| LONG TAKEOne of the great enduring disasters over the last half a century is the relentless assault on the notion that government is, in fact, an *efficient* force for good. That attack has been carried out by the endless droning on by media talking heads, politicians and “economists” that somehow the private sector is more efficient and better managed than government services. No matter how many times CEOs bankrupt their companies or loot companies for outrageous pay and benefits, the myth of private sector “efficiency” continues and also, as an aside, breeds the unconscionable attack against government workers. It’s almost comical actually and exposes how deeply ideological the canard or private sector “efficiency” really is. It’s an attack on government as an idea by those who want to enrich themselves endlessly and want no countervailing force to slow down their robbery of the people. It’s a fraud—on the facts, on the numbers. I could take up the entire space here with a flood of examples of this fraud. For now, just two. Health care: Medicare is one of the most efficient programs in the nation’s history, operating at something like 2-3% administrative costs—compared to the private sector insurance industry which, depending on what study you look at, rings in at between 15-25 percent administrative costs. Because, obviously, you have CEOs and high-ranking executives making tens of millions of dollars in the private sector versus your basic Medicare government high-level leaders who are making, comparatively, a quite modest low six-figure income of roughly $178,000 on average. The Pentagon: I regaled everyone recently with the story of the toilet that now costs $10,000, and no one in his or her right mind could point to the private sector defense industry has an efficiently-run operation. The opposite: cost overruns and waste and inefficiency are a business model among that gang. I raise this today because we are now on the cusp of shoveling tens of billions of dollars more into the hands of private companies under the guise of “public-private partnerships” (PPPs, in economic parlance) for infrastructure projects to be funded by the first pile of money almost certainly likely to pass Congress in the coming week or so. Here’s a good example: in the (insufficient) “bi-partisan” infrastructure bill, $65 billion is being targeted for broadband expansion. Broadband should be free, accessible to every person, and run as a municipal utility, not left in the hands of private profit-making companies who could not give a hoot whether poor people or rural dwellers or others have access to an essential educational and workplace tool. Instead, the money for broadband now in the “bi-partisan” infrastructure bill will effectively be a gargantuan subsidy to Internet providers: companies like Spectrum or XFinity have monopolies on cable and Internet service—monopolies handed to them by local politicians who get bought off with campaign contributions. So, here’s the truth: that $65 billion will, then, essentially be used, at the end of the day, to HIKE YOUR INTERNET BILLS. That’s what PPPs do—they divert money from the pockets of people and resources that should be used for the common good into the hands of very powerful corporations and wealthy individuals. This is a bi-partisan addiction. Way back when he was running for president, Joe Biden was all-in with the private-public partnerships in rhetoric and written documents, especially when it came to his promises on climate change. In a campaign document called “The Biden Plan for a Clean Energy Revolution and Environmental Justice”, he recalled that, “After World War II, public investment in research and collaboration between universities and the private sector spurred American innovation, led to rapid economic and job growth, and helped build a strong middle class” [emphasis added]. This is one of those enduring false myths, along with the brilliant CEO—that the middle class was built not by millions of workers but by the captains of industry (“private sector” is a generic buzz word that almost always means the executive class). We need to understand that “public-private partnerships” do not exist as some benign idea, as if ordained in economics as a natural phenomena like the sun rising in the east and setting in the west. Along with other bad ideas like de-regulation (which delivered, in fact, sky-high cable bills—you can thank Bill Clinton for that one, via his “let me pay off campaign contributors” via telecommunications de-regulation) “public-private partnerships” is a direct assault, going back to the 1970s, on the public sector. It’s actually a clever cover-up of the disastrous failure of the so-called “free market”—replete with the rhetoric, unchallenged, that government bureacracy is to blame for poor economic results and things would be so much better managed in the hands of the private sector. Share For the sake of brevity, I’m just going to leave you with two views on these partnerships. The first comes from a United Nations study which concluded: However, the evidence suggests that PPPs have often tended to be more expensive than the alternative of public procurement while in a number of instances they have failed to deliver the envisaged gains in quality of service provision, including its efficiency, coverage and development impact. In other words, they have failed to yield ‘value for money’ in its broadest sense taking into account not just the financial costs and efficiency gains deriving from a project but also its longer-term fiscal implications (including the risks of any contingency liabilities) as well as the broader welfare benefits for society such as the impact on poverty and sustainable development.
More recently, Joseph Stiglitz, the Nobel-prize winning economist, has a recent take on this topic in a short essay which I recommend: The fundamental, flawed premise of these initiatives is that the government is inevitably inefficient, so giving control of these assets to the private sector represents an opportunity for arbitrage: Both the private and public sectors can be better off. Experience around the world shows otherwise. There are several reasons for the disappointing results: For example, the private sector faces much higher costs of capital, and infrastructure projects are long-term investments, where differences in the cost of capital matter a lot. This puts the private sector at a marked disadvantage. Moreover, it turns out that in many areas, the public sector is remarkably efficient and innovative—more than it is given credit for—and the private sector is less efficient than is commonly recognized. It is rife with what economists refer to as “agency problems,” where conflicts of interests and misguided incentives lead to outcomes that are far from socially desirable—as we saw in the financial crisis.
And: Policies such as those being proposed, in which the private sector is given, if even temporarily, significant control over these public assets—making key decisions, including imposing charges from which they derive their profits—undermine government’s ability to accomplish these goals and give outsized power to private sector companies with conflicts of interest and misaligned incentives. And they do so without any evidence that the private sector is more efficient in these contracted areas. As a result, these provisions have historically, around the world, not had the promised beneficial effects, either on economic productivity or on the government’s budget, and instead often have adverse societal effects… Enhancing extractive corporate power. The private sector’s central goal is to maximize profit, not deliver necessary services. It has proven impossible to ensure that private providers’ incentives match public interest in these arrangements. Too often, contracted companies generate more income by exploiting workers, cutting corners on quality, charging high prices to users, and/or excluding certain groups from service—not by increasing efficiency. And, as already noted, the government tends to absorb the risks of investments without getting a share in any returns reflecting the risks it bears and the capital it provides. As a result, the hoped-for contribution to the government’s budget may well not even be realized. Weakening public power and democracy. Particularly with something as fundamental as infrastructure (broadly defined, as President Biden has done), democratic input and accountability are essential. Infrastructure proposals represent a unique opportunity to invest in and empower public institutions while building a more cohesive and responsive government and economy. Privatization does just the opposite: It dilutes the role and responsibilities of government in an often-deliberate attempt to diminish the capacity of public institutions and weaken already-low public trust. And it does this without any proven public benefit—and with a long history of harms that result from subjecting people to the whims of profit-driven executives. Widening racial and economic disparities. One of the many virtues of public institutions is that they can prioritize being accessible to all citizens regardless of age, race, gender, class, or ability. Their core mission is to serve the public interest. In contrast, private institutions are built to serve the interests of a narrow group of shareholders and executives, all but ensuring questions of equal access will be thrown to the wayside in favor of a singular pursuit of profit. This directly and disproportionately harms people who are already systematically marginalized, further widening the chasms in our economy. Dampening labor power. Another implication of private control of infrastructure is its impact on workers. In an effort to contain costs and maximize profits, private entities often skimp on job quality, limit wages, and don’t make either working conditions or the training of workers a priority. The single-minded focus on profits means that broader social goals are sidelined.
I am not so naive to believe that we can kill the entire notion of PPPs. It’s deeply embedded in the mindset of people running the political show. But, we should, at least, challenge the babble. Share SHORT TAKESIf you want to watch legal extortion unfold in real time and right before your eyes, Exhibit A is Big PHARMA’s insatiable greed: Pfizer and Moderna are hiking prices for the COVID19 vaccine right at the moment when people are most desparate, with the Delta variant on the march and tens of millions of people in poorer countries unable to get vaccinated. These people are just the bottom of the pond: Pfizer Inc (PFE.N) and Moderna Inc (MRNA.O) have raised the prices of their COVID-19 vaccines in their latest European Union supply contracts, the Financial Times reported on Sunday. The new price for the Pfizer shot was 19.50 euros ($23.15)against 15.50 euros previously, the newspaper said, citing portions of the contracts seen. The price of a Moderna vaccine was $25.50 a dose, the contracts show, up from about 19 euros in the first procurement deal but lower than the previously agreed $28.50 because the order had grown, the report said, citing one official close to the matter
Let me just two points here. First, massive amounts of PUBLIC money went into the development of these vaccines. To wit: Basic research conducted by Graham and others at the National Institutes of Health (NIH), Defense Department and federally funded academic laboratories has been the essential ingredient in the rapid development of vaccines in response to COVID-19. The government has poured an additional $10.5 billion into vaccine companies since the pandemic began to accelerate the delivery of their products. The Moderna vaccine, whose remarkable effectiveness in a late-stage trial was announced Monday morning, emerged directly out of a partnership between Moderna and Graham’s NIH laboratory. [emphasis added]… The vaccines made by Pfizer and Moderna, which are likely to be the first to win FDA approval, in particular rely heavily on two fundamental discoveries that emerged from federally funded research: the viral protein designed by Graham and his colleagues, and the concept of RNA modification, first developed by Drew Weissman and Katalin Karikó at the University of Pennsylvania. In fact, Moderna’s founders in 2010 named the company after this concept: “Modified” + “RNA” = Moderna, according to co-founder Robert Langer.
And At least 97% of the funding for the development of the Oxford/AstraZeneca Covid-19 vaccine has been identified as coming from taxpayers or charitable trusts, according to the first attempt to reconstruct who paid for the decades of research that led to the lifesaving formulation. Using two different methods of inquiry, researchers were able to identify the source of hundreds of millions of pounds of research grants from the year 2000 onwards for published work on what would eventually become the novel technology that underpins the jab, as well as funding for the final product. The overwhelming majority of the money, especially in the early stages of the research, came from UK government departments, British and American scientific institutes, the European commission and charities including the Wellcome Trust.
Taxpayer money brought these vaccines out fast. And it was gross incompetence and corruption of leadership to fail to ensure that the vaccines were in the public domain, controlled and owned by the public not corporations. Share Greed of these CEOs plays a central role in this mind-boggling grab for more riches at the expense of humanity. Moderna: Moderna CEO Stéphane Bancel collected a salary of $950,000, a $1.9 million bonus, and stock options worth $9 million in 2020 on top of a $58.6 million haul from the company’s IPO in 2018 and $8.9 million in overall compensation in 2019.
Pfizer: Pfizer Inc. paid Chief Executive Officer Albert Bourla $21 million in total compensation last year, as the pharmaceutical giant became the first to gain U.S. authorization for a coronavirus vaccine. The overall pay package, which included salary, bonus, stock and other incentive pay, represented a 17% increase from Bourla’s compensation in 2019, when he was paid a total of $17.9 million, according to a securities filing on Friday.
Immoral. Corrupt. And, alas, legal. Capitalism at its finest! Oh, and speaking of corporate immorality, the corporate tax cheats are at it again, as we learn via the Institute on Taxation and Economic Policy: Thirty-nine profitable corporations in the S&P 500 or Fortune 500 paid no federal income tax from 2018 through 2020, the first three years that the Tax Cuts and Jobs Act (TCJA) was in effect. The 39 corporations were profitable in each of those three years and, as a group, reported to shareholders that they had generated $122 billion in profits during that period. Some of these companies paid federal income taxes in one or two of these years, but their total federal income taxes for the three-year period were either $0 or a negative amount, meaning they received a refund from the IRS for taxes paid in previous years. [Emphasis added]
And because we like pictures: Remember this chart when you read about Fifth Columnist Joe Manchin whining about proposals to raise the corporate tax rate to 28 percent. Corporate America doesn’t pay taxes. Now, to be sure, raising the corporate tax rate won’t discourage the armies of corporate accountants and lawyers from using every loophole corporations have paid for by buying off, with campaign contributions, legislators of both parties who pass legal, immorally corrupt tax codes. But it’s a start. Share Breaking the law is part of Amazon’s business strategy, whether that means violating anti-competitive rules or safety and health codes. It’s a simple calculation: the profits made by breaking the law far outweigh the sanctions. So, of course, Amazon broke labor laws during the union organizing efforts by workers at the company’s Bessemer, AL plant; I followed the election closely and you can see, for example, this discussion here. When the ballots were counted, the union-supporting workers lost—but now it looks pretty likely that there will be a new election, per a National Labor Relations Board regional hearing officer’s findings upholding the union’s voluminous evidence that Amazon repeatedly broke the law (the union is referred to here as the “Petitioner”). A taste: After conducting the hearing and carefully reviewing the evidence and the arguments made by the parties, I recommend that Petitioner’s objections be sustained in part because the evidence demonstrates that the Employer’s conduct interfered with the laboratory conditions necessary to conduct a fair election. More specifically, the conduct which interfered with the result of the election relates to the Employer’s polling of employees by distribution of vote no paraphernalia in the presence of supervisors and managers (Objection 11), as well as the Employer’s unilateral decision to cause the United States Postal Service (USPS or Postal Service) to install a generic unlabeled mail collection box less than 50 feet from the main entrance to its facility, at a location suggested by the Employer and immediately beneath the visible surveillance cameras mounted on the Employer’s main entrance (Objections 1-4, 6 and 17). While this is a case of first impression, the Employer’s conduct in causing this generic mail receptacle to be installed usurped the National Labor Relations Board’s (Board or NLRB) exclusive role in administering Union elections. Notwithstanding the Union’s substantial margin of defeat, the Employer’s unilateral decision to create, for all intents and purposes, an onsite collection box for NLRB ballots destroyed the laboratory conditions and justifies a second election. [Emphasis added]
The hearing officer’s recommendation that a new election be held will ultimately be decided by the National Labor Relations Board where the majority of the five members are now Democratic appointees—so it’s fairly likely a new election will be in the cards. The problem is that the above tactics, and others, are pretty standard fare in union elections—companies run intense anti-union campaigns replete with manipulation and threats. Because the penalties for breaking the law do not include putting Jeff Bezos in jail. To be sure, re-running the election is great. But, the company will just roll out more anti-union steps and up the ante. The truth is the labor laws are deeply broken—and there is zero chance the PRO Act, which would give a lift to union organizing, will pass Congress (you need 60 votes in the Senate). So, to win, in my opinion, there will need to be a massive public campaign involving forces outside the labor movement—which should include a whole set of points of pressure on Amazon. After WW II, the key world economic powers created two institutions, the World Bank and the IMF. As I wrote last week, I’m no fan of the IMF which, dominated by the U.S., mostly forced countries to do painful economic “restructuring” over a number of decades which meant getting rid of social services, removing regulation and rolling out the welcome mat for global corporations to troll for big profits in exchange for getting badly needed loans. Those loans were so onerous that lots of countries could not hope to pay them back and the debt just grew which then brought more painful austerity measures that hurt, surprise, workers and poor people. Share When the 2009 Great Recession rippled through the world, the IMF created a big pool of money using a special tool called Special Drawing Rights, or SDRs. Essentially, this is money in the form of a credit that countries can tap to then, essentially, convert into dollars. In 2009 hundreds of billions of dollars in SDRs helped many countries get through the crisis with less unemployment and overall suffering. The same can be done today. Since last year, hundreds of leaders around the globe have been pushing the IMF to create $2-$3 trillion in COVID-19-related SDRs, which could be used to lower the global death toll by building up health care systems, or just providing food and economic relief. An important point: the SDRs are outright grants, not loans, so countries would not be adding to their debt burdens. It’s just a no-brainer. If you don’t care about peoples’ lives, look at it from a capitalist standpoint, which is the reason Goldman Sachs and other business leaders have been among those, quietly or more publicly, pushing for the SDRs—you want the global economy to stop imploding and recover, and the only way to that is to provide a big flood of support to countries so people stay healthy and economic activity perks up. During the Trump regime monstrosity, the U.S., which has the biggest voice at the IMF, was blocking the SDRs creation for reasons that are frankly mostly ideological. Even the head of the IMF, who normally wouldn’t cross the U.S., was publicly on board. And a big chunk—about $475 billion—could be created by the IMF with a U.S. president giving the OK, and without Congressional action. Biden, after a massive grassroots pressure campaign, reversed the U.S. position. So, part of this has now just happened the other day: The International Monetary Fund said on Monday its board of governors approved a $650 billion allocation of IMF Special Drawing Rights and said its largest-ever distribution of monetary reserves would become effective Aug. 23. IMF member countries will receive SDRs -- the fund’s unit of exchange backed by dollars, euros, yen, sterling and yuan -- in proportion with their existing quota shareholdings in the fund. Monday’s approval by all 190 IMF member states was long expected.
The bigger point I want to linger on, again, is the self-interested point, per the Goldman Sachs view of the world (ugh, I said it): if poorer countries have dough, especially to support pandemic responses, those countries will be able to get back to improved economic activity. As this Center for Economic and Policy Research paper explains, that means a return of export-related jobs in the U.S.—the paper is super wonky, by all means read it, but the gist is this: Many low- and middle-income countries have experienced more severe economic crises due to the pandemic than high-income countries, and thus have imported less from countries like the United States. This has led to the temporary loss of millions of export-related jobs in the United States. This fall-off in demand also means that rate of the return of American export-related jobs — jobs both directly and indirectly involved in the production of exports — is dependent upon a broad economic recovery in the rest of the world. Special Drawing Rights, which are cost-free for the United States, can help boost global demand for American exports by improving the financial position of low- and middle-income countries. Increased demand for American exports would bring back these export-related jobs back more quickly, as well as put the US economy on a path to creating more export-related jobs over the next five years. The US economy is still down about 6.5 million jobs from its pre-pandemic level of employment, and 9.2 million below the pre-pandemic trend
I’ll have more to say at some point about the future of the progressive movement, on top of my rumination in June about “Progressive Blind Spots and The Muddying of Long-Term Thinking”. Right now, there is a lot of handwringing about the failure to win the Democratic primary in the deep-blue 11th Congressional district in Ohio (“deep blue” meaning whoever won the primary was virtually guaranteed to win the general election). Here’s my brief thought on this, which I tweeted out the night of the election this past Tuesday: progressives have to build an electorally-winning movement based on a stronger foundation than cultism. Rather than solely whine and blame a whole host of outside actors and forces (which are worth considering and critiquing), it really would behoove the progressive movement to have the internal fortitude to be honest about the failures. It’s a sign of political immaturity not to do so. Stay tuned! Share Working Life Newsletter
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