There are times when, for just a quick moment, if you look really hard, a veil is lifted and you can see quite clearly the deep corruption of the economic system that impoverishes millions. Sometimes, it’s the actual lords of capital who, unintentionally, give everyone a glimpse—either because they goof or, more typically, they say something revealing about the system that seems pretty normal to them.
It’s really on us to catch these moments because the incompetent media mainly salutes the entire system, with very little critical analysis—how could you analyze if you don’t read and simply traffic in gossip, and spend most of your time bowing down at the feet of CEOs, praising them on cable news and elsewhere as the great “job creators”? By the way, the alternative progressive media isn’t much better because, frankly, most of the loudmouths who spew on podcasts and websites are mostly about building an audience, and making money, by feeding peoples’ understandable anger at the system—but they do so quite superficially and don’t bother to read (alert: reading Twitter does not count as in-depth inquiry).
Ah, so, to Larry Fink. Who is he? He’s the chairman and CEO of BlackRock, an American multinational investment management corporation, the largest in the world. He has his hands on roughly $10 trillion—yes, TRILLION with a capital “T”. Which means everyone takes his calls. He’s also made a big deal about BlackRock’s “commitment” to action around climate change—hold that thought for later on.
So, on March 24th, Fink wrote a letter to his shareholders (h/t to the Financial Times which is the only place I saw this discussed at any length). Every CEO letter to shareholders is an exercise in self-praise and glorification as well as a place to justify screw-ups in a corporate-speak kind-of-way (meaning, pretend like the CEO is being transparent but really obfuscating and covering up mistakes).
Two paragraphs in Fink’s letter—where he unintentionally gives a look at what the system is all about—are the most revealing for our conversation today:
Russia’s aggression in Ukraine and its subsequent decoupling from the global economy is going to prompt companies and governments worldwide to re-evaluate their dependencies and re-analyze their manufacturing and assembly footprints – something that Covid had already spurred many to start doing.
And while dependence on Russian energy is in the spotlight, companies and governments will also be looking more broadly at their dependencies on other nations. This may lead companies to onshore or nearshore more of their operations, resulting in a faster pull back from some countries. Others – like Mexico, Brazil, the United States, or manufacturing hubs in Southeast Asia – could stand to benefit. This decoupling will inevitably create challenges for companies, including higher costs and margin pressures. While companies’ and consumers’ balance sheets are strong today, giving them more of a cushion to weather these difficulties, a large-scale reorientation of supply chains will inherently be inflationary. [emphasis added]
When Fink talks about COVID, and to a lesser extent the war in Ukraine, having forced a change in “manufacturing and assembly footprints” he is talking about the “supply chains” you read so much about. Last October, I wrote extensively about supply chains—the main reason for the spider web of supply chains is, and has always been:
TO. PAY. SLAVE. WAGES.
To always be moving production to countries where wages are rock-bottom, where unions are weak, where authoritarian regimes open the doors to marauding corporations, where huge profits can be made.
So, the underlying point here, the thought bubble that goes unsaid, the self-own, the “tell”: “Corporations made lots of money by paying slave wages in countries around the world and, now, that whole model of exploitation might be at risk because globalization is looking like a rocky proposition.”
COVID exposed, from a capitalist’s perspective, the vulnerability of the supply chain model when thousands of factories in poor countries shut down because the virus ran rampant—because people who live in abject poverty are always more vulnerable to disease, and, especially, people who are packed into vast, unsafe, work spaces who are the very same people who can’t get vaccinated in large numbers because of the rickety nature of health care systems in poor countries and the greed of drug companies who have an iron grip on the use of vaccines.
When Fink bemoans the “on-shoring” or “near-shoring” of corporate manufacturing, he is, unintentionally, shining the light on the immorality of the system, crying over this: oh, no, we will have to pay higher wages, higher relative to some sweatshop in, say, Bangladesh or China.
Let’s move to the next Fink point exposing, unintentionally, the despicable system. He refers to “a large-scale reorientation of supply chains will inherently be inflationary”.
By that, he is saying, without being explicit, wages will be higher.
That’s pretty logical: if you come closer to “home”—and by “home” I’m simply referring to being closer to a home office and end-use customers because no global corporation gives a crap about national identity or “patriotism”—your other costs of delivering stuff to customers (transportation, mainly) are going to be lower (putting a product on a truck, for example, as opposed to having to move something thousands of miles in a shipping container over a weeks-long voyage) and it will be faster (which saves money).
Wages will be higher. Isn’t that awful?
Well, it is to the entire Fink world which has made massive profits over many decades principally based on a model of low wages—it’s the Wal-Mart economic strategy. And you don’t have to go further than re-emphasizing that had workers’ wages reflected productivity gains made over the past 40 years, the federal minimum wage should be somewhere around $22-per-hour, not the current poverty-level $7.25-per hour.
Now, to pick up the point about climate change. Fink has grabbed a lot of uncritical positive public relations in the media with his recent pledge to make investment decisions with an eye to climate change (I guess “uncritical” goes without saying for “journalists” who fawn over powerful and rich people). In his letter:
As I wrote in my letter to CEOs over the past three years, the energy transition can only work if it is fair and just. Importantly, it will not occur overnight or in a straight line. It requires us to shift the energy mix from brown to light brown to light green to green. [emphasis added]
Ha! “Fair and just”.
This is the additional “tell” on Black Rock and the “free market”. It’s a bizarre notion that the future of the planet should be in the hands of the “free market”, corporations and their CEOs: The entire motivation for globalization, which virtually every large corporation has pushed for, was to make gobs of money by exploiting workers AND the planet.
Impoverishing people by paying them pennies comes hand-in-glove with daily operations that ravage natural resources with very little, if any, cost to repair the surrounding environment. In fact, ravaging the environment is not a bug, it’s a feature on the plus side of the equation for CEOs and is the unseen positive part of the bottom line—if a corporation sucks out huge amounts of water from a river or mines ores from deep in the earth, and, then, drops the polluted water back into nature or leaves large piles of deadly ore tailings to blow in the wind, but never pays for the real cost of that plunder (an “economic externality” in the lingo), it’s a boon to profits—the natural world ends up, sadly, subsidizing its own plunder.
Fink’s use of “fair and just” is the way he, and other CEOs, are trying to co-opt the debate. Or, put another way, Fink’s “fair and just” is a far cry from a “fair and just” transition that means workers and communities will be made whole for any economic changes because of de-carbonization. Bemoaning the reversal of globalization, whose entire engine is driven entirely by quite unjust wage robbery, and, then, blaming inflation on the “onshoring” of production—meaning, largely, paying higher wages compared to slave-like wage levels in poorer countries—is not even close to what fair and just transition means.
In my opinion, written before, fair and just transition means:
All workers effected by decarbonization must be made whole in overall income and benefits, and, at the same time, communities must be robustly financed to encourage job creation that will benefit men and women equally and spark economic development that makes up fully for any decline in losses to the tax base or other income that decarbonization-related activities contribute. Where new jobs are created, those jobs must offer 100 percent equivalent wages to disappearing good-paying, union-wage jobs and offer every worker full-time, good-paying work, not precarious, low-paying, irregular work.
That is not what Fink believes.
If you want one last insight into BlackRock, consider that this leviathan controls about 13% of the stock of Warrior Met Coal at year’s end, making it the company’s largest stakeholder—a company where mineworkers have been on strike for an entire year because:
…Miners gave up wages, health care benefits, pensions and more to allow Warrior Met Coal to emerge from bankruptcy in 2016.
Since then Warrior Met has been extremely profitable, paying shareholders $852 million in dividends, paying a special cash dividend of $190 million and compensating CEO Walter Scheller with more than $17 million.
Yet the rank-and-file workers have struggled to make ends meet. Since the bankruptcy, Warrior Met Coal has: cut the hourly wages of the miners by more than 20%; replaced the defined-benefit pension plan with a 401(k) plan; shifted health care costs onto active employees; cut the health care benefits of 2,500 retirees; and told the miners to work up to 16-hour shifts with few days off and only three paid holidays a year that can be taken only on the days they actually occur. [emphasis added]
All that said, I appreciate that Fink exposed how rotten a system we live with.
The Insanity Of Public Money Spent on Sports Stadiums
I like sports. Or at least some sports—principally, mostly, baseball. It’s good entertainment. It’s a bonding experience between people.
Sports, obviously, is a big business—getting bigger with the more recent overt, mindless embrace and promotion of sports gambling. It’s a business that makes rich people even richer. During the recent lock-out by owners of the baseball players, I pointed out in this long Twitter thread that every single owner of all 30 teams was a very rich person, mostly white men, from billionaires to the “paupers” who were “just” piddling multi-millionaires (aside: follow me over at Twitter for thoughts outside of this newsletter)
So, not a single taxpayer dollar should be spent subsidizing rich people to make them even richer by building new stadiums on the public dime—virtually every sports franchise gets more valuable the minute after these rich people buy the expensive toy. But, it happens all the time—billions of dollars over the past few decades.
So, how ridiculous is this?
Gov. Kathy Hochul proposed a deal Monday in which state and county governments would pay $850 million toward the estimated $1.4 billion cost of building the stadium in a Buffalo suburb.
Those figures, though, covered only construction costs. The team's lease agreement would also require the state to pay into a fund to keep the new building in Orchard Park in tip-top shape, according to a 14-page memorandum released by the Hochul administration.
That would include $100 million, paid out over 15 years, for any needed maintenance and repairs, plus at least an additional $180 million for capital improvements, paid out over 30 years. Actual annual state payments for the capital fund might be higher, adjusted upward based on the consumer price index.
Together, the state and county payments would make up one of the largest public subsidies ever given to a new NFL stadium. [emphasis added]
This is just a putrid waste of money that is happening for one principle reason: a governor wants to cozy up to rich people and rich donors and use taxpayer money to do it, layered with all sorts of double-talk about economic development.
First, who owns the Buffalo Bills? Terrence Michael Pegula, a billionaire who has made his fortune in natural gas development, real estate, entertainment and professional sports. He ranks #438 on Forbes’ richest humans list, with a current net worth of $5.8 billion. If he is so hell-bent on having a new stadium for his team, by all means, go ahead and build one (assuming the land isn’t useful for other purposes like housing) but pay for it out of your own pocket.
Second, you will hear the argument, from the feckless governor and her ilk, that the public should ignore the immoral idea of showering rich people with hard-earned tax dollars because, miracles of miracles, putting a billion tax dollars—a billion dollars!—into the pockets of a very rich person will create economic benefits for people like you.
Let me give you a technical, economic term for that argument: utter bullshit.
This is not simply my rhetorical rejoinder. It’s been deeply researched by some serious economists.
And it’s just false. Rubbish.
Here is an in-depth study on the whole topic, with lots of economic data and a survey of 130 studies over 30 years, including a reference to one of the foundational research efforts in this field that appeared in 1997: “Sports, jobs, and taxes: The economic impact of sports teams and stadiums” written by Roger Noll and Andrew Zimbalist. I’ve read the book and followed Noll’s views on the issue for some time—he’s brilliant on this topic.
The linked study quotes the introduction in the Noll/Zimbalist book:
The introduction summarizes the “unattractive economics of stadiums” from the studies’ findings succinctly: “In every case, the authors find that the local economic impact of sports teams and facilities is far smaller than proponents allege; in some cases it is negative. These findings are valid regardless of whether the benefits are measured for the local neighborhood, for the city, or for the entire metropolitan area in which the facility is located” [emphasis added]
Also of note from the linked study—chew on this number:
Between 1970 and 2020, state and local governments devoted $33 billion in public funds to construct major-league sports venues in the United States and Canada, with the median public contribution covering 73 percent of venue construction costs. [emphasis added]
Indeed, back in 2018, I talked about taxpayer stadium subsidies with Roger, who is professor emeritus of economics at Stanford, when there was a looming idea to build a baseball stadium in Portland as a way of luring a major league team to the city and using taxpayer money for the project.
I asked him for his opinion on the Bills stadium focusing on just two issues (you can read a more extensive interview he gave here).
JT: The common thread in many of these deals over the years is the promise, to desperate communities, that somehow a stadium project will generate sought-after jobs. But, the good-paying ones for the construction are quite small and fleeting and the on-going jobs, which are mostly seasonal, can hardly be called middle-class creating work.
Roger: When the Governor said that the project would create 10,000 construction jobs (regardless of whether that is the right number), she was making the case for a depression-era public works program to reduce unemployment. The next task should be to identify the construction projects of this size that would generate the most public benefits. And you are correct that the local jobs at the stadium will be about 100 or so players, coaches and executives who are paid millions of dollars each, a small number of full-time maintenance jobs that pay ordinary wages, and hundreds of jobs that pay minimum wage for five hours per week 10-20 days per year. And, since these jobs are almost completely substitutes for other jobs in entertainment, recreation, restaurants and bars, the biggest effect is a massive transfer of income from a large number of people who are paid ordinary wages to a much smaller number who are paid millions.
JT: Certainly, one big issue of sports stadium subsidies is the “over-promising” of benefits. But, as important, is the “opportunity cost” of using a billion dollars overall for this that, then, isn’t available for other priorities say health care or actual long-term job building ideas. Your thoughts?
Roger: The opportunity cost of the stadium project is the best alternative use of the resources that are allocated to it. The most obvious examples: other potential uses of the site, another potential project that would employ the 10,000 construction workers, and other ways to spend the state and local government budgets – education, health care, infrastructure, etc.
Just a sliver more on Roger’s point about “opportunity costs”—that is money that won’t go to affordable housing, or subways or climate change efforts. And you don’t have to search to hard to see, through New York state, where a billion dollars could be better spent for the wider benefit of a lot more people.
So, this is just madness. A foolish use of scarce resources.
And it’s bad long-term politics, too. The average person has a very negative view of paying taxes—largely because she or he feels like they are paying too much and seeing little benefit. And in one sense, I totally understand the anger around taxes: compared to very wealth people, the average taxpayer pays a higher proportion in taxes on their income because rich people know how to dodge taxes—aided and abetted by a corrupt political system—and very little of their overall wealth is taxed at regular rates (hence, the very important idea of implementing a wealth tax).
What, then, is the average taxpayer to think when they hear, on the one hand, that regular services and benefits have to be cut, and other projects that really benefit the larger community have to be on hold, because the fiscal cupboard is bare while, on the other hand, there seems to be enough money to waste to build stadiums, which are just vanity edifices for rich people.
“Blue” Oregon Could Very Well Snub A Democrat For Governor
I’m simply reaffirming a point I’ve made for many months in a variety of places: “deep blue” Oregon (whatever “deep blue” means...) may very well elect a Republican for governor and/or reject the Democrat in favor of an “independent”. And I don’t think the Oregon Democratic party apparatus, or the national party, is taking that seriously enough. I’m simply reasserting this today with new info and a new specific observation.
If you look at the most recent statewide voter registration numbers:
-1,022,556 non-affiliated voters (or what are often called "independents")
To just hammer home the transparent point: independents are the largest category. As an aside that is relevant to this race: I subscribe to the notion that “independents” aren't some blank slate, or that they are unmoored in their beliefs. They are alienated from the two parties—for understandable reasons. Generally speaking, I think a big slice of them are probably fairly socially liberal/progressive (favor abortion rights, e.g.) and perhaps a bit less progressive on economics, though younger “independent” voters are likely more progressive than older "independent" voters on economics.
NEW INFO: The “independent” candidate Betsy Johnson is a state senator and a self-described “moderate Democrat”, which is just a term that muddles a practical point: these are folks who embrace the “free market” system and are quite content to aid and abet the theft of peoples’ hard work by a handful of very rich people. So, it’s no surprise that Johnson just received $750,000 from that prick (that’s a political term) Phil Knight for a total of $1 million just from Knight (there are no campaign contribution limits for statewide, non-federal races)—but Johnson is piling up the cash from other wealthy donors and will likely be far better-funded than the other general election candidates from the two major parties. That isn't usually the case for a third-party candidate.
It’s hard to understate how bad the Democrats’ options are (and, no, that carpetbagger, “free market” advocate phony Nick Kristoff wasn’t any better of a choice). Contrary to the general national Democratic Party wish that Trump-like candidates win primaries under the (suspect) theory that such a person can’t win a general election, whether the equally uninspiring/mediocre former Oregon House speaker Tina Kotek or current state Treasurer Tobias Read win the primary (Kotek is probably a bit of the favorite), either of them should pray Republicans nominate a “non-Trumpy” candidate...
Republicans will be extremely motivated to vote in 2022 and usually get in the vicinity of 40 percent of the statewide vote.
Betsy Johnson will play up “I was once a Democrat, I’m moderate but the party is too left-wing, the party left me and look at homelessness blah blah”. She will have plenty of money to make that case.
It’s hard to know whether Johnson catches fire enough to win a three-way generalelection race and I’m not predicting she will win BUT what is clear to me is that even if she only polls 10-15 percent (which I think is a no-brainer given the money she has raised), she will get the support of plenty of independents and “moderate Democrats” who will have no particular love for either Kotek or Read, either one of whom will be running with the baggage of following the equally stupendously mediocre Kate Brown (for whom, for the record, as a good “soldier”, I knocked on slews of doors for her re-election campaign).
A crazy lunatic Republican (I know, it's hard to categorize that exactly) would be welcome news for Johnson because whatever slice of “moderate Republicans” exists (mainly over things like abortion rights) who might flee from a Republican lunatic will do so to Johnson because they feel comfortable with the pro-free market, business mouthpiece, Phil Knight-endorsed Johnson. They are not going to run to vote for a Democrat but Johnson is a “safe harbor” for that cohort.
A non-Trump Republican will hold a solid base and deprive Johnson of some independent votes, make Johnson weaker in the general election, and, might, then, allow the Democrat to squeak through in a three-person race.
The warning lights are there.
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