Excellent analysis. The biggest problem is that private equity now makes all business decisions for almost every corporation. Vanguard and Black Rock not only have seats on every single board, they also own much of the commercial and residential property in the cities. Private equity has no interest whatever in value; the only thing that matters is next quarter's P&L statement with dividends for investors. The business of America used to be business, but now it's profit. You can see the damage that this sort of ownership has by looking at the 737 max disaster; boing sold that division to private equity, who decided that it would be more profitable to skip certain safety steps.
Here's the question for you: is it possible to solve this without completely tearing down this odious system? Is it even possible?
Then where do we start? We're clearly getting either Biden or Trump next year. It feels like running on a shitty treadmill. Where is the grassroots movement to fix this? I tried to join a union. Then I got laid off. Where is the momentum?
How would I know, as a Canadian, if these people were still rich if they didn't update us? There's only so many Canada Geese to carry the news across the border. Hamilton, thank YOU for doing Canadians a solid.
I wish there was more discussion about limited liability and corporate personhood. Without these two ingredients, many of the problems you describe might disappear.
I also find it interesting from the point of view of evolutionary psychology. Reciprocal altruism and other psychological and moral traits evolved to support cooperation between humans. Why do we make laws that empower organizations (corporations) that behave like sociopaths? As society becomes more complex and large organziations more powerful, shouldnt we learn from biological evolution how to make organziation cooperative rather than sociopathic?
Btw, an interesting popular science book about evolutionary psychology is the "Moral Animal" by Robert Wright (who also writes an interesting substack on foreign politics).
You need a certain amount of sociopaths in business in order to take the risks, so that the business can stay afloat. "Snakes in Suits" is a really great book about this. It also explains why this is an important "trait" to have for entrepreneurs.
I agree, but the problem is that our current laws favour sociopathic organizations over cooperative ones. Our system is totally out of balance, in my view. The evolutionary point of view suggests that we should make sure that sociopathic organizations remain the exception.
Capitalism has no room for diversity or inclusion, honestly. There's no room for sickness or disability, because that's money that the corporation isn't making from your work, if you're not working 40 hour weeks like the rest of your working peers. This needs to change. Why am I defined not as a person, but as how much I can contribute to someone else's money pile in society?
I agree with your sentiment. But in my own thinking I try to steer away from the old capitalism vs socialism debate. Not least due to the information revolution which continues to accelerate (AI, etc) society is changing so quickly that we need to find new ways coping with the new realities. So, yes, "this needs to change", but how?
Another book I found insightful is "The Human Network" by Matthew Jackson. He is a Stanford economist who moves away from mainstream economics by putting networks in the center of his studies. I am not sure whether economists would agree with me on this, but I see that as a potential revolution that could be able to upend the stranglehold that mainstream economics has on current politics.
Great writing - your labor v capital framing with its dose of humanity should be required reading for the Washington politicians and media. I keep scratching my head as to why more ambitious pols don't embrace these ideas. Stand apart to be noticed! A new progressive, Bernie-like, with solid professional comms support could be a force!
100% to everything you said. A genuine question I've been wondering about for a while: while globalization has increased inequality in the US, it seems to have decreased inequality across the world (looking at the Gini coefficient), how do we square this with the ultimate goal of better conditions for everyone? I'm sympathetic to the idea that less concentrated wealth would improve people's lives even more, but is there another argument against globalization that doesn't rely on conditions of workers just in the US?
Many thanks Hamilton. Clear and concrete as usual. It is always sad to observe how the multinational companies around the globe, can do what they want. Moving factories and money as they decide. It can only happens in a very corrupt planet ( polititians, media, regulators, and one million etceteras). In real life, what can we do? Answer: not too much. Just keep on fighting and reporting the truth, nothing more, nothing less. I watched your conference/ discussion by zoom on Thursday. Very interesting. Try to read about the miner's strike in the UK. Very sad and real story. Keep on fighting mate.
You make a good point, but omit mention of the "Disaster Capitalism" aspect of immigration. Between 1798 and 1994, the US is responsible for 41 changes of government south of its borders. This creates a constant flow of military and political refugees...and the attacks continue today. Equally to blame are the economic attacks. NAFTA, for example, ships subsidized Iowa corn to Mexico, possibly impairing Mexican corn farmers' income. The big farmers got a bailout in the treaty, but the little subsistence corn farmers got nothing.
Sure, corn is only arguably the most important food crop in the world, and those little farmers were only keeping the disease-resistance and diversity of the corn genome alive with the varieties they grew, but they weren't making any money for Monsanto, so we can safely ignore them.
In the wake of NAFTA, Mexican real, median income fell 34%--a figure not seen in the US since the Great Depression. Think of those immigrants as late Okies, then...
How about Option C: Companies operating in Mexico stay in Mexico and continue to provide jobs there, while in the US workers are re-skilled to participate in the more advanced manufacturing that also needs to happen, and that provides a level of reimbursement more appropriate to their demands and skills?
While a broad point around relatively open borders and not being hostile to immigrants is welcome, this article is essentially displaying a childlike understanding of economic issues. The author misunderstands market caps, ignores the concept of investment, and seems to think that tens of billions is somehow a lot in government terms. I would politely suggest that people here stop using Twitter for their analysis, and instead try reading some actual economic publications.
Actual economics publications are a demonstrable failure at accounting for the real impacts of economic activity. The field of economics has repeatedly failed to provide a forward-looking analysis that would help avert the twinned economic and ecological collapse we’re seeing worldwide. Every economist who isn’t desperately clinging to an unjustifiable six figure income will tell you the same thing: the field is rotten, unscientific, and completely bought and paid for by the rich. Just because you’ve been so beguiled by the snake oil of macroeconomic mysticism that you take it as Truth doesn’t mean everyone should make the same mistake. Get out of here
I DO follow the Bank of Canada and what Tiff Macklem is doing. He helped us out of the pandemic and managed to keep the economy out of a recession, BUT he made is VERY clear that the Bank of Canada will not help people out of the housing crisis. I can really respect that.
It’s one thing disagreeing with mainstream economic analysis on certain issues, but it’s quite another to misunderstand basic facts about the stock market and taxation. By all means object to some of the conclusions being drawn by economists, but I’d advise doing so with at least a basic understanding of economic theory and how certain institutions work.
Assuming other people don’t have this knowledge, based on very little information, makes your concerns appear to be in bad faith. What’s the point of engaging in this discussion in bad faith? If you want to do anything other than use the idea of economics as a rhetorical gotcha, you’d have been more specific in your objections. Tiresome non-contribution.
“This is all done quite openly. It is not a secret at all. Apple manufactures its iPhones in gargantuan worker villages in poor countries like India and China and Apple evades tens of billions of dollars in taxes by stashing its money in offshore tax havens and Apple is, not coincidentally, worth close to $3 trillion.”
In this paragraph alone, we have:
- A confusion between market capitalisation and actual revenue. Apple being ‘worth $3 trillion’ is more of a function of the stock market betting in favour of its future success, rather than actual value - even before factoring costs, its revenue last year was only about $380bn - a decent amount, but on nowhere near the same scale, and even leaving aside tax avoidance this isn’t something you could just tax away.
- No acknowledgement anywhere about the fact that globalisation has overwhelmingly benefitted these poor countries and led to some of the largest quality of life increases in history. There are still potentially arguments to be made about living standards, as well as the impact on eg American workers (although I’d partly attribute this to poor economic policy), but the fact of the matter is that the likes of China and India have very much benefited from these changes
- A lack of understanding that, in macroeconomic terms, tens of billions is pocket change when it comes to government revenues, particularly in the US. For all the cries of tax avoidance (as far as I’m aware none of what they do is illegal) this is essentially a rounding error in US budgets, and the notion that you could somehow solve every problem by taxing them this is naive at best. Furthermore, this also fails to acknowledge the positive externalities that result from such tax havens with respect to places like Ireland, that benefit far beyond the missing billions in tax.
There are several more of these points I can point to. By no means am I an expert on these issues and I may well be unfairly misrepresenting the author’s understanding on this. Individually there is also much to debate on each of these points and I’d be happy to discuss further. However, taken altogether, this essentially comes across like a sixth-former’s (or high-schooler for those across the point) understanding of economics - well meaning yes, but lacking some basic conceptual knowledge and having seemingly not done any research beyond what other left wing authors from the same brand of well meaning naïveté have put out (I say this as someone who themselves identifies as left wing, and probably agrees with many of the author’s beliefs).
While some of Zucman’s proposals seem plausible, and certainly the tax evasion of individuals carries comparatively fewer positive externalities, at the end of the day he only attributes $200bn to the amount of missing tax - for reference, this is less than the GDP of New Zealand or the operating budget of the NHS in the UK. While it may be helpful, you are not going to change the world with that. Furthermore, at least in the stuff of his I read, he offers no account of the positive externalities of corporation tax avoidance - this for example is massively beneficial to the economy of Ireland, and it is dubious that the possibility of recouping a relatively small amount of tax income is worth destroying a viable engine for growth.
As far as I’m aware, he says nothing on either of the other points, so I’m not sure how this is supposed to refute what I say.
My only complaint about this piece is that it puts the current Democratic push for a border bill completely out of context. That bill was NOT about pandering to the racist anti-immigrant base. It was EXPLICITLY an effort to get Republicans to pass funding for Ukraine/Taiwan/Israel/Gaza. This piece is excellent, but that one point (in my opinion) was made in bad faith.
Hey, Mike, thanks for providing the correct framing for the immigration debate in the USA. I'm restacking and sharing this on twitter. People need to understand the points you're making.
I have never actually thought of immigration being a Bad Thing (TM) until Sweden started whining about integration. Most Western democracies go "refugee shopping" at the refugee camps, so I don't think they have any right to whine about who they pick. They should want to help them integrate instead, maybe they need more time to learn Swedish, maybe they need more time to adjust to a new country. Even If I ended up in Sweden, it would take me time to adjust.
I don't really understand why having neighborhoods of one specific diversity group is a problem either. So what if all the Somali Muslim women wear abayas? It's not really up to you, Very White Swedish people, to decide if she should do that OR even if she should not speak Somali anymore. Most of the immigrants from incredibly poor countries come with literally nothing, so we should not be so judgmental and learn about their culture. Try to help them out, I think everyone has a part to play in this.
I also don't like the fearmongering of "There's terrorists in the refugee streams." My mother keeps trying to convince me that there is because, "I don't know everyone personally." They're not allowed to come here until go through the vetting process, whatever that entails. This seems to be a problem with only Very White People. (TM).
Great article. There’s another pernicious aspect to the story - we’re told companies move abroad because of environmental regulations, despite zero evidence of this happening. On the contrary, stronger environmental regulations are a pull factor. Yet we have all kinds of neo-industrial policy that is anyway mostly ineffective except as a marketing tool to turn voters against climate policy and distract from the real reasons capital moves, which you discuss.
Thanks for laying it all out. I sell a board game - The Game of REAL LIFE. I have found immigrants buy my game. Board games are cheap entertainment and with my game I think they are trying to learn how to be American. But as a business owner, immigrants buy my game - let them all in! I wonder how many other business owners have not thought this through - your business will grow with more immigration.
Excellent analysis. The biggest problem is that private equity now makes all business decisions for almost every corporation. Vanguard and Black Rock not only have seats on every single board, they also own much of the commercial and residential property in the cities. Private equity has no interest whatever in value; the only thing that matters is next quarter's P&L statement with dividends for investors. The business of America used to be business, but now it's profit. You can see the damage that this sort of ownership has by looking at the 737 max disaster; boing sold that division to private equity, who decided that it would be more profitable to skip certain safety steps.
Here's the question for you: is it possible to solve this without completely tearing down this odious system? Is it even possible?
Yes it's possible, it's just a matter of regulation. It's a political problem.
Then where do we start? We're clearly getting either Biden or Trump next year. It feels like running on a shitty treadmill. Where is the grassroots movement to fix this? I tried to join a union. Then I got laid off. Where is the momentum?
lol at these dorks emailing to assure you they're still rich. I'M SO RELIEVED
How would I know, as a Canadian, if these people were still rich if they didn't update us? There's only so many Canada Geese to carry the news across the border. Hamilton, thank YOU for doing Canadians a solid.
I wish there was more discussion about limited liability and corporate personhood. Without these two ingredients, many of the problems you describe might disappear.
It infuriates me that corporations that are souless bastions of greed, have personhood.
I also find it interesting from the point of view of evolutionary psychology. Reciprocal altruism and other psychological and moral traits evolved to support cooperation between humans. Why do we make laws that empower organizations (corporations) that behave like sociopaths? As society becomes more complex and large organziations more powerful, shouldnt we learn from biological evolution how to make organziation cooperative rather than sociopathic?
Btw, an interesting popular science book about evolutionary psychology is the "Moral Animal" by Robert Wright (who also writes an interesting substack on foreign politics).
You need a certain amount of sociopaths in business in order to take the risks, so that the business can stay afloat. "Snakes in Suits" is a really great book about this. It also explains why this is an important "trait" to have for entrepreneurs.
I agree, but the problem is that our current laws favour sociopathic organizations over cooperative ones. Our system is totally out of balance, in my view. The evolutionary point of view suggests that we should make sure that sociopathic organizations remain the exception.
Capitalism has no room for diversity or inclusion, honestly. There's no room for sickness or disability, because that's money that the corporation isn't making from your work, if you're not working 40 hour weeks like the rest of your working peers. This needs to change. Why am I defined not as a person, but as how much I can contribute to someone else's money pile in society?
I agree with your sentiment. But in my own thinking I try to steer away from the old capitalism vs socialism debate. Not least due to the information revolution which continues to accelerate (AI, etc) society is changing so quickly that we need to find new ways coping with the new realities. So, yes, "this needs to change", but how?
Another book I found insightful is "The Human Network" by Matthew Jackson. He is a Stanford economist who moves away from mainstream economics by putting networks in the center of his studies. I am not sure whether economists would agree with me on this, but I see that as a potential revolution that could be able to upend the stranglehold that mainstream economics has on current politics.
"Corporations are people, my friend"--the Republican senator beloved by Democrats
Apparently, they also have values, also like people. *makes disgusted face*
one of the best pieces you've written since i've been on the list
Great writing - your labor v capital framing with its dose of humanity should be required reading for the Washington politicians and media. I keep scratching my head as to why more ambitious pols don't embrace these ideas. Stand apart to be noticed! A new progressive, Bernie-like, with solid professional comms support could be a force!
Dang it Hamilton, it's an election year, NOW IS NOT THE TIME FOR LOGIC AND RATIONALITY!
100% to everything you said. A genuine question I've been wondering about for a while: while globalization has increased inequality in the US, it seems to have decreased inequality across the world (looking at the Gini coefficient), how do we square this with the ultimate goal of better conditions for everyone? I'm sympathetic to the idea that less concentrated wealth would improve people's lives even more, but is there another argument against globalization that doesn't rely on conditions of workers just in the US?
Branko Milanovic has written some good books about this.
Many thanks Hamilton. Clear and concrete as usual. It is always sad to observe how the multinational companies around the globe, can do what they want. Moving factories and money as they decide. It can only happens in a very corrupt planet ( polititians, media, regulators, and one million etceteras). In real life, what can we do? Answer: not too much. Just keep on fighting and reporting the truth, nothing more, nothing less. I watched your conference/ discussion by zoom on Thursday. Very interesting. Try to read about the miner's strike in the UK. Very sad and real story. Keep on fighting mate.
Nice work and writing.
You make a good point, but omit mention of the "Disaster Capitalism" aspect of immigration. Between 1798 and 1994, the US is responsible for 41 changes of government south of its borders. This creates a constant flow of military and political refugees...and the attacks continue today. Equally to blame are the economic attacks. NAFTA, for example, ships subsidized Iowa corn to Mexico, possibly impairing Mexican corn farmers' income. The big farmers got a bailout in the treaty, but the little subsistence corn farmers got nothing.
Sure, corn is only arguably the most important food crop in the world, and those little farmers were only keeping the disease-resistance and diversity of the corn genome alive with the varieties they grew, but they weren't making any money for Monsanto, so we can safely ignore them.
In the wake of NAFTA, Mexican real, median income fell 34%--a figure not seen in the US since the Great Depression. Think of those immigrants as late Okies, then...
How about Option C: Companies operating in Mexico stay in Mexico and continue to provide jobs there, while in the US workers are re-skilled to participate in the more advanced manufacturing that also needs to happen, and that provides a level of reimbursement more appropriate to their demands and skills?
While a broad point around relatively open borders and not being hostile to immigrants is welcome, this article is essentially displaying a childlike understanding of economic issues. The author misunderstands market caps, ignores the concept of investment, and seems to think that tens of billions is somehow a lot in government terms. I would politely suggest that people here stop using Twitter for their analysis, and instead try reading some actual economic publications.
Actual economics publications are a demonstrable failure at accounting for the real impacts of economic activity. The field of economics has repeatedly failed to provide a forward-looking analysis that would help avert the twinned economic and ecological collapse we’re seeing worldwide. Every economist who isn’t desperately clinging to an unjustifiable six figure income will tell you the same thing: the field is rotten, unscientific, and completely bought and paid for by the rich. Just because you’ve been so beguiled by the snake oil of macroeconomic mysticism that you take it as Truth doesn’t mean everyone should make the same mistake. Get out of here
I DO follow the Bank of Canada and what Tiff Macklem is doing. He helped us out of the pandemic and managed to keep the economy out of a recession, BUT he made is VERY clear that the Bank of Canada will not help people out of the housing crisis. I can really respect that.
It’s one thing disagreeing with mainstream economic analysis on certain issues, but it’s quite another to misunderstand basic facts about the stock market and taxation. By all means object to some of the conclusions being drawn by economists, but I’d advise doing so with at least a basic understanding of economic theory and how certain institutions work.
Assuming other people don’t have this knowledge, based on very little information, makes your concerns appear to be in bad faith. What’s the point of engaging in this discussion in bad faith? If you want to do anything other than use the idea of economics as a rhetorical gotcha, you’d have been more specific in your objections. Tiresome non-contribution.
“This is all done quite openly. It is not a secret at all. Apple manufactures its iPhones in gargantuan worker villages in poor countries like India and China and Apple evades tens of billions of dollars in taxes by stashing its money in offshore tax havens and Apple is, not coincidentally, worth close to $3 trillion.”
In this paragraph alone, we have:
- A confusion between market capitalisation and actual revenue. Apple being ‘worth $3 trillion’ is more of a function of the stock market betting in favour of its future success, rather than actual value - even before factoring costs, its revenue last year was only about $380bn - a decent amount, but on nowhere near the same scale, and even leaving aside tax avoidance this isn’t something you could just tax away.
- No acknowledgement anywhere about the fact that globalisation has overwhelmingly benefitted these poor countries and led to some of the largest quality of life increases in history. There are still potentially arguments to be made about living standards, as well as the impact on eg American workers (although I’d partly attribute this to poor economic policy), but the fact of the matter is that the likes of China and India have very much benefited from these changes
- A lack of understanding that, in macroeconomic terms, tens of billions is pocket change when it comes to government revenues, particularly in the US. For all the cries of tax avoidance (as far as I’m aware none of what they do is illegal) this is essentially a rounding error in US budgets, and the notion that you could somehow solve every problem by taxing them this is naive at best. Furthermore, this also fails to acknowledge the positive externalities that result from such tax havens with respect to places like Ireland, that benefit far beyond the missing billions in tax.
There are several more of these points I can point to. By no means am I an expert on these issues and I may well be unfairly misrepresenting the author’s understanding on this. Individually there is also much to debate on each of these points and I’d be happy to discuss further. However, taken altogether, this essentially comes across like a sixth-former’s (or high-schooler for those across the point) understanding of economics - well meaning yes, but lacking some basic conceptual knowledge and having seemingly not done any research beyond what other left wing authors from the same brand of well meaning naïveté have put out (I say this as someone who themselves identifies as left wing, and probably agrees with many of the author’s beliefs).
Ironically you are the one who seems to have misunderstood every single point you make above. Read more Gabriel Zucman.
While some of Zucman’s proposals seem plausible, and certainly the tax evasion of individuals carries comparatively fewer positive externalities, at the end of the day he only attributes $200bn to the amount of missing tax - for reference, this is less than the GDP of New Zealand or the operating budget of the NHS in the UK. While it may be helpful, you are not going to change the world with that. Furthermore, at least in the stuff of his I read, he offers no account of the positive externalities of corporation tax avoidance - this for example is massively beneficial to the economy of Ireland, and it is dubious that the possibility of recouping a relatively small amount of tax income is worth destroying a viable engine for growth.
As far as I’m aware, he says nothing on either of the other points, so I’m not sure how this is supposed to refute what I say.
Hey, I bet you don't know everything about economics and accounting. So stick a sock in it.
Not in the slightest, nor do I pretend to. However, I at least know the difference between a company’s market capitalisation and its revenue.
You may find this link helpful: https://www.investopedia.com/ask/answers/122414/what-difference-between-market-capitalization-and-revenue.asp#:~:text=Market%20capitalization%20and%20revenue%20are%20two%20metrics%20used%20for%20value,as%20a%20result%20of%20sales.
Right on👍excellent article
My only complaint about this piece is that it puts the current Democratic push for a border bill completely out of context. That bill was NOT about pandering to the racist anti-immigrant base. It was EXPLICITLY an effort to get Republicans to pass funding for Ukraine/Taiwan/Israel/Gaza. This piece is excellent, but that one point (in my opinion) was made in bad faith.
Hey, Mike, thanks for providing the correct framing for the immigration debate in the USA. I'm restacking and sharing this on twitter. People need to understand the points you're making.
I have never actually thought of immigration being a Bad Thing (TM) until Sweden started whining about integration. Most Western democracies go "refugee shopping" at the refugee camps, so I don't think they have any right to whine about who they pick. They should want to help them integrate instead, maybe they need more time to learn Swedish, maybe they need more time to adjust to a new country. Even If I ended up in Sweden, it would take me time to adjust.
I don't really understand why having neighborhoods of one specific diversity group is a problem either. So what if all the Somali Muslim women wear abayas? It's not really up to you, Very White Swedish people, to decide if she should do that OR even if she should not speak Somali anymore. Most of the immigrants from incredibly poor countries come with literally nothing, so we should not be so judgmental and learn about their culture. Try to help them out, I think everyone has a part to play in this.
I also don't like the fearmongering of "There's terrorists in the refugee streams." My mother keeps trying to convince me that there is because, "I don't know everyone personally." They're not allowed to come here until go through the vetting process, whatever that entails. This seems to be a problem with only Very White People. (TM).
Great article. There’s another pernicious aspect to the story - we’re told companies move abroad because of environmental regulations, despite zero evidence of this happening. On the contrary, stronger environmental regulations are a pull factor. Yet we have all kinds of neo-industrial policy that is anyway mostly ineffective except as a marketing tool to turn voters against climate policy and distract from the real reasons capital moves, which you discuss.
Thanks for laying it all out. I sell a board game - The Game of REAL LIFE. I have found immigrants buy my game. Board games are cheap entertainment and with my game I think they are trying to learn how to be American. But as a business owner, immigrants buy my game - let them all in! I wonder how many other business owners have not thought this through - your business will grow with more immigration.