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Dow Jones hits new record high – what’s that mean for the working stiffs?

Dow Jones hits new record high – what’s that mean for the working stiffs?

While watching the Today show this morning I learned, “The Dow crossed above its intraday high of $14,198.10 hit on October 9, 2007. The blue chips got a boost from upbeat economic data from Europe.”

The television reporter referred to the Dow as “a barometer of the overall economy.”

Really? Take a look at this chart from Derek Thompson’s article on The Atlantic:

Derek gets to the heart of the matter with:

When the economy crashes, we all crash together: corporate profits, employment, and growth. But when the economy recovers, we don’t recover together. Corporations rack up historic profits thanks to strong global demand, cheap global labor, and low interest rates, while American workers muddle along, their significance to these companies greatly diminished by a worldwide market for goods and people.

The Pale King: Corporations are Not People

The Pale King: Corporations are Not People

From pages 136 – 137 of David Foster Wallace’s posthumous novel, The Pale King, IRS agents discuss corporations and their responsibilities or lack thereof.

‘Corporations make the pie. They make it and we eat it.’

‘It’s probably part of my naïveté, that I don’t want to put the issue in political terms when it’s probably irreducibly political. Something has happened where we’ve decided on a personal level that it’s all right to abdicate our individual responsibility to the common good and let government worry about the common good while we all go about our individual self-interested business and struggle to gratify our various appetites.’

‘You can blame some of it on corporations and advertising surely.’

‘I don’t think of corporations as citizens, though. Corporations are machines for producing profit; that’s what they’re ingeniously designed to do. It’s ridiculous to ascribe civic obligations or moral responsibilities to corporations.’

‘But the whole dark genius of corporations is that they allow for individual reward without individual obligation. The workers’ obligations are to the executives, and the executives’ obligations are to the CEO, and the CEO’s obligations is to the Board of Directors, and the Board’s obligation is to the stockholders, who are also the same customers the corporation will screw over at the very earliest opportunity in the name of profit, which profits are distributed as dividends to the very stockholders-slash-customers they’ve been fucking over in their own name. It’s like a fugue of evaded responsibility.’

‘You’re leaving out Labor Unions advocating for labor and mutual funds and the SEC’s effects on share-price over basis.’

‘You’re a complete genius of irrelevancy, X. This isn’t a seminar. DeWitt’s trying to get at the heart of something here.’

‘Corporations aren’t citizens or neighbors or parents. They can’t vote or serve in combat. They don’t learn the Pledge of Allegiance. They don’t have souls. They’re revenue machines. I don’t have any problem with that. I think it’s absurd to lay moral or civic obligations on them. Their only obligations are strategic, and while they can get very complex, at root they’re not civic entities. With corporations, I have no problem with government enforcement of statutes and regulatory policy serving a conscience function. What my problem is is the way it seems that we as individual citizens have adopted a corporate attitude. That our ultimate obligation is to ourselves. That unless it’s illegal or there are direct practical consequences for ourselves, any activity is OK.’

Economic Injustice is what Occupy Wall Street is About

Economic Injustice is what Occupy Wall Street is About

This week’s edition of This Modern World explains to all the people to dumb to figure out what the Occupy Wall Street protest is about:

TMW - But What Do They Want? click to read the rest

There’s more here.

What the heck is this “economic injustice” thing the protester is yelling about?  Well let me give you an example as reported in the Tuscon Sentinel:

The head of the parent company of the Arizona Republic, the shuttered Tucson Citizen – and part owner of the Arizona Daily Star operation – resigned Thursday. Gannett CEO Craig Dubow may be paid out as much as $37 million, after leading the company for five years in which the company’s stock dropped from $72 to $10.

Dubow, 56, has suffered back problems over the past several years, and began his second medical leave in two years on Sept. 15.

He is positioned to to collect as much as $37.1 million in retirement and disability benefits. Gannett’s president and chief operating officer, 60-year-old Gracia C. Martore, succeeds him. Marjorie Magner, 62, an independent member of the board since 2006, was named non-executive chairman.

Under Dubow’s tenure, Gannett has seen it’s revenues fall from $7.6 billion in 2005 to $5.4 billion in 2010.

As the company has lost revenue and seen readership plunge, it has laid off thousands of employees. The company’s workforce dropped from 52,600 in December 2005 to 32,600 at the end of last year. Included in those who lost their jobs were the 65 staffers of the Tucson Citizen, and dozens at the Republic and Star.

Something wrong with that?  Isn’t it okay for the CEO of a news organization to leave and take as much as $37 million while journalists are losing their jobs all over the country? NO IT IS NOT!!!!!!!!!!!!!!

No CEO is worth $37 million dollars.  Who the hell comes up with these exit packages? It’s got to be the organized union of greedy ass CEO’s that run corporate America.  They all look out for each other while they piss all over the thousands of people who work for them.

Karl Marx Said Unbridled Capitalism Will Destroy itself, and He was Right

Karl Marx Said Unbridled Capitalism Will Destroy itself, and He was Right

The rich will do anything for the poor but get off their backs. – Karl Marx 

Bloomberg BusinessWeek has been extolling the works of Karl Marx over the past few weeks. One article, “Marx to Market” by the Bloomberg News Services economics editor Peter Coy, brought me to a reflection on my own studies in Karl Marx in the early 1970s at the University of Pittsburgh. Although my focus was on alienation themes in his treatises, one could not help but be captured by the breadth and depth of his writing. In 1999 the BBC did an extensive polling to determine who were considered the greatest men and women of the millennium. Karl Marx topped the list followed by Einstein, Newton, and Darwin.

My interest even led me to London where I ordered an ale from the same corner of The Museum Tavern in Bloomsbury where Marx revived himself after his efforts at the British Museum across the street. I also came to identify with Engels plea to Marx, “You just read, read, read. It’s time to stop reading and start writing.”

Even the Vatican signed in on Marx in 2009 when L’Osservatore Romano praised his diagnosis of income inequality—a phenomenon that is becoming increasing rampant in American society.

Marx argued that overproduction was in fact endemic to capitalism because the proletariat isn’t paid enough to buy the stuff that the capitalists produce. Again, that theory has lately been hard to dispute. The only way blue-collar Americans managed to maintain consumption in the last decade was by overborrowing, according to Coy.

That statement reminded me an encounter between Henry Ford and Walter Reuther decades ago. Ford, showing Reuther a new factory that was to open and noting all of the automated assembly machines, baited Reuther with “You won’t get many union members from those machines.” Reuther’s reply was prophetic, “And you won’t sell them many Fords.”

Because, as Marx noted, the wild excesses of capitalists tend to sow the seeds of their own complete destruction, deregulation is actually disastrous for capitalism in the long run.  Former Oxford professor David Harvey believes that “The Republican Party is en route to destroy capitalism and they may do a better job of it than the working class could.”

Marx predicted that companies would need fewer workers as they improved productivity, creating an “industrial reserve army” of the unemployed whose existence would keep downward pressure on wages for the employed.

Although Adam Smith is often cited as the first economist to describe capitalism, Smith fell short in his projections missing the growth of child labor sweatshops, the deliberate displacement of workers to keep pressure on workers to work for wages that were not commensurate with their productivity. Neither did he foresee the alienation of labor from its work product as assembly lines developed. Marx did.

Critics often point to the USSR as failures of Marxism but they did not exemplify the teachings of Marx either in concept or in the development of the proletariat. Both of them jumped from feudalism to socialism skipping the important step that Marx required: Going through a stage of capitalism first. That’s why the socialism of the Scandinavian countries is so effective.

Marx believed that societies follow laws of motion simple and all-encompassing enough to make long-range prediction fruitful. Second, he believed that these laws are exclusively economic in character: what shapes society, the only thing that shapes society, is the “material forces of production. Third, he believed that these laws must invariably express themselves, until the end of history, as a bitter struggle of class against class. Fourth, he believed that at the end of history, classes and the state (whose sole purpose is to represent the interests of the ruling class) must dissolve to yield a heaven on earth.

Evidence of stage three is all about us.

Marx was much more original in envisioning the productive power of capitalism. He saw that capitalism would spur innovation to a hitherto-unimagined degree. He was right that giant corporations would come to dominate the world’s industries. He rightly underlined the importance of economic cycles (although his accounts of their causes and consequences were wrong).

The central paradox that Marx emphasized, “namely, that its own colossal productivity would bring capitalism to its knees, by making socialism followed by communism both materially possible and logically necessary” has turned out to be false (so far). As Coy points out, Marx could lay claim to having sensed more clearly than others how far capitalism would change the material conditions of the world. And this in turn reflects something else that demands at least a grudging respect: the amazing reach and ambition of his thinking.

When one looks at the huge increase in families living in poverty, at the fact that the laboring class has not realized any increase in their true income in over 40 years and the fact that a small percentage of Fat Cats have nearly half of the total income in this country one can only wonder what the defenders of our form of capitalism can say to defend it.

They will probably sound like the slave holders of many years ago who proclaimed that they provided a wonderful life for their slaves who were much better off than if they were on their own. Not surprisingly that sentiment was repeated in a pledge that was signed by many of the Republican candidates this year when they agreed that the family structure of the slave family was preferable to the family structure of black families today. A blatantly false representation because families were torn apart as they were sold off. But don’t let facts get in the way.

That wonderful, C-minus student (in Animal Science at Texas A & M), Governor Perry, knows better than to trust science with its facts. (His statement of Galileo Galilei: namely that the scientists of his time didn’t believe him was 180 degrees off the mark. All the reputable scientists in Rome and elsewhere accepted a heliocentric universe. It was the church–e.g. the government–that wouldn’t accept his theory just as there are people today who make a political determination that man has no part in global warming.

One more example of capitalism working very hard at its own destruction.

Let’s start deficit reduction by eliminating the Double Irish and Dutch Sandwiches

Let’s start deficit reduction by eliminating the Double Irish and Dutch Sandwiches

For the past year or so the business magazines have discussed the way in which U.S. corporations use offshore shells to dodge some $60 billion in U.S. corporation taxes each year.  The most prevalent strategy has earned the sobriquets “Double Irish” and “Dutch Sandwich” because they rely on the laws of Ireland and its relationship with the Netherlands.  I developed a schematic or pert chart to make it clear to myself

It works like this.  Company 1, an American corporation–Microsoft is one of them–sets up a separate company (company 2) in an offshore tax haven such as Bermuda or the Cayman Islands.  That company is licensed to conduct all overseas sales.  Actually there is no one in that office.  It’s a paper fiction and a law firm performs “corporate administrative services”.

Company 3 is set up in Ireland as a wholly owned subsidiary of Company 2 and is licensed by company 2 to sell the products and services of Company 1.  Company 3 pays royalties and fees to company 2 but they are untaxed by Ireland, the Caymans, or the U.S.  What company 2 retains in its tiny office could be taxed by Ireland at 12.5% but Ireland has an arrangement with some European countries that permits payments between Irish and companies in selected European countries to be untaxed.  The money that remains with the Irish office (company 3) is taxed at 2.4%.

Company 4, a Dutch company receives the payments from Company 3 and immediately sends them to Company 2.  (Remember, no corporate taxes in Bermuda or the Caymans.)  The stop in the Netherlands is no longer than a plane landing and departure.  There is no office and no staff, just a forwarding service.  The Netherlands has 13,000 such entities.

When the money gets to company 2 it just stays there and is taxed only if sent to company 1.  But company 1 rarely does that.  It uses the money for overseas expenditures or for certain investments or it just draws interest.  More important the corporation has dodged millions of dollars in U.S. taxes.

It gets worse.  In 2004 the GOP Congress enacted a one-time exemption that permitted companies to bring their money “home” at an effective tax rate of 5.3% instead of the standard 32%.

Next time a Tea Party adherent proposes a deficit-reducing budget cut that is designed to bring pain to the most helpless among us, tell them you will take them seriously when they have eliminated this travesty.

For a perspective on this practice, take a look at this Bloomberg article, “U.S. Companies Dodge $69 Billion in Taxes with Global Odyssey.”