Archive for the ‘Economic matters.’ Category

The return to public corporations in the US.

June 2, 2009

In a well-argued opinion piece published today by salon.com, Michael Lind, a Senior Fellow at the New America Foundation, and Policy Director of New America’s Economic Growth Program, argues that if the American people now own General Motors and other big organisations, then the time may have come to revisit the idea of their being owned as public corporations.

…The truth is that corporations in the U.S. and other countries have always been quasi-public entities chartered for public purposes. You would never know this from corporate propaganda that treats giant, multinational corporations as though they were simply giant versions of sole proprietorships or partnerships. But history and law alike make it clear that today’s large corporations, like automobile manufacturers, are much more like spun-off government agencies than like large-scale lemonade stands.

…………………..

In the middle section he gives the reader a potted history of how, over a century or so,  what were once heavily regulated chartered corporations broke lose of the ties to government to become wht they are today.

Having done this, he comes to his proposal for how a  the old ideas might be given new life.

For example, if we want to have a domestic automobile industry, why not charter companies specifically for that purpose? Other goals like high wages for employees or reasonable executive compensation could be pursued by corporate charter reform, rather than tax breaks or regulations.

This, he claims, is not an especially new set of proposas. Back in 1996, the New Mexican Democrat, Senator Jeff Bingaman  and Senate Minority Leader Tom Daschle (Democrat South Dakota) put forward a similar of proposals which the Clinton administration ignored, sponsoring instead the  a “corporate citizenship” campaign that turned out to be nothing much more than a public relations exercise for everybody involved. He admits that this proposal were probably not workable anyway.

Nevertheless, the idea of chartering particular kinds of private corporations for particular public purposes is a good one that deserves to be revived. Imagine a USA Corporation, which pays a lower corporate income tax, or perhaps no corporate income tax, in return for locating most of its value-added production in the United States (the economist Ralph Gomory has proposed a similar deal through the tax code). USA Corporations could be chartered only by the federal government, in order to prevent a race-to-the-bottom in standards among American states (yes, that means you, Delaware). The chartering could be done by simple registration with the federal government; separate bills before Congress would not be necessary. And if Goldman Sachs could convert itself into a bank holding company, then existing general corporations should be allowed to convert themselves into USA Corporations, if they were willing to fulfill the requirements.

Would the USA Corporation run afoul of international trade and investment liberalization? Not necessarily. Foreign-based multinationals like Toyota and BMW, provided that they located high-value-added production in the U.S., could own their own USA Corporations and repatriate their profits. And there would be no discrimination among foreign and domestic investors. Indeed, one of the goals of the USA Corporation would be to increase foreign direct investment in building up America’s domestic productive capacity.

New kinds of corporations also could be chartered for other purposes, such as nursing or janitorial companies that receive tax and regulatory breaks in return for paying higher wages and permitting unionization. America’s financial sector has always been characterized by a diversity of forms, from retail banks and investment banks to thrifts. There is no reason why our large-scale corporate landscape has to be limited so much to general corporations.

The power of ownership that the American people now wield in the case of GM and other corporations is both limited and passing. But the power to charter corporations for the purposes we choose and in the forms we prefer will always be a power we wield as a sovereign people. We the people should think about using our power.

One can see why this proposal might appeal to the American public. The whiff of socialism, a whiff Americans seem to fear as much as they would the whiff of plague, is not quite so evident here as it is in other proposals I seen put forward.

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Management should learn from the past.

May 31, 2009

In his column in today’s issue of The Observer Simon Caulkin, draws his readers attention to The Puritan Gift  by  brothers Will and Kenneth Hopper in which theyargue that up to the 1970s, US management was living “on the strength of its Puritan inheritance, part of which (with idealism, mechanical aptitudes and unparalleled ability to galvanise energy behind a single aim) was a belief that the coherence of the collective was more important than any individual”

But from the seventies onwards, America, forgetting what had served it well in the past, went in altogether different direction.

 Managers abandoned true north in favour of “neo-Taylorism” – quantitative techniques, “the cult of the expert”, of which the temples were business schools, and heroic CEOs. Raging self-interest and the malign influence of shareholder value did the rest;

Managers in the UK were all too easily persuaded, or could persuade themselves all to easily, to follow suit:

….. lacking their own tradition and burdened by inferiority complex, UK managers were all too easy to drag in the same direction.

Caulkin ends his piece by saying that that the Hoppers’ book does end  on a note of “qualified optimism”

Just as the French had to go to the US to reintroduce resistant vines after their own had been wiped out by phylloxera, so the most thoughtful Anglo-US firms are relearning what they once knew from Japan, inheritor of the human-centred US tradition via Deming and others after the war.

The Puritan Gift2

For those who may have never heard of Deming, a good place to start learning about him and his work is The W. Edwards Deming Institute.

The City & Capitalism.

May 12, 2009

Seth Freedman, author of Binge Trading:The Real Inside Story of Cash, Cocaine and Corruption in the City, has written a rather good article  for today’s edition The Guardian in which he reminds us that the current preoccupation we have with blaming just the City for the financial crisis that has so crippled us ” is utterly unhelpful, and is simply an easy way for the public to ignore its ­collective ­culpability for the financial crisis”.

For all its faults, the City is ­essentially a manifestation of today’s culture, reflecting, and reacting to, the society that it is a part of. Those working in the stockmarket are not genetically programmed to dispense with morals and ethics in their pursuit of ill-gotten gains. Rather, they are products of a society that uses money to rank individuals in terms of success and status. It is ­inevitable that young, ambitious ­graduates will gravitate to an arena where they believe cash rains down like manna from heaven……………….

..The City does not exist in a vacuum; the stockmarket is the heart of a capitalist society, pumping blood around the system. And until capitalism is rejected by the world at large, to attempt to control it is useless: regulation only encourages more potent strains to spring up.

So long as money still trumps morals in society’s eyes, it is futile to protest about those who profit from swine flu by short-selling travel shares. Those frowning now at such activities will be smiling again in a few years when the boom times return. Underneath these short-term ups and downs, the corrosive nature of capitalism’s core still needs to be addressed before any fundamental and far-reaching change can ever occur.

Here we have the dilemma stated baldly and well. I wonder whether or not those who have considered the fall of Communism as a the victory of Capitalism – and there are many who do – can now bring themselves to consider the “corrosive nature of capitalism’s core” might be, let alone address it.

New models for the economy.

May 7, 2009

Today’s edition of The Guardian contains a commentary column  by the never less than interesting  essayist and polemicist Timothy Garton Ash in which he argues that to emerge from what he calls “the greatest crisis of capitalism for 70 years” we need “new models for a sustainable social market economy”. Thea new models will, as he sees it have their core,  a rigorously regulated “free-market” economy in which  each and every one of us will behave more responsibly that we have in the past.

More than 30 years ago, Daniel Bell explored in his Cultural Contradictions of Capitalism the paradox that the dynamism of capitalism depends on individuals living by somewhat different values in their personal lives as producer and as consumer. Extending Max Weber’s famous argument about the protestant ethic and the spirit of capitalism, he suggested that the production side depends on people harking to values such as hard work, punctuality, discipline and a readiness to accept deferred gratification.

The demand side, by contrast, depends on them being self-indulgent, expansive, pleasure-seeking and given to living in the now. Add to this the new constraint that the planet will not sustain more than 6 billion people enjoying constantly rising living standards achieved by the methods of production and consumption so far used. Complicate matters further by the moral argument that the world’s rich have no right to deny the world’s poor a materially better life, which would still be a fraction of the affluence we ourselves enjoy.

What you end up with is not just a systemic conundrum but also a personal challenge to every one of us. The challenge is to find a new balance in our double-lives as producers and consumers, at the same time consciously contributing to a larger set of new international balances between economy and environment, oversaving east and overspending west, rich north and poor south. That, too, is what I mean by a sustainable social market economy.