famines, the corporates and speculators see opportunity. Environmental pain can be corporate gain. In this synthesis of some of his great magazine journalism over a number of years, Funk brings the “booming business of global warming” spectacularly to life.

Some of his climate profit-takers do something useful to stem the problem at source – by building bigger and better wind turbines, for instance. But they are a small minority. Most of the windfalls are elsewhere. Seed companies like Syngenta and Monsanto develop more drought-resistant crops. Engineers ship air-conditioners or seek contracts to build sea walls round coastal cities. [Continue reading…]

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Capital in the Twenty-First Century: Thomas Piketty’s data-driven magnum opus on inequality

Jacob S. Hacker and Paul Pierson write: When Alexis de Tocqueville visited America in the early 1830s, the aspect of the new republic that most stimulated him was its remarkable social equality. “America, then, exhibits in her social state an extraordinary phenomenon,” Tocqueville marveled. “Men are there seen on a greater equality in point of fortune and intellect … than in any other country of the world, or in any age of which history has preserved the remembrance.”

To Tocqueville, who largely ignored the grim exception of the South, America’s progress toward greater equality was inevitable, the expansion of its democratic spirit unstoppable. Europe, he believed, would soon follow America’s lead. He was right—sort of. Democracy was on the rise, but so too was inequality. Only with the 20th century’s Great Depression, two terrible wars, and the creation of the modern welfare state did concentrations of economic advantage in rich democracies start to dissipate and the fruits of rapid growth begin to accrue generously to ordinary workers.

Now another Frenchman with a panoramic vista — and far more precise evidence — wants us to think anew about the progress of equality and democracy. Though an heir to Tocqueville’s tradition of analytic history, Thomas Piketty has a message that could not be more different: Unless we act, inequality will grow much worse, eventually making a mockery of our democratic institutions. With wealth more and more concentrated, countries racing to cut taxes on capital, and inheritance coming to rival entrepreneurship as a source of riches, a new patrimonial elite may prove as inevitable as Tocqueville once believed democratic equality was.

This forecast is based not on speculation but on facts assembled through prodigious research. Piketty’s startling numbers show that the share of national income coming from capital — once comfortingly believed to be stable — is on the rise. Private wealth has reached new highs relative to national income and is approaching levels of concentration not seen since before 1929. [Continue reading…]

John Cassidy writes: Piketty believes that the rise in inequality can’t be understood independently of politics. For his new book, he chose a title evoking Marx, but he doesn’t think that capitalism is doomed, or that ever-rising inequality is inevitable. There are circumstances, he concedes, in which incomes can converge and the living standards of the masses can increase steadily — as happened in the so-called Golden Age, from 1945 to 1973. But Piketty argues that this state of affairs, which many of us regard as normal, may well have been a historical exception. The “forces of divergence can at any point regain the upper hand, as seems to be happening now, at the beginning of the twenty-first century,” he writes. And, if current trends continue, “the consequences for the long-term dynamics of the wealth distribution are potentially terrifying.”

In the nineteen-fifties, the average American chief executive was paid about twenty times as much as the typical employee of his firm. These days, at Fortune 500 companies, the pay ratio between the corner office and the shop floor is more than two hundred to one, and many C.E.O.s do even better. In 2011, Apple’s Tim Cook received three hundred and seventy-eight million dollars in salary, stock, and other benefits, which was sixty-two hundred and fifty-eight times the wage of an average Apple employee. A typical worker at Walmart earns less than twenty-five thousand dollars a year; Michael Duke, the retailer’s former chief executive, was paid more than twenty-three million dollars in 2012. The trend is evident everywhere. According to a recent report by Oxfam, the richest eighty-five people in the world — the likes of Bill Gates, Warren Buffett, and Carlos Slim — own more wealth than the roughly 3.5 billion people who make up the poorest half of the world’s population.

Eventually, Piketty says, we could see the reëmergence of a world familiar to nineteenth-century Europeans; he cites the novels of Austen and Balzac. In this “patrimonial society,” a small group of wealthy rentiers lives lavishly on the fruits of its inherited wealth, and the rest struggle to keep up. For the United States, in particular, this would be a cruel and ironic fate. “The egalitarian pioneer ideal has faded into oblivion,” Piketty writes, “and the New World may be on the verge of becoming the Old Europe of the twenty-first century’s globalized economy.”

What are the “forces of divergence” that produce enormous riches for some and leave the majority scrabbling to make a decent living? Piketty is clear that there are different factors behind stagnation in the middle and riches at the top. But, during periods of modest economic growth, such as the one that many advanced economies have experienced in recent decades, income tends to shift from labor to capital. Because of enmeshed economic, social, and political pressures, Piketty fears “levels of inequality never before seen.”

To back up his arguments, he provides a trove of data. He and Saez pioneered the construction of simple charts showing the shares of over-all income received by the richest ten per cent, the richest one per cent, and, even, the richest 0.1 per cent. When the data are presented in this way, Piketty notes, it is easy for people to “grasp their position in the contemporary hierarchy (always a useful exercise, particularly when one belongs to the upper centiles of the distribution and tends to forget it, as is often the case with economists).” Anybody who reads the newspaper will be aware that, in the United States, the “one per cent” is taking an ever-larger slice of the economic pie. But did you know that the share of the top income percentile is bigger than it was in South Africa in the nineteen-sixties and about the same as it is in Colombia, another deeply divided society, today? In terms of income generated by work, the level of inequality in the United States is “probably higher than in any other society at any time in the past, anywhere in the world,” Piketty writes. [Continue reading…]

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How Google and Apple avoid ruinous competition

f13-iconMark Ames writes: [O]ne the most interesting misconceptions I’ve heard about the ‘Techtopus’ conspiracy [between tech giants in Silicon Valley] is that, while these secret deals to fix recruiting were bad (and illegal), they were also needed to protect innovation by keeping teams together while avoiding spiraling costs.

That was said to me, almost verbatim, over dinner by an industry insider, who quickly understood he’d said something wrong — “But of course, it’s illegal, so it’s wrong,” he corrected himself.

The view that whatever Jobs and Google did to deny workers wages and lock up talent was necessary for innovation is likely much more widely held than publicly uttered. And yet, all the evidence in the pre-trial demonstrates the very opposite: That the non-solicitations stifled innovation.

A perfect example of this can be found in emails (Update: embedded below) and deposition testimony which have emerged, and been reviewed by PandoDaily, in the run up to the trial. The episode occurs in the spring of 2006, just a year after Google and Apple first forged their core secret non-poaching agreements. [Continue reading…]

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Apple and Google’s wage-fixing cartel involved dozens more companies, over one million employees

n13-iconMark Ames writes: Back in January, I wrote about “The Techtopus” — an illegal agreement between seven tech giants, including Apple, Google, and Intel, to suppress wages for tens of thousands of tech employees. The agreement prompted a Department of Justice investigation, resulting in a settlement in which the companies agreed to curb their restricting hiring deals. The same companies were then hit with a civil suit by employees affected by the agreements.

This week, as the final summary judgement for the resulting class action suit looms, and several of the companies mentioned (Intuit, Pixar and Lucasfilm) scramble to settle out of court, Pando has obtained court documents (embedded below) which show shocking evidence of a much larger conspiracy, reaching far beyond Silicon Valley.

Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees. [Continue reading…]

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The dead are wealthier than the living: capital in the 21st century

f13-iconTimothy Noah writes: In Honoré de Balzac’s 1835 novel Père Goriot, a cynical observer of Parisian society under the reign of Louis-Philippe extends some career advice to a penniless young nobleman:

The Baron de Rastignac thinks of becoming an advocate, does he? There’s a nice prospect for you! Ten years of drudgery straight away. You are obliged to live at the rate of a thousand francs a month; you must have a library of law books, live in chambers, go into society, go down on your knees to ask a solicitor for briefs, lick the dust off the floor of the Palais de Justice. If this kind of business led to anything, I should not say no; but just give me the names of five advocates here in Paris who by the time that they are fifty are making fifty thousand francs a year! Bah! I would sooner turn pirate on the high seas than have my soul shrivel up inside me like that. How will you find the capital? There is but one way, marry a woman who has money.

It was much the same, the French economist Thomas Piketty tells us in his new book, Capital in the Twenty-First Century, two decades earlier in Jane Austen’s rural England, and it remained so five decades later on Henry James’ Washington Square. To belong to the landed or urban gentry of the 18th and 19th centuries—that is, to possess “books or musical instruments or jewelry or ball gowns”—you needed at least 20 to 30 times the income of the average person, and the most lucrative professions paid only half that. You needed capital, typically in the form of land. And you needed a lot of it—much more than could typically be amassed in the course of one lifetime. Consequently, “society” (i.e., the rich) consisted almost entirely of rentiers living off inherited wealth. It was much more true in Europe than in the United States, but it was true up to a point here, too, especially in the antebellum South.

This “patrimonial capitalism,” as Piketty calls it, was dealt a mortal blow a hundred years ago with the outbreak of World War I, which diverted financial resources, impeded shipping and trade, destroyed infrastructure, and killed members of the officer (i.e., upper) class disproportionately. Then the Great Depression and World War II put it out of its misery. In recent memory, the way to get rich has been to do it yourself. The world’s richest man, Bill Gates, is the opposite of a 19th-century society dandy—an almost comically unglamorous figure who parlayed an unexceptional upbringing in the upper middle class into a reported $76 billion fortune (according to Forbes). Plenty of others get rich through more questionable means (especially the manipulation of abstruse financial instruments), and a lively discussion has begun about how we should address the three-decade trend of growing income inequality. But it’s income that mostly interests us, not wealth, because income is the currency of the modern economy. Gone are the days when the only way to acquire an upper-class income was to marry into a family fortune.

Or are they? Piketty says patrimonial capitalism is coming back. Being born into or marrying wealth never stopped being the easiest path to acquiring a fortune; Piketty fears it may once again become the most common path as well. [Continue reading…]

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Industrial society heading for ‘irreversible collapse’

a13-iconAt The Guardian, Nafeez Ahmed writes: A new study sponsored by Nasa’s Goddard Space Flight Center has highlighted the prospect that global industrial civilisation could collapse in coming decades due to unsustainable resource exploitation and increasingly unequal wealth distribution.

Noting that warnings of ‘collapse’ are often seen to be fringe or controversial, the study attempts to make sense of compelling historical data showing that “the process of rise-and-collapse is actually a recurrent cycle found throughout history.” Cases of severe civilisational disruption due to “precipitous collapse – often lasting centuries – have been quite common.”

The research project is based on a new cross-disciplinary ‘Human And Nature DYnamical’ (HANDY) model, led by applied mathematician Safa Motesharri of the US National Science Foundation-supported National Socio-Environmental Synthesis Center, in association with a team of natural and social scientists. The study based on the HANDY model has been accepted for publication in the peer-reviewed Elsevier journal, Ecological Economics.

It finds that according to the historical record even advanced, complex civilisations are susceptible to collapse, raising questions about the sustainability of modern civilisation:

“The fall of the Roman Empire, and the equally (if not more) advanced Han, Mauryan, and Gupta Empires, as well as so many advanced Mesopotamian Empires, are all testimony to the fact that advanced, sophisticated, complex, and creative civilizations can be both fragile and impermanent.”

By investigating the human-nature dynamics of these past cases of collapse, the project identifies the most salient interrelated factors which explain civilisational decline, and which may help determine the risk of collapse today: namely, Population, Climate, Water, Agriculture, and Energy.

These factors can lead to collapse when they converge to generate two crucial social features: “the stretching of resources due to the strain placed on the ecological carrying capacity”; and “the economic stratification of society into Elites [rich] and Masses (or “Commoners”) [poor]” These social phenomena have played “a central role in the character or in the process of the collapse,” in all such cases over “the last five thousand years.” [Continue reading…]

The research paper, which is quite technical, can be read here: “A Minimal Model for Human and Nature Interaction.”

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How America’s billionaires are taking over science

f13-iconWilliam J Broad writes: American science, long a source of national power and pride, is increasingly becoming a private enterprise.

In Washington, budget cuts have left the nation’s research complex reeling. Labs are closing. Scientists are being laid off. Projects are being put on the shelf, especially in the risky, freewheeling realm of basic research. Yet from Silicon Valley to Wall Street, science philanthropy is hot, as many of the richest Americans seek to reinvent themselves as patrons of social progress through science research.

The result is a new calculus of influence and priorities that the scientific community views with a mix of gratitude and trepidation.

“For better or worse,” said Steven A. Edwards, a policy analyst at the American Association for the Advancement of Science, “the practice of science in the 21st century is becoming shaped less by national priorities or by peer-review groups and more by the particular preferences of individuals with huge amounts of money.”

They have mounted a private war on disease, with new protocols that break down walls between academia and industry to turn basic discoveries into effective treatments. They have rekindled traditions of scientific exploration by financing hunts for dinosaur bones and giant sea creatures. They are even beginning to challenge Washington in the costly game of big science, with innovative ships, undersea craft and giant telescopes — as well as the first private mission to deep space.

The new philanthropists represent the breadth of American business, people like Michael R. Bloomberg, the former New York mayor (and founder of the media company that bears his name), James Simons (hedge funds) and David H. Koch (oil and chemicals), among hundreds of wealthy donors. Especially prominent, though, are some of the boldest-face names of the tech world, among them Bill Gates (Microsoft), Eric E. Schmidt (Google) and Lawrence J. Ellison (Oracle).

This is philanthropy in the age of the new economy — financed with its outsize riches, practiced according to its individualistic, entrepreneurial creed. The donors are impatient with the deliberate, and often politicized, pace of public science, they say, and willing to take risks that government cannot or simply will not consider.

Yet that personal setting of priorities is precisely what troubles some in the science establishment. Many of the patrons, they say, are ignoring basic research — the kind that investigates the riddles of nature and has produced centuries of breakthroughs, even whole industries — for a jumble of popular, feel-good fields like environmental studies and space exploration.

As the power of philanthropic science has grown, so has the pitch, and the edge, of the debate. Nature, a family of leading science journals, has published a number of wary editorials, one warning that while “we applaud and fully support the injection of more private money into science,” the financing could also “skew research” toward fields more trendy than central.

“Physics isn’t sexy,” William H. Press, a White House science adviser, said in an interview. “But everybody looks at the sky.”

Fundamentally at stake, the critics say, is the social contract that cultivates science for the common good. They worry that the philanthropic billions tend to enrich elite universities at the expense of poor ones, while undermining political support for federally sponsored research and its efforts to foster a greater diversity of opportunity — geographic, economic, racial — among the nation’s scientific investigators.

Historically, disease research has been particularly prone to unequal attention along racial and economic lines. A look at major initiatives suggests that the philanthropists’ war on disease risks widening that gap, as a number of the campaigns, driven by personal adversity, target illnesses that predominantly afflict white people — like cystic fibrosis, melanoma and ovarian cancer. [Continue reading…]

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