'...more industries are being dominated by a handful of extraordinarily successful companies..' Deja vu for readers of old time American business scenarios when a 'handful of extraordinarily successful businessmen' like Carnegie, Morgan, etc dominated the economy ?!
There are problems in macroeconomy that are not mattered here and this is the relation between speculative economy and real economy. This is 3 times more financial transaction amount than real economy based in goods.
Monopolies surge in 1975 with high oil prices, when oil industry incomes grow from 5%GDP US to 10%GDP US (data taken from Fortune), this obscene earnings stayed for several years giving to oil moguls capacity to manipulate American economy. From this time to now wages were in sustained fall relative to other earnings.
Economists are directed out of these facts by David Ricardo, Austrian and other economic theories especially pointed to speak on anything except on monopolies driven by power of money and politic.
In the street where I live space that used to be taken by parked cars is now filled by empty Amazon boxes waiting for trash-day pickup.
What a dark indictment of the central bank: "Two of the most important economic facts of the last few decades are that more industries are being dominated by a handful of extraordinarily successful companies and that wages, inflation and growth have remained stubbornly low."
THE LAST FEW DECADES??????? Where has the central bank been? Oh, yeah, in places like Jackson Hole, WY, where people like Esther George, president of the central bank of Kansas City, are intrigued by weak lending to small businesses and wonder if whether the concentration of the banking industry among a handful of giants might be a cause. Ya think?
7
So, Trump is right to press the Fed to keep interest rates low.
Why, then, are liberal media condemning him so harshly for "pressuring the Fed"? Any scholar can tell you that "pressuring the Fed" is a constant. (See economist Thomas Havrilesky's book documenting the recent history and how it happens).
This is another example (along with condemning the president's attempt to block the AT&T merger) of liberals attacking everything Trump does, even when it coincides with historic Democratic Party principles. (One could mention negotiation with North Korea, talking to the Russians, and questioning undemocratic provisions in "free trade" treaties as similar positions now condemned by liberals because Trump endorses them. Is this the way to build a new, principled, left-of-center party?
3
Neil,
I came by your report from Jackson Hole via a link on Paul Krugman's column.
I am interested in these Federal Reserve meeting because I am looking for findings and recommendations that will lead to an effective policy response to long-standing problems of inequality, climate change and a global drift toward autocracy.
Capitalism, as practiced in our mixed economy, seems to work but it seems when we compare with other advanced economies we seem unable to arrive at a politically acceptable solution to the growing gap between the top of the income distribution and most of the workers in our economy. I would like to see more discussion by the economic policy community on what we could do better as a government.
I support eliminating the cap on social security, a much higher minimum wage, a pre-k through 16 public education system, and an increase in payments to social security, child welfare programs, and Medicare for all. These programs have now been experimented with in other advanced economies appear to be successful and should be tried in the U.S.
2nd, the economics community should begin to consider how humankind can transition from fossil fuels to new technologies and new non-fossil energy sources. It would appear that they need to begin to study how to deal with this inevitable future and render a solution or alternative solutions for how central bankers can assist in maintaining financial and macroeconomic stability.
2
@james jordan When Oil, Coal and Natural Gas provide 87% of the world's energy, 1,321 terrawatt-hours out of 1,514 twh, that isn't going to change any time soon. It's a piper's dream to think solar and wind (11 twh, total) will become meaningful in this century. (Pg 135, "Factfulness" by Hans Rosling, et. al.)
On income distribution, get and read "Dream Hoarders" by Richard Reeves. The top 20%!! are who is keeping the other 80% down, mostly thru "rent seeking" actions by government bureaucrats at the behest of rent seekers. The economy (Gulliver) is being tied down by Lilliputans (gov.).
I agree with you on much of your 4th pp but we need to start much earlier than pre-K. We need to start pre-birth. https://www.yahoo.com/news/two-brains-both-belong-three-120608571.html And we need to solve the single motherhood issue. http://www.huffingtonpost.com/2013/05/01/single-motherhood-increases-cen...
Medicare for all has to answer a key question: Who, exactly, is going to take the huge risks, expend big money, sustain failure after failure before success, IF it comes, to develop new drugs, new medical procedures, new medical equipment, etc., if prices are controlled by government? And how are you going to deal with the sudden surge in demand that will occur? Killing the golden goose that has markedly lengthened our lives is not smart.
1
It's been apparent to me for a while that one of the key features of the digital economy is that it destroys businesses and replaces them with more efficient businesses, meaning great for consumers, who get more precisely what they want at cheaper cost, but lousy for workers, since these more efficient businesses don't need nearly as many actual human employees.
Netflix destroys broadcast, cable and much of the movie business and replaces it with a business that has been pared down just to the folks who create the content, plus maybe a couple thousand back office employees who slice and dice the data. Uber replaces cabs with low-cost gig drivers. Just wait till driverless cars hit. Uber won't need humanoid employees at all. Neither will trucking companies, limousines etc. Public transport might retain workers longer because of unions I guess.
2
"The Nation recently published a stunning overview of the working poor and underpaid. One of the most powerful data points in the piece described how empty the decline in unemployment actually is: having a job doesn’t exempt anyone from poverty anymore. About 12% of Americans (43 million) are considered poor, and yet they are employed. They earn an individual income below $12,140 per year, and slightly more than that for a family of two. If you include housing and medical expenses in the calculation, it raises the percentage of Americans living in poverty to 14%. That’s 45 million people.
"At that level of income, there’s almost no way to pay for food and shelter in any sizeable American city. That means people now can both be employed and homeless."
https://www.forbes.com/sites/petergeorgescu/2018/08/22/americas-real-eco...
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1) The HHI (Herfindahl-Hirschman Index) metric should show increasing market shares captured by the leading firms in an economic sector to evidence and measure this increasing market concentration phenomenon.
2) Robinson Meyer has a complementary article in the Atlantic Magazine entitiled: "The Trustbuster," July/August 2018. In this article, Meyer writes, when warning of Amazon's recent growth: "When a company comes to monopolize a market-- when it grows so big that it can threaten other industries just by entering them-- it ceases to be merely a company. It becomes an institution so powerful that it can rule over people like a government."
3) Rachel Abram in her recent Times reporting writes that many fast food franchisees have agreed to negate "no poach" agreements between franchisees. Per Ms Abram: The agreements "prohibit a cashier at one Panera location, for example, from working at another Panera location." Arby's, Carl's Jr., McDonald's, Jimmy John's, Auntie Anne's, Buffalo Wild Wings, Cinnabon, Applebee's, Church's Chicken, Five Guys, IHOP, Jamba Juice, Little Caesar's, Panera Bread, and Sonic, all agreed to end such "no poach" clauses. Consequently, more competitive labor markets in the fast-food sector should result.
[JJL 8/27 M 10:54a Greenville NC]
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"Mainstream economists are discussing questions like whether “monopsony” - the outsize power of a few consolidated employers - is part of the problem of low wage growth... [and] sluggish investment spending.... [T]he ideas have become prominent enough that this weekend...leaders of the Federal Reserve and other central banks discussed whether corporate consolidation might have broad implications for economic policy.”
I’m missing something here, and I’d be grateful if anyone could help me understand. It seems as if the word “monopoly” got kneaded into “monopsony” and now central bankers are acting like it’s a new issue that (wow!) “might have broad implications for economic policy.” As in: “Leaders of major transportation policy agencies discussed whether the fact that the earth isn’t flat might have broad implications for navigation. ‘A few years ago, questions of movement between points on the globe were studied by specialists in a very technical way, without linking them to the broader issues that animate transportation policy,’ said somebody with stellar credentials. ‘In the last few years, there’s been an explosion of research that breaks down those walls.'"
1
Monopoly and monopsony are related but distinct concepts. A monopolist is a single entity exclusively serving a given market. Think of a single phone operator serving customers. That is, we are looking on the supply side of things. A monopsonist on the other hand is a single entity that is the unique buyer on a given market. Think of a dominating network that is the only company buying tv series. That is, we are looking on the demand side of things. Incidentally firms are on the demand side when it comes to hiring workers. A monopoly may exercise its power by supplying less at higher prices, a monopolist may exercise its power by demanding less at lower prices. As I see it macroeconomics is not so much about inventing new concepts but rather trying to understand which parts of microeconomics matter in the aggregate. Of course the answer should be more or less all of it. But integrating the details into an encompassing theory is a difficult exercise in itself.
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@Jonathan I don't know about you but I can barely remember when the world was flat.
I began my day here in Sweden reading Paul Krugman's admonition that I should read Times home page articles by Corey Robin and Neil Irwin together. I have and thank Krugman.
I have a useful background for reading and commenting on the Robin article - 22 years retired from USA to Sweden and almost none for commenting on Irwin. But Krugman is right they go hand-in-glove together.
Read comment by Alexa Maryland (41) and see that there is only one plausible solution to the American dilemma, find a way to make America Sweden, that is a social democracy (Robin seems not to understand that none of the Nordic countries is "socialist").
If an American economy flying at healthy cruising speed cannot generate well-paying jobs for millions of people, then the least it could do is provide Universal Health Care, tuition free colleges, parental support, and universal birth control for starters.
Otherwise, why live in America?
Only-NeverInSweden.blogspot.com
Citizen US SE
3
“Wage stagnation is not a puzzle,” said Marshall Steinbaum, a fellow at the Roosevelt Institute, who spoke on a panel organized by the activist group Fed Up outside the lodge where the Fed symposium later took place. “Cutting-edge research tells us exactly what’s going on, and yet the Fed seems to be considering this for the first time.”
The Fed is very late to the party. How about 43 years!!
http://www.huffingtonpost.com/stan-sorscher/inequality---x-marks-the_b_7...
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Perhaps they should have held their meeting in Brooklyn instead of Jackson Hole and gone for a field trip to the Bronx. These people have no idea how families pay rent and afford food. We are fast approaching a point when the majority of families will not be able to even that.
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This is a brilliant analysis. Thank you, Mr. Irwin.
This is a weird article, since you’d never guess from it that there are many other factors under discussion as affecting inflation and wages (e.g. non-compete agreements or globalization). This may be part of the picture, but it’s hard to believe that dynamic pricing at Amazon is all the bankers have to think about.
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There's a spate of new research on this topic?
150 years ago we had Rockefellers, Morgans, Carnegies, Vanderbilts. Now we have Bezoses, Musks, Brins, and Gates. Titans of Industry are now Titans of Tech. The Gilded Age, an era of huge inequality and mass poverty, marred by periodic depressions in economy, is now the Chrome Age. Unless we do something about it we'll stagger along for a few decades and ultimately end up in another Great Depression.
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The problems mentioned must be solved by Congress and Executive Branch agencies. It's nice that central bankers are researching and learning about them, but there is comparatively little they can do.
Your first sentence gave me pause..."inflation remains stubbornly low?" These economists must not have been inside a grocery store in ages. I get sticker shock every time I go shopping. Or to the movies. Or experience all the activities that make up everyday life. Costs are going up-up-up.
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All else aside, these people couldn't meet at the Newark Airport Best Western????? And save all of us a ton of money!!!!!
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A Ph.D. is now the new high school diploma. Unless you are very highly educated, you do not have the ability to jump from job to job like there are fifty factories in your home town. Bosses know that people are too scared to move, so no raises.
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One of the main reasons for the low wage growth, though a taboo topic in the nytimes, is the flood of illegal and legal immigrants. Huge supply of labor-- no need to raise wages !
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Guilded Age, 2.0 !!!!
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Surely you jest...
"...Another paper...presents evidence that the algorithms used by Amazon and other online retailers, with their constantly adjusting prices, may mean greater fluctuations in overall inflation in the event of swings in currency values or other shocks...
"...Physical retailers tend to be slow to change prices because of some temporary disturbance...online retailers are able to reflect changing prices almost instantly...
.....
Amazon is helping consumers to arbitrage the prices of consumer goods - and that's somehow unsettling...
Yet - the financial industry has behaved exactly parallel, regarding things like electronic exchanges and lightning trades and global commodity-trading systems...
So - helping hedge funders arbitrage the price of almost any form of wealth or capital - no problem there???
Imagine if an Apple or an Amazon had the temerity to issue a cryptocurrency, back when that whole party was getting started...
.....
To put things in perspective, Walmart couldn't even get a bank charter, a decade ago...
https://www.nytimes.com/2007/03/17/business/17bank.html
“…opposition to Wal-Mart’s application had initially come from bankers…Such a move, they argued, could wipe out small community banks and hurt profits at bigger ones, given Wal-Mart’s huge economic might and record of vanquishing rival retailers…
“…Wal-Mart…saw obtaining a banking charter as a way to save money by internally processing credit and debit card transactions…
1
Any idiot knows that the only trend that's irreversible is the growth of the global middle class of about 200 million a year. This is a consumption model without borders or boundaries and Asia understands monetary policy therein. The West and America, specifically, needs to watch how Asia capitalizes infrastrure, stamps out poverty by the hundreds of millions and achieves political alignment and citizenry policy support.
Times column----When the Rich Said No to Getting Richer
David Leonhardt Sept. 5, 2017
"A half-century ago, a top automobile executive named George Romney — yes, Mitt’s father — turned down several big annual bonuses....because he believed that no executive should make more than $225,000 a year (which translates into almost $2 million today).
He worried that “the temptations of success” could distract people from more important matters....this belief seems to have stemmed from both Romney’s Mormon faith and a culture of financial restraint that was once commonplace in this country."
Yes, a different corporate and political culture.
Compare our past to the present in:
The ratio of CEO pay to that of average workers.
Higher tax rates on the rich, and regulations on business.
Strong union power, rising pay/benefits and consumer spending.
Jobs here, business profitable.
How did that all work, Neil Irwin?
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Are Superstar Firms and Amazon Effects Reshaping the Economy? Do too many idiots buy too many things because some celebrity tells them to, or because it is convenient to not deal with other people? Same answer.
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Extraordinary, Central Bankers “discover” a connection between blood sucking monisolopy and negative wage growth for decades and their answer from the tone of the article seems to be keep interest rates low! No where does this article mention when there were big companies like Ford and monopoly’s such as ATT they worked very well, the phones lasted forever the service was prompt and the employees were well treated retiring with benefits and a pension. Enter the era of financial engineering and we have vulture capitalists tearing apart everything, selling assets loading a company up with debt, extracting their usurious fees and shortly there after the company is bankrupt along with tens of thousands of lives, the latest example being toys r us a once great company even though online was hurting it like all brick and mortar stores until KKR, Bain Capital and Vornado launched a takeover following the above formula, Michael Corkery wrote an excellent article in the NYT on this travesty. The “new companies” have little capital investment and most have no product they are merely figuring out ways to disrupt and cannibalize the efforts of others. Enter into this mix big companies sent good paying jobs abroad and Unions have been destroyed and the middle classe is in a death spiral. As far as the Central Bankers that always think lowering interest rates paid to little savers to goose the markets is the answer, read Noni Prins new book Collusion, she better describes these parasites.
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Greed has a corrosive effect.
We have embraced it, and now everyone will pay the price.
3
Interesting that “cutting edge research” confirms what has been obvious to anybody with a lick of sense for the last four decades.
But knowing what we know about tobacco hasn’t caused nearly the changes it should. So who’s going to tell those super-rich mega-corporation owners that they have gotten too rich and powerful? Everyone in politics is afraid of them.
3
“When workers have few potential employers to choose from, he said, they may have less ability to demand higher pay, and it becomes easier for employers to collude to restrict pay, whether through explicit back-room deals or more subtle signaling.”
This could be a direct quote from Adam Smith’s “The Wealth of Nations.” It’s hardly a new idea the economists, apparently, are just figuring out. Their algorithms must not be designed to see the forest for the trees.
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Larry Fink, BlackRock CEO who manages $6T+ of others invested money, wrote an open letter to CEOs of companies his funds own early this year. Speaking greater power to power, he told each CEO that his analysts would be evaluating them to assess whether and how their company "is making a contribution to society" that considers "the long term" . . .and not just lines the pockets their own pockets, with some pops to shareholders in dividends periodically, based on short-term price points hit.
Given the number of companies that used the overseas money repatriation window to bring profits parked offshore back to this country at huge tax discounts, then proceeded to use big parts of the net dollars to buy back shares and artificially drive up share prices, and finished with top management unloading its "insider sales" shares at these artificially high prices, I wonder whether any of this message got through. Last analysis reported on PBS this week was that workers have gotten 7% of this repatriated money in "wages and bonuses."
That sound like a longer-view contribution being made "to society?" Or could it be the unimaginable? CEOs of these mega-companies believe and behave like they are accountable to no one? Hide and watch to whether Larry Fink dumps these companies in his funds.
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Of course, massive ownership CHANGES everything. We used to have laws about monopolies but that seems to have disappeared with MONEY HANDOUTS by corporations. Get the money ---and LOBBYING--out of politics, and we will have a better society over all./ Right now about 6 people control most of everything. This is worse that the Robber Barons of the 19th century. and then you have the real estate industry with people like Kushner who own 50000+ housing units where raising the rent 10 bucks adds another half million dollars to their income every month and worsens the lives of people trying to eke out a living on 7.50/hr.
where the government should be helping the people for whom it was established--you by the people FOR THE PEOPLE, we get crooks in charge like trump and the recent indictments of 3 GOP congressmen. somehow we need to take control of the government so it works for the people and the we can shape the world to the needs of the average joe.
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Wow! Bourgeois economists are discovering the impact of monopolization. Let's NOT overlook and dismiss the analyses of the Marxist critique that has emphasized the inexorable tendency toward accumulation and concentration of capital in mature capitalism. Marx himself pointed to the tendency a 150 years ago. Baron and Sweezy's analysis in in "Monopoly Capital" from the mid 20th century and those that have following in that path (e.g., Samir Amin, John Bellamy Foster) establish a real basis for understanding the origins and consequences of these inherent directions of global capitalism. Focusing on whether Amazon and other large online retailers use algorithms for price-setting, is simply a matter of looking at the trees rather than the forest. So-called "mainstream" economists spin their wheels modeling patterns and "predicting" short-term consequences. If you want to understand the broader bases of what is going on, you'll need to look elsewhere.
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@mlsilver ... Marx!? I thought he ended up in the dust bin of history.
@BD
Only for those who don't want to look reality in the face. Sometimes denial is the highest form of flattery. Since bourgeois political economists couldn't answer his analysis, the response has been to dismiss him and ignore the social scientists who continued to work in that tradition.
Meanwhile, small businesses cannot compete with the Amazons and Costcos and have seen their profit margins almost completely eliminated. To most of us small employers, who still employ a majority of Americans, wages are too HIGH and finding employees willing to work for what we can afford is getting nearly impossible.
Another perspective you will almost never hear in the NYT, which is of course a hundreds-of-millions of dollars a year corporation.
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Who cares how cheap products are if we don’t have jobs to pay for them? Concentrating all of the market into a few companies will eventually be the same as nationalizing industries. The consumers and citizens will no longer be able to compete or participate in the free market as entrepreneurs, merchants or consumers. Commerce lifted the quality of life for millions o Americans, monopsy is destroying it.
2
We should realize that the (infamous) markets were anxiously waiting for the enabler that will shift them in overdrive to sell stuff and services like never before. And that Enabler has arrived: Internet and algorithms!
Amazon is the new rubber baron chieftain leading the other behemoths. They are grabbing global profits while paying local wages.
The rest is really, just commentary!
2
Big business wants the consumer but not the employee.
The employee wants the pay without the labor (like those that inherit great wealth).
Government wants the taxpayer's taxes but not their need for services.
The consumer wants cheap mindless consumption without any responsibility for the mulit-dimension self destruction that results (low wages, poor health, discontent society, degraded natural environment).
Want to have a better economy, a better society? Work on changing these tendencies.
Won't happen until we do.
MB
4
I recently published an article in MBE Magazine on how Amazon is impacting diverse businesses (Black, Native American, Hispanic, Asian, Women, Veteran, the Disabled, and LGBT). The increased industry concentration resulting primarily from technology and globalization, is also transforming diverse businesses. There are literally millions of diverse retailers in the U.S. economy that face an existential threat from Amazon, Apple and other large firms. The choice is often either try to join them or get run over by them.
The KC Fed President’s concern of the lack of lending to small businesses is a reflection of the understandable pessimistic outlook banks and other sources of capital have for small and diverse firms. Political comedian, Bill Maher, commented last night on his HBO show that soon there will only be two companies, “Applazon” and “GoldmanGoogleMart.” While this might not happen, the forces of concentration are a real threat to diverse businesses.
2
“Many of the world’s most powerful economic policymakers” are just now waking up and smelling the coffee? Where have they been for the last 50 years? Heck, have they ever read anything about economic history? Are they just now waking up, for instance, to the possibility that New Deal era laws and regulations like Glass-Steagall actually served a valuable purpose?
2
They aren't superstars. They are subsidized by the American taxpayer corporations just as Walmart, Burger king, McDonald's, and any corporation or company whose employees collect welfare, food stamp or Section 8 benefits. That doesn't even count the direct subsidies they get or other subsidies to support industries for a business that might not even be a real and viable business without those subsidies.
If these companies could not exist if they paid higher wages think about what they have been actively suppressing in our economy by getting political backing to stay afloat. Imagine all the millions of small local business that might have come to be to fill whatever need is being filled or new needs might have come up to drive more creative small business..........
The folks whom have been guiding our economy with lies about "the market" and free trade and all the rest of the lies that created this sick distorted and over priced economy we live in are profiting and a few others off the rest of us.
2
"If online retail makes prices jump around ... , policymakers should be more reluctant to make abrupt policy changes based on short-term swings in consumer prices."
Short-term swings are one problem with algorithm pricing. But what the Fed needs to be looking out for here is 'flash inflation', the inverse of wall street's flash crashes. (For background see M. Lewis's Flash Boys). The Fed is used to thinking of inflation as a generally slow process except in final stages of run-aways like the 1930's German Mark. But with algorithm pricing the new paradigm raises the ugly possibility that frequent clusters of price spikes, even if short lived, may drive net inflation at actual levels above apparent baseline.
Whether snow shovel prices before a blizzard or supply prices before a hurricane we know temporary 'price gouging' works when lots of people all buy at once. People do not buy at smooth, well distributed rates. Whether impulse or essentials, they buy when they perceive need. Algorithm pricing can cause surge buying if people learn gas or other prices are going up fast. The Fed needs to factor this into their models if they do not wish to find themselves on a bed of inflationary spikes.
4
“...intrigued by the weak lending to small and midsize businesses in recent years” Try to apply for such a loan, and I guarantee there will be no more intrigue. Unless you are in the .1%, banks won’t touch you for a business loan.
1
US “wage growth” remains low because everything that Amazon, Walmart and Apple sells is made in China! Wages in China can’t grow because there are too many people (1.4 billion people) and automation competing for too few jobs.
2
@Donald Matson The communist tyrants also won’t permit too much wage growth.
PAY ATTENTION TO THIS ARTICLE. The makings of a collapsed economy are in the works. Fewer small businesses mean lower employment. Concentrated decision making in industrial sectors strangles competitive innovation. Narrow-minded nationalized government policies in a global economy weaken the ability to compete globally. A suppressed wage blunts consumer markets, decreasing demand with the potential for increased unemployment. Eventually, other nations' prosperity grows as we shrink. Is it an avoidable collapse in the longer term? Absolutely. But only if the control of the economy is wrested from the hands of the few.
5
Superstar companies... is that what we call monopolies of today? It doesn’t matter how big these ‘superstars’ get, they won’t be paying their workers a living wage ever. Until the American middle class finally feels secure again and that comes with access to affordable health care, merit based tuition free education, a robust welfare system. Until we once again have extra money to spend AND enough leisure time to actually be able to spend it, this white elephant of an economy will keep ticking like the time bomb that it is. Corporations are not the answer, corporations are not people. Responsible governance is the true solution and we won’t have that until corporations influence in our politics is reduced substantially.
1
Economists mostly research the past whereas businesses mostly research the future. This is why economists and central bankers almost never see events coming and why smart business leaders frequently are at the center of new developments. Ford, DuPont, Gates, Jobs and Bezos foresaw great changes and opportunities and positioned their companies to benefit. Greenspan, for example ignored or was ignorant of the malfeasance in the mortgage markets and by doing so brought on a great financial fiasco.
The great business leaders brought jobs and prosperity to thousands of people while central bankers have often brought economic chaos from their myopic vision.
1
Shop locally whenever possible. Create a graduated business tax and rent control for small businesses that rent space from others.
Is growing monopsony responsible for stagnant wages and economic growth? Of course it is. The heads of these corporations have amassed enough power to control virtually the entire economy, and (abetted by Citizens United, and the Trump/Republican tax cut give-away to the ultra wealthy), Congress and the Presidency as well. Our government has all but abdicated on its responsibility to uphold the Constitution, which includes “provide for the common welfare”. All of us who live outside their rarified circle are pawns to be manipulated and thrown away when they are done with us.
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No statistics support the theory. The marketplace for low skilled labor is very big, even bigger than Amazon.
2
When I was a kid growing up, there was "As GM goes, so goes the Nation". When I was a kid growing up, we had Labor Unions and Collective Bargaining.
Jeff Bezos is worth something like 150 Billion and thousands of his workers are on food stamps. I'd say that whatever Amazon is doing to the economy, it is doing great damage to the moral landscape we inhabit.
7
Abnormally huge, wealthy, and powerful companies should be broken up, according to anti-trust laws. These companies threaten competition, prices, and the very financial security of millions of Americans. Break them up, just like we did Ma Bell.
2
Interesting. I think those opposing corporations would be fellow travelers with the rebels in Paris: They would be manning the barricades put up by Commune not storming them.
Central bankers should not be expected to have any more effect against these monopolistic forces than do spectators at a house fire.
1
Thanks to Amazon I will never have to go to a Mall again. the World is now at my door.
6
While Mr. Irwin is obsessed with the economics of these major corporations, he ignores the obvious and most dangerous. It is the ability of these giant entities to influence and dictate the policy of government AND financial institutions to serve strictly their interests at the expense of everyone else.
The fact is another "Gilded Age" is upon us.
2
Oh dear! Some corporations are getting so big that they don't need to grovel to the bankers! And perhaps the bankers can't break them! Which means that the banks can't act as agents to control corporations on behalf of their favored nations (those for which they affiliated by power, religion, or heritage) and governments. Well, gentlemen... have you heard of BRIC? In those nations, other large software companies are growing too. Curb the growth of those in your areas and the biggest worldwide companies will be in Brazil,Russia,India and China. And the populations of the world will be using those providers and their services rather than those of the companies that do business with the US and European Central banks.
2
@Analyst So some companies are so big that the banks cannot control them. How does that help the average person, who can’t control either one?
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@ej Especially when these huge companies destroy existing businesses and replace them with leaner, meaner machines that don't require so many humanoids as employees. You get cheaper, more customized goods but what good does that do when you don't have a paycheck?
I've been trying to tell people this simple fact for years but since I have no PhD no one cared. Smart people these economists.... The profession is bankrupt and yet they finally see a light....
Whenever central bankers get together, I get nervous. Their policies regularly and inevitably lead to recessions, and bailouts. Their policies concentrate wealth.
Strip banks of the right to create money "out of thin air". Fractional reserve banking should be reduced by "full reserve banking" (google it) and we could end FDIC welfare-for-banks supports.
Income inequality. The biggest welfare cheats are corporations with the advent of limited liability laws just over a hundred years ago. Get rid of them. There is no reason why the French Cajuns should still be suffering from the Deepwater Horizon oil spill and BP completely off the hook for the remaining (and continuing) damage. The same goes for the continuing damage in Alaska from the Exxon-Valdez spill.
Limited liability is a free pass to socialize the losses and privatize profits, leading to increasing concentrations of corporate wealth because corporations never die.
1
It's mind-blowing that this is the first time they've really considered this.
3
Study Teddy Roosevelt and they will know what they need to do.
1
Rather pathetic that economists are slowly inching towards discovering that how the economy actually works in the real world, outside the Ivory Tower, might actually be important.
It not for the incalculable damage these eejits have caused, and will cause in the very near future as citizens of developed countries that have been decimated by the reckless arrogance of neoliberal-globalization-promoting economists mindlessly citing Ricardo seek vengeance, it might actually be amusing.
But, unfortunately, there's nothing amusing about violent social unrest across the developed world and the demise of democracy.
So thanks for that, economists.
1
This is not rocket science, just history repeating itself, again. For last 20 yrs our justice dept has not enforced anti rust laws. We have re monopolized yet again, w a vengeance, and now leveraged w technology.
3
The first case of a mega corporation controlling the market and setting salaries artificially low was, of course, the US government. Talk about low salaries, government is notorious for paying pathetic wages for work and skills that are worth several times their salaries in the private sector. Of course, where else can you get this experience? So, the G-men and women viewed their government time as an investment in the future. Now they are out, making their 7-figure salaries and outsmarting their old bosses. Big surprise? I think not.
Now the fed is worried about exactly the same practice in the private sector? Really, guys!!!!
Any system in order to be viable, reliable, and valid must be in balance.
The great and ever growing disparity in wealth and income in the nation is causing a severe imbalance in the system.
A strong progressive taxation policy is the first and most basic and necessary way to correct the imbalance.
Greed - one of the seven deadly sins - naturally leads to corruption.
Greed may will lead to the destruction of our society by way of a complicit government in the hands of a corrupt political party, namely the GOP, which is beholden to its wealthy benefactors.
Add to this that part of the electorate that can be defined as the uninformed, misled, ignorant, and uninterested.
In addition there is the truly large group known as single issue voters - who should broaden their view of our society as a whole.
Let us hope that all recognize the obvious need to take part in the upcoming election in November as well-formed voters.
Voting by such persons is a civic responsibility that cannot and must not be ignored.
2
America has always had "concentrated economic power." The Robber Barons, The Trusts and now The Corporations. And we all know what concentrated economic power does, it corrupts.
The only thing in the world that has ever been powerful enough to constrain the abuse of concentrated economic power is American democracy.
That is why those with concentrated economic power want to "drown our government in the bathtub." If they can't kill our government then they will attempt to purchase it through the obscenity that is Citizen's United.
3
Whatever happened to anti-trust laws?You would think that even conservatives would support busting up these huge companies because they distort the “perfect market.”
3
Oh, the best and brightest ivory tower economists...
“By keeping interest rates low and allowing the labor market to strengthen, employers may eventually find they have no choice but to increase worker pay.”
Here we go again with that tired old cliche: trickle down economics. Jeff Bezos didn’t become the world’s richest man by sharing his wealth. Ask the rank and file at Amazon.
But then again, I’m not a Princeton-educated economist, so what do I know?
4
Citizens United put money on the same stump as free speech. Money speaks loudly but only with a limited vocabulary around greed and power, not of nor for the people. The decision was incompatable with the greater good of the United States and should be reversed.
1
"Are Superstar Firms and Amazon Effects Reshaping the Economy?"
Duh. Tell us something we don't know.
2
Power tends to corrupt; absolute power corrupts absolutely
Scary future.
3
Does “Superstar Firm” include companies like Clear Channel, or Saudi Aramco, perhaps? Or are we just supposed to be concerned with the monopoly monster of the month?
I blame Coca-Cola for everything.
I just have to laugh at this. The biggest companies "may" be influencing things like inflation and wage growth?! I respect the work that economists do, but, boy, are they ever out of touch with what's going on with people "on the ground." And, that they met at Jackson Hole to discuss it says a lot about these conveniently insulated folks. It's stunning that not everyone knows--even those who study this for a living--that corporate consolidation is bad for the economy. As in, bad for wages and bad for prices. Couple that with the just horrible attitude of Donald Trump (and his complicit GOP Congress) toward workers--trying at every turn to bust unions--and consumers, and why is anyone surprised about any of this? At the store yesterday, a medium-sized package of toilet paper was $15. Trump's tarriffs are to blame, apparently. Maybe that will finally be his undoing--the price of the one thing everyone needs and buys regularly. Meanwhile, these big firms will keep raking it in, hand over fist, sharing as little as possible with their workers, and caring not a whit about the rest of us.
7
@Carla ... Trump is not the cause, he's the consequence. Hyper globalization; free flow of capital, jobs/off shoring, people/immigration; have suppressed wage growth in the high wage countries of Europe and North America.
5
What Irwin is describing here, what the Fed is trying to understand, doesn't require that much research really. George Orwell described it very well in two books, "Animal Farm" and "1984."
Make Orwell Fiction Again!
3
Calling firms like these run by "robber barons " and "malefactors of great wealth" superstars pays homage to corrupt crony capitalist corporate plutocrat oligarch welfare kings and queens. Instead of praise their firms should be busted up and they should be locked up and fined.
3
Marx covered this in great detail, you're late to the game with this, but thanks for playing
3
Finally the New York Times inadvertently supports two of the principle tenets of Trumpism; that interest rates can be kept low and the economy run 'hotter' than normal without inducing massive inflation and that Amazon deserves to be vilified.
3
Read "Space Merchants" by Pohl and Kornbluth for a too true view of the future we are allowing to be built.
1
We need a new Trust-Busting Teddy Roosevelt.
4
The real problem is that the slaves are too passive. They have been trained to hate socialism and love capitalism because that is what gets them all the cheap plastic stuff from china that they want. Of course, as Trump installs more corporate judges the passivity of the slaves may become moot. The country may soon become a fake democracy as the government is weakened. Much like Putin has installed in Russia. This is a real possibility because the GOP and corporations would not mind that kind of government. They could use the FBI, CIA and Justice Department to defeat and incriminate their political opponents, like Putin does. That is the plan anyway, and it will be seen this fall if the soft and moronic people of the US can summon the ability to change that trajectory. I have my doubts.
Lets be clear, if the corporations are superstars at anything it is subverting the democratic processes of the US. It is their money that has installed the criminals who are running this country into the ground.
2
Middle-class shrinks,
While the rich accumulate,
Anamyst not wealth.
1
Remember the old adage: "Power corrupts and absolute power corrupts absolutely!"? I felt like the thirsty, in fact parched man in the desert, whose discovered an oasis of water and shading palm trees when I read your article and especially the accompanying comments. If all of you could be collected, divided into groups, and your ideas put into a mixing bowl and then strained with the power and negotiation of a jury, we would likely move towards a more enlightened society with less suffering and more reward both economic and psychic for our society. But, as my experience living and practising personal injury law in the microcosm of Tucson has shown me, the bigger the economic consequence of the matter at hand : "It's not what you know but who you know." I applaud all of you for your thoughtful grasp of many of the issues at hand. We will always have disparity, greed, selfishness etc. because that is part of "the human condition." But we will also have the valiants who are attempting to improve this human condition.
3
These days remind me of the early days of the petroleum industry. If you started an oil operation and had any degree of success, Standard Oil put the squeeze on your ability to fairly compete, and ultimately, you sold out to Standard for their stock, or risked going broke as they worked to break you.
Start a successful commercial business these days selling a product or service, and you have to worry about Amazon, Google, or some other FAANG operation copying you and driving you out of business, or having vast competitive advantages over you due to better, and existing, marketing infrastructure. So you, like a 1890 fledgling oil operation, sell out to the major, or partner with them.
Employees benefit from numerous employers competing for talent. By the big companies sucking up their competition, the number of potential employers declines, and employee compensation suffers. One employer economies seldom have generous compensation packages.
12
Yes, “easier for employers to collude to restrict pay.”
That’s the Domestic Collusion our media ignored that affects all our lives.
Why don’t you talk about how U.S. unions have been deliberately weakened? That other capitalist democracies have higher union membership and govts that protect workers with mandatory wage laws. In Germany union reps sit on corporate boards, with input into policy. And training and education is more accessible than in the US due to govt policy.
It’s obvious the U.S. govt is regulated by the big corporations, instead of elected govt regulating corporations to preserve citizens’ rights.
Our corporations pay for our elections---they scout, vet and finance the candidates offered for us to vote for. What's the inevitable effect?
We need the media to trace our problems with downward economic mobility to campaign finance, the ultimate Collusion. The S. Court’s Citizens United decision created the Trump type lie that big money in politics strengthens our democracy, defining money as ‘free speech’ protected by 1st Amendment. The constitution can mean whatever the powerful want it to mean.
Our free press takes pride in challenging Trump, but it stops short of analyzing the cause/effect of big money politics, which helped create the problems that led to Trump’s being elected.
17
Yes.
@Meredith
Why don't you talk about the blue collar Reagan Democrats who voted in the union busting president and then re-elected him overwhelmingly? It wasn't just the ultra rich voting for that man that gave him the majorities he got, and scared the Democrats in Congress at the time so much that they wimped out and gave him his tax cuts that started the destruction of our national financial basis.
And you must not read very much to conclude the free press stops short of analyzing the cause/effect if big money politics -- I have read hundreds of articles on that very subject, which started long before Citizens United and McCutcheon, which indisputably made the problem far worse, over the last decades, in this very paper.
The problem is not that the free press hasn't covered the topic -- the problem is people don't care enough to either educate themselves or vote for politicians that serve them instead of serving themselves.
The deplorables being a perfect example.
Or they throw away their vote on third party liars like Nader (Gore = Bush II) and Stein (vaccines cause Austism -- from a pediatrician no less).
And all those years of deplorable Republican appointees to the Supreme Court have devastated worker protections and campaign finance laws. We would not have Citizens United and a host of other ugly decisions if it were not for Nader and Stein and their Green party adherents.
Yes, corporations and the ultra wealthy control just about everything.
Why anyone in the U.S. is concerned about inflation is baffling.
Inflation, in a developed country, is caused by the middle class buying incrementally more things/spending incrementally more money year over year.
Our middle class has been shrinking for 30+ years.
The 1%, as has often been discussed in this paper, while consistently getting a larger piece of the pie, will never be able to make up for the loss of middle class spending.
14
Requiem for the American Dream, Noam Chomsky's documentary, explains how the 10 principles of concentrated wealth has created concentrated power.
1. Reduce Democracy
Activism and democracy in the 60s scared the protectors of wealth and privilege.
2. Shape Ideology
The Powell Memo from the corporate right, "The Crisis of Democracy"' referred to an "excess of democracy".
3. Redesign the Economy
Deregulation since the 70s has enabled concentrated wealth, economic crashes and taxpayer bailouts. Offshore production reduced wages and Greenspan testifes about the benefits of job insecurity.
4. Shift the Burden
The 50s / 60s saw rich and poor get richer. Since then, the wealthy few who run the show receive the new wealth. Back then, taxes were quite high on corporations, dividends, and wealth. Not anymore.
5. Attack Solidarity
The 50s was able to make college free with the G.I. Bill. Now a much wealthier US claims that such a thing is impossible.
6. Run the Regulators
The 70s saw enormous growth in lobbying. Now it is routine for the interests being regulated to control the regulators.
7. Engineer Elections
SCOTUS blesses corporate personhood and the equation of money with speech (Citizens United).
8. Keep the Rabble in Line
Dismantle unions / attack organized labor.
9. Manufacture Consent
Direct people (advertising) to superficial consumption as a means of keeping people in their place.
10. Marginalize the Population
Citizens have no impact on US policy.
24
@Abbey Road you might want to read the article first. This article is not reporting on a good thing or a bad thing, just a thing.
@Craig
You might want to reread the article first.
Abbey Road clearly did read the article.
The article does *not* imply anywhere that mergers causing wage stagnation is merely a neutral fact.
The economists commenting all clearly consider the stagnation of wages & salaries in a booming economy not just surprising or puzzling, but definitely a negative & worrying phenomenon.
The article presents it as a problem everyone wants to solve:
a Bad Thing.
Nope, Craig -- the article is clearly reporting on a bad thing, not just 'a thing'.
Perhaps you have a reading comprehension thing, or a difficulty-with-context thing or -- much more likely, -- a secret resentment that low wages should ever be generally considered a bad thing ...
We won't have a superstar company until one of them has the willingness to tackle the most lucrative global business that has not even been thought of yet. I have thought of it for 50 years. I call it cybercommunities and I am referring to the car-free cities of the future which will be built as computers were. The prototype will cost a mint to conceive and build but from then on it will be gravy. Silence around the wisdom of a car free world with integral cities on a scale that enables viable local commerce and democracy is deafening. Every time I see a reference to hot monster corporations I think how short-sighted everything is.
3
I read Prof Krueger’s paper, which I recommend, and thanks to Mr Irwin for linking.
It was interesting how many of his examples come from nursing, the majority of which are in the not for profit sector.... So much for capitalism-bashing.
He emphasizes the inelasticity of labor supply. He observes that where there are fewer employers in less populated areas, wages stagnate. He says “monopsony”. While that may be a technically correct label, the article paints it with way too broad a brush.
For example, there is the chicken & egg problem. Which came first, the low wages or the big employer? It may be - see auto factories in the south - that the factory came to the workforce because the workers had preexisting low wage opportunities, yet the arrival of the factory actually raised economic fortunes locally. (As opposed to the cartoonish robber baron narrative of “ha ha, now that I’ve driven the other businesses away, I’m lowering your wages”). Krueger notes that overall employment increases where there is a big local employer. That seems true of those southern cities where auto factories have been built. I don’t see those as having reduced economic welfare in their region.
I was recently in a small town in Wyoming that had the largest WalMart I have ever seen, I bet there were more SKUs in that store than people in the town. Krueger would call it a monopsony but I didn’t see anything untoward about it. I doubt there is a counterfactual with that store & higher wages.
@Mark T
from a retired attorney for hospitals:
"Not for profit" is a label that has no bearing on how an enterprise operates in terms of employees and wages and power structure, most especially hospitals and those like nurses that work there. None.
1
Proving my point that this isn’t strictly a consequence of capitalism
My wife and I both have graduate degrees and middle income salaries. I have received zero raises the last 4 years and she has received 2% per year. This is despite record profits at our companies.
19
I work part-time as a picker at Amazon Prime. I earn $12.25 an hour. I have been told that there are no raises. There is no health insurance for part-time workers. I get a 10 percent discount on Amazon purchases. Compare that to when I worked as a truck loader at UPS years ago. I received regular raises, good health insurance, and student loans --all negotiated by the Teamsters Union. Amazon workers are not covered by a union. Lordy, what a difference a union makes for workers. I was disgusted when Bezo's net worth increased by $12 billion this year.
Not a dime trickled down to the warehouse workers.
56
@Alexa: Thank you for your input from the "trenches", Alexa. Central bankers are you listening? If workers aren't compensated fairly, who is going to buy the products these mega corporations are producing?
1
I'm not sure I know the difference between Stalin's Collectivization and Mergers & Acquisitions and the movement toward further consolidation in the market. In Upton Sinclair's The Jungle, the argument was made against wage competition for workers would bid lower and under cut each other. The Student Loan Bubble is about that: students borrow to pay higher and higher tuition that their salaries cannot afford to pay back. Debt is a lender's asset, until there is a crash. Companies, like Amazon, will be able to pay their workers less and less to the point that they won't be able to buy things (from Amazon or anybody else). A little profit is better than a big loss and your report shows that we are headed toward a big loss. Happy Labor Day!
13
Its a winner take all world. This is American style capitalism. In the all areas of corporate activity there is a concentration of power and wealth. In Facebook, a ploy to increase advertising revenue brought about the Trump presidency.
4
I’m no expert, but in my simple way of understanding economics, the purpose of market capitalism (the most successful economic growth engine ever devised) is to generate profit with the end goal of concentrating wealth. Wow, has that ever worked well!
The less this engine is held back by pesky governance mechanisms, the faster it is able to aggregage this wealth. Such a global system will eventually reach a tipping point beyond which it becomes difficult if not impossible to slow down through fragmented regulation by individual nations or trade alliances.
Isn’t that where we are right now? And, as wealth is concentrated into fewer and fewer hands, doesn’t this inevitably impact the circulation of capital and create a persistent class system consisting of a few “haves” and many “have nots”?
It may sound sexier to blame marquis corporate power players (these days, they’re all tech companies) for these trends — trends that are apparently mysterious and surprising to traditional economists, but seem awfully familiar to frustrated “have nots”. But these behemoths are simply natural products of a system that has gotten far, far out of balance and is now stuck in an unhealthy (maybe even terminal) pattern.
Maybe we need new metrics, new perspectives and new experts ... and new, smarter, regulation mechanisms.
17
"Superstar Companies," so that's what we're calling monopolies now? Crazy just how comfortable with these ideas we are now, just how easily we've re-normalized and accepted so many things we've historically fought so hard to change.
24
When the big airlines raise (or lower) fares, their competitors usually follow suit. There is no "hotline" that Delta picks up to tell United what they're doing - no "collusion" that the government could uncover - they simply raise fares when others do and make record profits because there is no real choice (outside of some outlier fares that disappear quickly).
If there were 50 airlines instead of the handful we have now, this practice would not be possible.
As giant companies come to dominate the landscape: it also becomes easier to track wages. Companies like Amazon and Walmart sets the prices (wages) for a given industry, and company's peg theirs a little below (or a bit above) what they see. No one needs to pay much more than the large companies, and it's easy to know how low you can go.
8
Sometimes I think that the people who run corporations and financial institutions have more real power over our lives than any and all government and we can't vote them out of office. Of course, if enough of us elected government representatives to regulate them for the interests of workers and consumers, borrowers, home buyers and renters, we could gain some power that way, but Americans generally have put their faith, hopes and dreams in capitalism or simply taken an "It is what it is" attitude toward the prevailing power structure and gleaned what they could from the system. There are signs that that faith and acceptance are weakening as more Americans realize that "getting ahead" is not just a matter of working harder and more hours but has something to do with who controls the system.
11
@abigail49
America has its all-powerful, if not all-corrupt, oligarchy just like Russia. Fat-cat capitalism with a "human face" is just an illusion.
2
It’s amazing how orthodox your (and most economists’) thinking is. Other economists like Joe Stiglitz have been way ahead of you on this topic. Monopoly power is just one example of a larger category of behavior: rent seeking.
As far as monetary policy goes, most economists have also failed to come to grips with a fundamental fact of the global economy: the world is awash in excess savings. These savings are chasing rents, not being invested. So inflation, interest rates and growth stay low.
12
It is no surprise that such changes in the economy are a mystery to economists. Because there’s no real interest in this country beyond if-it’s-good-for-big-business...
The financial industry blew up the economy just a few years ago, and we’re right back to enabling the banking superpowers. No wonder there’s no experience or interest in small business lending. Everyone wants the fast, easy big-business transaction—that only serves the big company and well-protected investors.
15
@JP
My husband is an economics professor and I know a lot of economists and absolutely none of them hold the views you ascribe to them.
You read an article about a teeny subset of economists, which discussed how other economists are mounting a challenge to their thinking. So how did you reach the conclusion you did?
And "we" are not right back to enabling the banking superpowers. The present Republican dominated Congress and administration of the guy who received 3 million fewer votes is doing that.
I agree it is horrific. But let's assign proper responsibility. These people have been enabled by those voting in that Republican Congress and administration -- the deplorables and their ilk.
I haven’t read these papers but the proposition of the article makes no sense. This is because the biggest tech companies tend to pay well above-average compensation.
A more likely explanation is the one provided by traditional microeconomics: marginal labor productivity drives marginal wages; in a service economy there just isn’t much marginal productivity; the modest productivity gains in recent years have come from technological replacement of labor, or technological enhancement of labor, where the value of the productivity increase has accrued mostly to the technology provider, with some being retained as consumer surplus by the consumer.
4
Housing in India's top tier cities cost between $150-$250 per square foot. Annual rent per square foot is about $120 -$200. Even a shack rents for $800 per year. Annual wages on the other hand, for unskilled/semiskilled labor in these cities range from $2000 to $3000. In other word housing costs 30 to 40 times annual salary. Completely unsustainable. It's not that the the labor in India is not aware of how low their pay is. It's just that they don't know how to protest. I bet it's worse in China (I think China recently 'ordered' it's banks to lend money to renters below official rate). IMHO reset will come when there's mass uprising in these countries, especially China.
7
@Vasantha Ramnarayan
India's social culture is dog eat dog with little to no regard to helping the less fortunate.
China's is quite similar.
I base my statements on time spent in both countries and discussions with people I know who grew up in China/India or lived there for 5+ years.
Unfortunately the USA has also become like China in India in this regard.
Does anyone know the primary reasons for this?
1
Let’s consider a scenario with $100 wealth in the economy distributed evenly among the population of 100 people. We give this scenario a score of zero. In the next scenario let’s assume that only one person among the population of 100 has $100 and rest have zero. This second scenario gets a score of one. Now we have a scale from zero to one. Guess where USA is on this scale that we just created? We are at 0.8 and this scale is callled Gini coefficient. We are getting very close to the concentration of wealth and income that existed in pre-revolutionary France.
41
@Ravi Srivastava We visited Versailles some time ago and after seeing all the grand things we came to conclusion that it's no wonder that there was a revolution.
1
Too big to fail has become too big to succeed. But maybe the size of these mega-corporations is not the cause but a symptom of the real issue. When Eisenhower warned of the Military-industrial complex he missed that the co-opting of US government would bled over into every aspect of the economy. We now live in a country where power lies with the corporations and not with the people. We live in a country where competitive advantage is not won in the marketplace but lobbied for in the halls of government. We live in a country where wages and benefits are not raised to compete for labor but controlled to maintain the competitive order. We live in a country where capital is in the hands of a few and laws are in place to ensure the wealth is passed from generation to generation.
35
I am a software developer and it feels like salaries have been going up the last five years after being stagnant for some years after the sub-prime meltdown.
On the other hand, I imagine that union manufacturing jobs continue to go away and get replaced with lower paying jobs and even minimum wage.
Put these two things together and it is really sad.
We have people who are uneducated and can't get jobs. At the same time we are bringing in people from India as software developers.
We have people who can't get jobs at the same time there is a shortage of people in construction in some areas of the country, often being filled by Mexican immigrants, both legal and illegal.
Germany is know for high-tech manufacturing. Yet they have faced the same globalization we have. They have good schools for the working class. They give people trade school or high-tech manufacturing or two years of college. BMW is even training Americans in high-tech manufacturing in South Carolina.
After 35 years of trickle-down Reaganomics, we got an opioid crisis.
53
Expansive corporate power and influence are not inevitable - they are the result of policies that can be changed.
Unfortunately, we’re at a point where our politics and laws and tax structure have been captured by the wealthy, even as the distortion of our world’s economies that has resulted from the greed of this .01% creates unstable lives for human beings and unsustainable demands on our environment.
25
@Corduroy
Yet it's this very group which yells loudly about human rights and environmental protection. And then go off to celebrate 'Burning Man'.
That might be very good since the market is much better than a managed economy anyhow. As is typical people in government are more concerned about their power and possibly loosing it than helping citizens.
3
Corporate power is a managed economy. The only difference is who is doing the managing and to what purpose.
29
@vulcanalex
Go visit Holland and Denmark and get back to us.
They don't have the poverty we have.
They have universal health care and spend half as much per person as we do.
We have parts of the US with infant mortality rates the same as Botswana.
They have better schools for the working class. They have trade school and training for high-tech manufacturing.
After 35 years of trickle-down Reaganomics, we got and opioid crisis.
I am being serious, go spend two weeks and talk to people. They all speak English so you won't have a problem.
3
“It’s hardly the case that central bankers are becoming storm-the-barricades opponents of corporate power.”
And unfortunately, our big money electoral extravaganzas are giving us nothing suits stuffed with nothing but ambition - certainly not the courage to challenge the anti-democratic corporate power that is destroying our nation.
This report would have been a good opportunity to mention Sanders’ proposed legislation to force Walmart, Amazon and other behemoth corporations to cover the government’s expenses in providing food stamps and other support to the low wage workers.
20
The world of Economics is a mystery to me, but, even in my advanced years, it is obvious to me that Amazon has gotten way too big, so I refuse to buy anything through Amazon, and I dropped my digital subscription to The Washington Post, just because Jeff Bezos bought it. These monopolies just don't seem right to me. Admittedly, I do buy a few things from Walmart, but buy most of my groceries at Winco, an employee owned company. It's not much, but refusing Amazon feels like a small stand for me against corporate monopolies.
31
@Pat Boice It is a mystery to those so called experts as well so don't feel bad. I wonder why you think Amazon is an monopoly, you can get almost anything that they have somewhere else. Surely if it was an illegal monopoly the feds would be suing it.
1
@Pat Boice Unfortunately, you can only get some items through Amazon.
@Pat Boice Great!, individual choices and actions to avoid monopolies, are meaningful, hope they influence others. Let s stop feeding these monsters.
Not mentioned here, and perhaps not at Jackson Hole, is the gig economy. Case in point: adjunct faculty in Universities. Their ranks have increased dramatically in recent; some say that as many as 3/4 of college professors were non-tenure track, earning maybe $25,000 per year, with PhDs and college loans to pay off. Many other such cases. . .
35
@Dan Moerman Funny how that invisible hand can get around almost anything. And adjunct facility is not a gig economy issue, it has been around for decades. If you have loans you better have studied something that is actually in demand, not something where supply is greater than demand.
The first problem here is the Federal Reserve itself. Despite the name 'Federal,' The Federal Reserve is NOT a government entity as many people think. It is a private corporation run by bankers for bankers. The idea was to stop the 'bank' panics of the late 1800's and really 1900's but it has failed miserably. For example, the Fed's low interest rates fed the mortgage crisis and thus caused the Great Recession. Of course the advent of companies like Amazon & Google have changed the face of our economy. Of course this has contributed to the stagnation of wages. Along with the demise of Unions, the rise of 'monopolies' through mergers and acquisitions are also keeping wages stagnant. The only way we will ever have a 'fair' economy is for the Fed to be dissolved (thats right, no central bank is needed), and for our government to break up the huge monopolies that dominate he economy.
13
Didn’t TR break up the big monopolies 100 years ago? But we’re smarter now, right?
@Mike L
No, no no no. The Federal Reserve is not a private corporation, it is a government entity. It is not run by bankers, but by government appointees. It does interact with banks.
The mythical “invisible hand” of the free market can neither significantly lift wages nor ensure prosperity for Americans in the middle and lower classes.
It is painful to watch so many people take seriously the troubleshooting efforts of establishment elites, such as economists, politicians, bankers, and corporate executives.
These people are a part of the problem if they are doing anything other than working to shift the focus of our current capitalist economic system away from wealthy shareholding elites and toward workers in the middle and lower classes.
America is failing because she has been playing a board-game called “Shareholder Capitalism.”
A study of the impact of the mega-corporation trend on the economy? No, we don’t need a study of the obvious. We need for our leaders to help us switch to a more just economic board-game.
22
@Howard Gregory Sure it can if the federal government does its job and limits imports. And just what switch would you like, socialism, communism, etc. That might be fine if I am in charge, not so good if anybody else is.
@vulcan8alex
Limiting imports leaves an economy less better off because the goods and services it produces domestically are not produced as efficiently as an exporting economy can produce them. (If the importing country could produce them more efficiently, there would be no need for the imports in the first place.) Thus, wages will not likely rise. After all, who would pay higher wages for less efficiently produced products?
@vulcanalex limiting imports will cause other countries to limit imports from the US. Our economy needs foreign markets to grow. Nothing nefarious, just fact.
Is the Fed thinking that economic dominance of a few smart companies in new industries is new? The Bell telephone system, Standard Oil, GM...all huge companies that defined their industries and shaped US employment policy in their time. But competitive barriers fell, other companies caught up, monopolists were broken up, technology defined new competitive rules and the influence of those companies waned in the face of their perceived invincibility.
Amazon is not bulletproof but it is defining new competitive rules for now. The average lifespan of a company on the S&P 500 has dropped from over 80 years to under 20.
Tall trees are susceptible to lightning. Recognize the economic cycle and the fact that it will be different in 15 years.
5
It's very frustrating to read that economists are just now linking their rarefied theories about how an economy works, in the various micro aspects they use, to the "real world" economy of ordinary Americans.
They've taken long enough to even consider the link, and they were motivated not by the economy of regular Americans, but by the fact that banks were losing power to set interest rates, thanks to monopsoly wage fixing.
The world of the economist must be as sere as the desert, filled with paper and numbers, a sense of investments by the wealthy, but totally lacking in any real flavor that human beings bring. Perhaps that's why they're economists -- paper and numbers are cleaner and far more straightforward than the complexities of human society.
Every time I've read an economist's opinion about how the U.S. economy is revving, I wonder, "WHOSE" economy? Certainly not that of the majority of Americans.
In Wyoming, it seems they grasped a connection between wage suppression, few corporations setting wages and that the few banks with any power, another monopsoly, are losing the power to set interest rates.
But while they espoused their theories, not one of them mentioned the negative effects of wage suppression on people.
It's time economists entered the human sphere. Sure, Amazon's algorithms may affect the cost of a mortgage from a bank, but the more important issues, to humans, involve affording food, rent, healthcare, let alone a mortgage.
22
@Lilou If you believe that they have any idea on how a real economy works well you are naive at best. Humans and their actions are way too complex for anybody to understand yet, and perhaps never.
@vulcanalex--I believe you repeated back to me what I wrote. I'll take it as a compliment. Like they say, imitation is the sincerest form of flattery.
While I am sure mega-conglomerates are one source of downward pressure on wages, I cannot help but think there are many other sources of that pressure. Automation and cheap labor in emerging market countries contribute to this issue. So does the need to pay back student loans, the high cost of housing, and the need to self-fund pensions in the U.S. All reduce demand for things that are consumed, and consumption is what drives inflation. I know the central banks know how complicated this all is, and the article should lay that out also.
5
It seems that the simplest explanation for low wage growth in the U.S. is the fact that U.S. employers have to compete with Mexico and China. Both these countries can produce goods for sale at lower prices than the U.S. can because they pay very low wages. Globalization is the problem, but given that globalization is good for most people in most of the world, it's hard to foresee a solution to the problem of low wage growth.
7
@joe Great point, but the solution is quite simple but difficult to swallow. Produce in the US what we consume or if we import some we export other things except where we want to have charity to poor friendly countries. Tariffs are the method. Now this means less cheap stuff, and more jobs and the associated economic activity that the velocity of money brings. It might crash some economies like say China that depend on exports, but who cares.
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@joe
And yet the U.S. companies participating in those cross-border value chains are making more and more money. It's a question of who gets what share.
1
@vulcanalex Some economies like China? Who is second on that list? The US is the worlds second largest exporter.
1
Remember the era of Robber Barons? The era when change brought great wealth to a few, along with monopolies, exploited workers and a huge gap between labor and capital?
Remember when our courts ruled that restraint of trade was against the law? Remember the era of reform, which balanced ownership and labor more; which reduced monopoly power so that competition could continue? Which allowed a strong business environment but not a return to a feudal system?
Now forget all that.
Currently we are building an aristocracy and a truly divided economic reality. We can be lords, or serfs. That is what our political system is building by not looking at super-corporations. The new Dukes are Amazon, Apple and Google.
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In brief, Yes! Definitely, a few most powerful 'firms' have control of our economy by driving consumption, for good and bad, as our minds are pretty much controlled by a permanent, persistent drive, as we gave up our private thoughts to public consumption.
1
“The US economy faces a number of longer-term structural challenges that are mostly beyond the reach of monetary policy. For example, real wages, particularly for medium- and low-income workers, have grown quite slowly in recent decades. Economic mobility in the United States has declined and is now lower than in most other advanced economies. Addressing the federal budget deficit, which has long been on an unsustainable path, becomes increasingly important as a larger share of the population retires. Finally, it is difficult to say when or whether the economy will break out of its low-productivity mode of the past decade or more, as it must if incomes are to rise meaningfully over time.” Jerome Powell thus recognizes that things are not so rosy as they appear to be and the inability of the fed to do something about it. Tinkering with rates won’t make corporations give up on buybacks and invest in production. Tax cuts and cutting social security and Medicare they champion though
4
How can one have an extended discussion of low wages without any mention of labor unions? In the past, they were the principal mechanism for forcing (and that word is used advisedly) the distribution of some of the wealth produced by companies down the line to their workers.
The election of Reagan began the process of "breaking" the unions, and the Democratic Party hardly lifted a finger. That abandonment eventually led many workers to turn their back on the party, and now we have two parties representing different sectors of the affluent.
Workers are now largely defenseless against the predations of their employers, and even labor shortages do not produce substantial increases in pay. They need unions and they need a political party to represent them. Then they might have money to spend and the economy could correspondingly improve.
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@ERP Unions are mostly obsolete, automation and such makes them so. And they are mostly very corrupt where they still exist mostly in government.
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@ERP It is more nuanced than this. I lived in Youngstown for a while and noticed an erosion from heroic unions that corrected egregious worker subjugation, into unions that had to produce constant marginal gains for already well compensated union members.
Workers took for granted the struggles and hardships of the generations before them, and union leaders had to produce protections that evolved into almost impenetrable barriers to firing workers with terrible performance. An attitude took root among some workers that to work hard and quickly was not necessary because even the worst job performance was protected.
I don’t pretend to know how to connect this to the larger picture of other industries and other circumstances and other factors that went out of business or located production outside of USA. But I do know that this was a factor in the of most street and related industry from Youngstown and surrounding areas. Many of the former workers themselves were keenly aware of this arc. This is a little remembered feature of the growth and decline of a mighty industry that fueled America’s 20th century expansion and then ended with rusted abandoned hulks of old mills. It is useful to note than unions grew from heroic protectors of former industrial serfs, into organizations that had to keep serving up gains that went too far and helped open the door to a next generation of serf labor located elsewhere.
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We have entered a new wave of monopoly type companies like it was before Teddy broke them up circa 1900.
We need another Teddy now especially in IT/telecom.
We have the worst of both worlds, higher prices and lousy service.
At least with the air industry, the service went way downhill after deregulation but the prices did come down.
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If you ask me, income from capital should be taxed more and income from labor should be taxed less. This would not change the government's income but would give the majority of the people more disposable income (which they will more likely spend) and strengthen the economy by more consume, indirectly also helping the owners of capital.
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@Peter Great idea if you want to crash our economy. It is very simple today capital is way more valuable than unskilled labor. Automation does this and that is only going to increase. We need fewer humans, especially low skilled ones.
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@vulcanalex, capital is way more valuable to those who own, the rentier class. To those who don't own it, ownership is moving away from them a red light shift.
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You don’t seem to grasp how much of the return on capital these days flows to blue state creatures like state pension funds and the not-for-profit sector, particularly university endowments, completely untaxed.
Seriously? It is "governments" and "central banks" keeping the world economy healthy?
Here is an alternative perspective more closely related to reality and real history. Greenspan's low interest rate policy, from 1999-2007, left in place way too long to shore up his buddy "W" and his failed Presidency, along with the SEC willingness to look the other way as mortgage companies and banks made loans to imaginary people and people without income, directly resulted in the collapse of the entire world's economy.
This "collusion" between government oversight, central banks, and mortgage lenders was in no way "shoring up" the world's economy. Indeed, it designed and resulted in a collapse of the world economy.
On the other hand, Amazon employs thousands of well paid, highly skilled, and, low skilled workers. Amazon is not in the process of setting up the entire world's economy for a collapse like government and central banks were from 1999-2007.
So, this article is political in nature and is blind to history in fact.
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@Michael
Re-read the sub headline:
"The biggest companies may be influencing things like inflation and wage growth, possibly at the expense of central bankers’ power to do so."
What I read was that wages are not rising because the companies don't have to. Monopolies don't serve the worker.
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@Bob Bruce Anderson How foolish, no company "serves the workers" they have a duty to serve the owners and obey the law.
@vulcanalex Companies have far more duties than just your simple list. One of them is to be able to sustain the organization which requires that they not lose sight of the fact that the employees (or gig workers) that they have the power to prey upon as monopsonies are also directly or indirectly their customers. As "people" (according to SCOTUS), they have the obligation to behave like good citizens and not destroy their communities and environments as well. Considering the sustainability of the system in which they live is necessary for their own sustainability and their shareholders' continued profit.
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It's very frustrating to read that economists are just now linking their rarefied theories about how an economy works, in the various micro aspects they use, to the "real world" economy of ordinary Americans.
They've taken long enough to even consider the link, and they were motivated not by the economy of regular Americans, but by the fact that banks were losing power to set interest rates, thanks to monopsoly wage fixing.
The world of the economist must be as sere as the desert, filled with paper and numbers, a sense of investments by the wealthy, but totally lacking in any real flavor that human beings bring. Perhaps that's why they're economists -- paper and numbers are cleaner and far more straightforward than the complexities of human society.
Every time I've read an economist's opinion about how the U.S. economy is revving, I wonder, "WHOSE" economy? Certainly not that of the majority of Americans.
In Wyoming, it seems they grasped a connection between wage suppression, few corporations setting wages and that the few banks with any power, another monopsoly, are losing the power to set interest rates.
But while they created their theories, not one of them mentioned the negative effects of wage suppression on people.
It's time economists entered the human sphere. Sure, Amazon's algorithms may affect the cost of a mortgage from a bank, but the more important issues, to humans, involve affording food, rent, healthcare, let alone a mortgage.
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But this column has neglected mainstreaming of race to the bottom tendency in recent corporate development. Mega corporations like Amazon could send out RFPs (request for proposals) to their relocation, 2nd/regional HQs or just major presence. This is nothing new. Hog farms used to do that, leaving runoffs and trail of tear and broken dreams.
In MA, a big financial company got a cheap campus from another consolidated company, it garnered some tax credit from both the state and the town where the campus is located and still got a highway offramp to the site to boot. Ten years later, it shuttered the campus and distributed its workforce to other states where it also got tax credit deals when the tax credit was spent with the campus. It sold the campus to another corporation to boot.
Spin, rinse and repeat.
This is not to say Amazon Effect doesn't exist but there are also other forces like globalization and moat effect etc. Still, many CBs still have a free printing press but the whatever-it-takes will buttress the downside. But guess what, a lot of the cheap money slouching around in the world these days is coming from the sovereign wealth fund, like the Saudi plucking down $2B for Tesla stock
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With the dawn of the Robot and AI age fast approaching shouldn't government be considering taxing work product produced by data. Aren't the true winners in this economy those who trade 1's and zeros rather than bricks and mortar? San Francisco real estate prices are so far out of the national norm mainly because of their outsized control of data usage. Redistribution of wealth should be less concerned about rich and poor and more concerned about moving wealth from the internet back into the physical world where we humans truly live.
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@Christopher Forget talking about redistribution of wealth, if you really tried that well the back lash would be massive and a revolution might happen.
Amazon did the same thing as Standard Oil a century ago. They accepted losses to destroy competing retailers. The difference is that our Justice Department ignored this classic anti-trust case.
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Or maybe wages are low because there are plenty of workers (think population) and an increasingly digitalized economy does not need as many people to make it hum.
Scary thought because government can’t do anything about it.
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@maguire
As you note, an increasingly digitalized and automated economy will require less workers, at least for the employers and processes that exist now. What is most difficult to see is what will result in terms of employment from new innovators finding a niche to enter the market that the larger firms do not serve.
On the matter of plenty of workers, I see that as a yes and no; businesses in my area constantly have "help wanted" signs out, and maintain they can not find enough "qualified applicants". So the question I would ask is (with the retirement of baby boomers and subsequent reduction in total work force) are these businesses not finding enough workers with the skills they want, or are they not finding enough worker with the skills they want for the wages they are willing to pay?
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There are plenty what the government could do: mandatory increase salaries, shorten workday, increase tax on profit, introduce universal income.
@Don Great point, but even deeper, they don't actually "need" these workers they just want them. If they needed them they would offer to train those with potential or pay more to compete for those who are already trained. And if that costs too much automation is the alternative.
Having lived in the US for some years, it is puzzling that, generally, people say they value a free-market economic system, with little interference from Washington, but have little understanding of the economic flows of money in the system. There is little discussion about the negative impact of the multitude of leakages and brakes to economic expansion imposed by federal, state, county and city authorities and what this impact is.
Many times I have been told that the strength of the US lies in the independence of these authorities to control their piece of the pie. The reality is that this is the elephant in the room. As long as there are minimal uniform and anti-monopolistic rules enforced in the economic sectors across the US, large companies will continue to throw their weight around and arbitrage the system, which currently is there for the taking and legal.
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@Jenny Samfat
from a retired corporate attorney:
Not "legal" monopolies, just unenforced well-understood laws on the books. From antitrust to a gutted-by-Republicans IRS doing a tiny fraction of tax audits of the top 5% . . .described brilliantly in another recent NY Times article describing why Manafort and Cohen thought they could get away with not reporting tens of millions in income sitting in offshore banks and used to live an over-the-top lifestyle.
I have been living in Austria since 2000. Yes, we have our issues and yes there is also a level of disparity here caused by the "new economy". However, it is nothing like what is going on in the United States. We have laws here that MANDATE a liveable wage for full-time employment. This includes, affordable health care insurance AND treatment, pension plan, dental care, ( cosmetice dental not included)paid maternity leave ( 80% of income), paid day-care, an excellent public school system and University system. Not to mention a national rail system that would be the envy of any American who ever fantasized about jettisoning their car and payment.
And don't tell me the money is not there. The United States is much wealthier than Austria.
It is the government's responsiblity to guarantee these protections to it"s citizens. However it is the citizen's respnsibility to elect such individuals to office.
So, get on with it America.
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@Joey Green
You expressed my meme. Wages, ergo the economy, cannot expand without a rational health system. Anecdotally, a co. put aside 1 million for employee raises and then received its new health insurance bid which was an increase of 1/2 million. I tire of reading that wages are suppressed due to other factors when the health care system (or lack thereof) will bankrupt this country.
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@Joey Green Great that you live where you like the system, anybody want to move there? And our constitution says nothing about all those things you want, and the US is not wealthy we are in massive debt from similar things you propose.
It’s a easier to keep wages up if you keep the workforce down by blocking migrants.
Also, do remind me of the last major invention that originated in Austria.
We need less labor relative to all forms of capital (machines, buildings, know how or technology, services, and even money capital) to produce what we consume. The historical tendency to overproduce capital relative to individual consumption continues to confront us from time to time despite its global spreading. The concentration and centralization of capital only retards this tendency but it does not stop it altogether. The events leading up to the first world war show us how the frictions created by this gap were attempted to be solved. Then the crash of 1929 restored equilibrium momentarily to start cycle all over again. All monopolies and centers of power were superseded by new ones and production restarted again in full after the second war after the immense destruction and devaluation of capital in the preceding period. Then we have seen the cycles that show attempts to fix the thing (1970s, 2000, 2008, ...)
1
No,no,no!
The combination of flexible production hardware and software, a huge market in used capital goods, and easy access to historically cheap funding has led to a situation where overcapacity exists in almost everything from raw commodities to high value added finished goods.
Now, huge new retailers might be squeezing the gap between wholesale and retail prices but the main culprit is surpluses of almost everything (except love said Burt Bacharach).
14
Dominance by fewer and fewer large companies will naturally lead to depressed wages. It has been dubbed “Monopsony”. Employees have fewer choices.
Additionally the wealth of our nation held by the top 1% has steadily grown, and mostly at the expense of the bottom 80%.
This doesn’t happen when you have strong unions, but our Congress and the Supremes have been on a mission to crush Unions since Reagan took office. Why is anyone surprised?
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Spot on! We need a Law that guarantees ALL full-time workers a Liveable wage which includes health care insurance, dental, and paid maternity leave. ( up to one year) Trust me the money is there--- in the hands of the " 2 per-centers"!
1
It has seemed unusual that a tight labor market has not reflected higher wages. Since inflation is low, the individual’s buying power has not been noticeably reduced. Pricing has stabilized also. Perhaps lower interest rates are an answer. That would cement lower wages and inflation to a point of stagnation perhaps.
Inflation low? Health care premiums and copays have outpaced inflation for a few decades, rents are not stable, transportation, cable bills and utility costs are higher than ever. There are flaws in the index. Wage growth is too weak to keep up.
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Not a word mentioned here of the wage depressing effects of highly trained foreign technology workers entering our labor markets on temporary/permanent visas. Nor the rapid global proliferation of technology advance which discourages capacitance formation as in eons gone by when barriers to trade were far more effective.
Low wage growth in the low pay service industries is evident in th fast food and similar industries with their increasing numbers of immigrants, often illegal. As visits to such retail establishments can easily identify.
Finally our notion of “capital investment” focusing on plant and equalipment is increasingly becoming outdated in our ever more high tech universe. The “high tech factories” of our new age are likely to be found in modern high rise office buildings.
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@Peter I Berman
"High rise" spaces? Nope. Consider medical innovation, including genetic/genomics like Invitae/NVTA. Jettisoning the old learning milieu and hierarchy and workplace.
NVTA has highly paid and highly skilled jobs in its world class genetic testing and counseling service offered only to physicians. Not Direct-to-Consumer hobby-level service providers like the ancestry DNA places, but physician-only orders for testing and interpretation of results.
Most NVTA job postings include instant access to online applications. They highlight the ability to work "remote." Many employees can be anywhere if he or she shows the job will get done well and on time with the ability to meet performance metrics that lots of old-school economists and managers struggle to comprehend. NVTA's model is our future.
Everything I see around me reinforces my forecast that, for the rest of my life (F/70), the 1% who own most of our wealth cannot spend enough to fill the gap left by those who live paycheck-to-paycheck. Worldwide there is vastly more supply than demand for most goods and services. That keeps pricing and wages frozen at historic lows - unlikely to be reachable by central bank interventions or policies.
Look at Bezos or the Walton family cadre, where AMZN and WalMart employees cannot afford to feed their families buying their employer's products with their take-home pay. Wealth inequality worldwide is creating a dangerous mix of power and powerlessness.
45
Your last paragraph is spot on. Did you hear the one about the Walton who bought his wife her own private jet for her 40th? Meanwhile, one illness could send a Wal-Mart employee into homelessness. Hey, maybe he could just buy them a jet!?!
1
Of course the weak regulation which resulted in over-consolidation is hurting America. Not only do employees suffer, prices are going up and service is going down too. The oligopoly of wireless carriers gave us extortionate prices for mobile phone subscriptions in the US, over twice as expensive compared to many EU countries (NB where the same rates as national now by EU law apply in all 28 countries). Everyone here thinks Amazon is amazing but in Belgium and the Netherlands for example, where Amazon is only a marginal player and there’s more competition, the standard is: order before midnight, get your shipment free by 6PM the next day. Market regulation is on the long list of things to be fixed in America.
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The simple concept of market - capital, labor and material no longer works, and macro economic theory based on Samuelson's work no loner captures the current complexity of internet based global economy. We need new way to define the economy - it is no longer a capitalism nor it is communism - this is now Uber economy, no ownership to property, only service. This lack of deep knowledge is exploited by the elites to create an oligarchy out of our liberal democracy. We are in a total Intelectual vacuum and are depended on those elites who are enjoying the fruits of this anomaly to find the solution. The new economy has to replace market by family, change profit by responsibility and consider replacing doing good by doing no harm. We need different types of economic leaders who will not maximize profit only, but maximize family well being where family includes employee and customers. If company is not cost effective employees will be harmed, if customers are exploited, society will be destroyed. We have technology to do this, do we have the desire to do it?
35
These same companies are not hiring too many Americans either. They claim that they cannot find skilled Americans to do the jobs when the truth is that they do not want to train, hire, or invest in any employee (hired or potential). There are lots of unemployed Americans looking for jobs. Some of us are experienced, know how to learn, are quite competent but aren't even considered because of our ages, our gender, or whatever criteria is used to exclude us.
These same companies are not interested in paying to fly interviewees in, cover the costs of relocating (unless it's a very special employee), or do anything that might convince someone with family ties and obligations in one part of the country to apply in a different part.
What we have now is luck. We're lucky if we get a job that has a regular paycheck, isn't a contract position, has benefits like vacation time and sick time, and doesn't expect us to be available 24/7. It's a pity that the technology we have now is used to exclude people from applying, makes it much more difficult to reach another human being, and has not helped to spread the wealth but has helped to spread to prejudice and hate and economic inequality in ways that are pernicious to the maintenance of an open and free society.
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@hen3ry. I have also noticed how miserable workplaces are these days if one does get a job. Employees are supposed to be groveling supplicants. There is no joy of teamwork any more.
2
Bottom line is income inequality!
Equity is breeding more equity like a wealth virus!
You start out with nothing and you are basically relegated to a lifetime of economic irrelevence!
Unless you develop software or a patent. -LOL
Yes -the best and brightest youth can still overcome great odds with STEM skills and advanced degrees in highly valued professions BUT it's longer and longer odds against!
And then there's robotics and AI whose benefits serve the already and forever entrenched upscale.
Guaranteed incomes and Nread and Circus OR chaos!
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If folks come to their senses in 2020 and vote for Bernie Sanders , these issues will become acedemic, everything will be free, compliments of the state. Comrades “ workers of the world unite.
2
@Dan Green. I like free stuff too but where would the money come from to buy all of this stuff that is given by the government to all of us? I'd like the government to pay for college for both of my kids, medical care for my family of four, cars for all of us, housing for all of us, our clothing and our food. My kids would like a puppy as well. A vacation or two each year to someplace warm would be nice too, but that might be asking too much. I don't want to be too greedy in my requests for free stuff.
2
This is one of the most important articles that NYT has published in months but no one will notice because of the focus on all things Trump.
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@Rich Kershis.....at least it's on page 1. Now they must go on cable TV and talk about it. If they can spare a few minutes to analyze factors that led to the election of Trump, instead of only the scandals of Trump in office, 24/7.
The robber barons pay their employees so poorly, many are on food stamps. Essentially, middle class tax payers are subsidizing these companies. Bernie Sanders pointed this out in his most recent bill, which attempts levy onto the companies a surtax so that THEY pay that gap, not taxpayers!
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@John Mardinly They are on food stamps etc. because they have children that they can't afford. Around here a person can live fine on minimum wage. Get a room mate or spouse, no children.
1
@John Mardinly, in spite of this and all the publicity these practices have received there continues to be a sizable number of Americans who firmly believe that people are not entitled to a living wage, that food stamps are bad, and that tax breaks, which are a form of government welfare for the rich (people and corporations) are fine.
In America it's Christian and good business to shortchange employees and potential customers.
@vulcanalex
They are on food stamps because much of the population is not paid enough -- no matter how hard they work -- to be able to cover costs of food, lodging, transportation, clothing, health care, heating, lighting etc etc etc etc.
Look at what you said: you can afford to feed yourself as long as you join forces with another working adult & you have no dependents. Then & only then can you buy enough food without outside help.
This -- in the richest country on the planet, in the capitalist paradise in which the majgic market is supposed to provide prosperity for everyone who works, unlike evil socialist states like Sweden.
Do you see now how juvenile, cheap & downright ignorant your comments ring? You sound, frankly, like a 13-year old quoting his corporate executive daddy's dinner table rants.
No one with a brain would rely on your airy assurance that people can live 'fine' on minimum wage, even in Tennessee.
By the way, it's almost impossible to get food stamps anyway unless you have dependents, or are disabled.
1
I think this is pretty funny: Steinbaum says, “Cutting-edge research tells us exactly what’s going on, and yet the Fed seems to be considering this for the first time.” And yet you can read exactly the same thesis that monopolization depresses wages in Hobson's Imperialism (1902). Hobson was a liberal reformist, a precursor to Keynes, if you will (and gets several pages of discussion by Keynes in the General Theory). The "monopoly capitalism" theories of the mid-twentieth century also had much to say on this topic. But OK Marxists like Sweezy don't count. But Sylos-Labini's book "Oligopoly and Technical Progress," (1969) is the work of a Keynesian, not a Marxist. Seems that whenever we are talking "cutting edge research" what we really mean is "reinventing ideas that are old enough no one remembers them any more."
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@gnowell Cutting edge research does not exist in economics, and they have no idea what really is happening. The data is very loose, or even fake especially from say China.
Thanks for this. It's great to hear about what's going on at the cutting edge of economic theory.
While we're busy on that, we should apply the one obvious solution we have to our two biggest problems, inequality and unsustainable budget deficits: Raise taxes on the rich, and use that to fund healthcare and education subsidies.
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@David Doney And Joan Robinson and Sraffa. I didn't mention them in my own post and now I can't ed it. But they were cutting edge theorists of non-competitive markets too.
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@David Doney
David certainly our debt is the elephant in room. Your suggestion about raising taxes on the rich is indeed popular. The 1% has the wherewithal to avoid a lot of taxes. The next well off group pay the bulk of the taxes now. Reality is there are not enough of them to carry the load.
15
@gnowell"Raise taxes on the rich, and use that to fund healthcare and education subsidies."
Wow! That's some dream bubble you live in -LOL
1
Look at the rise of blockchain currency. Quite a number of the biggest corporations are run by young(ish) libertarians who know little to nothing of the economy before Reagan and are convinced that big, bad government is merely standing in the way of prosperity for all. Some are pushing blockchain currencies as privatized currencies that can circumvent central banks altogether. They rub their hands together in miserly glee when they imagine being able to hide massive amounts of revenue from tax authorities all over the world, shrinking and disabling any governmental powers that might try to stand up to them.
I often wonder where this is heading. Sometimes I think that all nations will be broken apart and that everyone will return to living in neo-medieval, feudal city-states, each one governed by a corporate overlord of some kind.
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Throughout human history and until as recent as 300 years ago the king/queen was the most powerful person in a country (loosely define country). His/her power came from wealth, from being the largest land owner who controlled agriculture and the way of life of the people that lived around them. They settled prices and wages.
The came the industrial revolution and there was a significant shift in wealth. The wealthiest people became industrialist, no longer the monarchy. For the first time government wasn’t dictated by the wealthiest people. With it, came different forms of society and government - capitalism, socialism and communism, and different ways to distribute the wealth.
Fast forward to 2018. The likes of Amazon, Apple, Google and others are shifting government responsibilities to these companies’ board of directors. These companies exert so much power that are now controlling wages and inflation. The media power of Facebook and others control the flow of information.
The CEOs are the new kings (no queens). The board of directors are the new monarchies. New Kong’s aren’t selected by the people. They aren’t even transferred to heirs. It’s much like how Cardinals choose a new Pope.
There is a way out, though. Break up these companies and end their monopolies. Government still has the power to overthrow these new forms of monarchy.
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@BWCA: What if these new companies are preferable to the government?
6
@Stan Sutton People still elect the government officials and they can change who is in power. These new companies are run by the board of directors put in place by the their owners. This is like suggesting that a benevolent king is preferable, but what check is there on the king if malevolent? One of our modern problems is the greater and greater amount of influence being exerted by these giant corporations over who is elected to public office. That may be the source of your discontent with the government.
2
@Hugh Robertson: I agree that we don't want government to be controlled by corporations, but it's already questionable whether people can freely elect government officials and change who is in power. And it's not just corporations who have distorted the electoral system.
Regardless, there are specific issues under the current administration in which I personally side with large corporations. When it comes to energy policy, global warming, and pollution, I prefer the approach of large corporations who are committed to green energy to the administration's policy of denying global warming, rolling back pollution controls and promoting dirty energy. When it comes to healthcare, I prefer the initiatives of some large corporations to the policies of the party in power who prioritize the dismantling of the healthcare system. Most large corporations of which I am aware have better attitudes about human rights than our current administration does.
I do not at all believe that large corporations should wield unbridled power, but I voted in the last election and that didn't work out from my perspective. In the meantime, large corporations may be more effective than Congress in minimizing some of the abuses of the current administration.
As corporations and banks become larger and multinational, they concentrate decision making power. Simultaneously workers are getting weaker. There has been no unionization drive in the service sector and globalization and mechanization allow businesses to shop for workers. The gig economy atomizes the working class into contractors and part-time workers. American workers, especially in the heartland, are a shrinking share of the consumers of American megacompanies, becoming marginalized. This power imbalance is inherently undemocratic and is going to provoke rebellion.
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@Bruce Shigeura
I compare so called Globalization to prescription medicine both have side effects. Most show up 5 or 10 years down the road.
7
@Bruce Shigeura Chillingly, "atomization" is a term Hannah Arendt used in her book Totalitarianism. She argued it was a precursor to mass manipulation via propaganda.
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@Bruce Shigeura "American workers, especially in the heartland".....so why do they vote Republican so consistently?
The one percent are getting richer and the 99 percent are getting poorer. The wages are not keeping up that is why businesses are moving to Mexico and China for cheap wages and no health care. Wall street said recently they see Trumps recession coming soon and it needs to be a big one so the GOP get hit hard in the mid terms and future elections. When you give so much welfare tax breaks to the people who don't need it the one percent will always do better.
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@D.j.j.k. I am not a 1% er, and I am getting a better life all the time. Larger TV for less money. More computer for the same money. Food inflation not too bad and alternatives exist. When I was in college a main frame computer was the same power as the one I am using now. Things improve if we actually understand them.
Why is this so surprising? The old adage that if you build a better mousetrap, the world will beat a path to your door is a fundamental truth. Amazon doesn’t extort anyone to use their services and certainly not to take a Prime membership, yet they do in the millions.
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Excellent studies on the concentration of corporate control of our economy in 2016 should have received far greater attention. Nonetheless, this work by Mr. Irwin helps and should be expanded for reasons other than focusing attention on the Fed. Most important for me were the Issue Briefs from the Council of Economic Advisers in April and October 2016, both of which ought to still be available. But, more important was the work, noted as a sideline of the Fed. meet, of the Roosevelt Institute. Its report in June 2016--Untamed: How to Check Corporate, Financial, and Monopoly Power--should receive the recommendation by anyone wishing to really understand how tenuous government's hold, or hold of citizens on their own economic future may well be.
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Prior to reading this piece, I was reading the chapter titled "Moat Nation", in Steven Brill's book, "Tailspin". This chapter begins by describing business leaders who no longer see what government can do for them (build and maintain infrastructure, train and educate their workforce, maintain the rule of law that allows them to do business at all), andse have for that past few decades focused on what they fear government can do to them (create regulations that protect the populace, but curtail their businesses profits, increase minimum wages or taxes, etc.)
There is no doubt in my mind that the business community, writ large, sees itself as deserving of government's protection of their greedy practices. And why not? They have paid good money for these politicians, and they expect a satisfactory ROI.
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@Sandi
The list during campaigns of which corporation or Bank donated to who tells it all. With that said itdidn’t Work for Hillaryand we were all surprised.
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@Sandi - Rome 47 BC -bread and Circus works!
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@dave - "The United States - set in a wilderness, forever dreaming itself Athens reborn, even as it crudely, doggedly, re-created Rome."
Gore Vidal - "The Golden Years"
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If we do not include software and applications, the elements that most corporations in 2018 identify as critical to their survival, never mind success, as capital investment, we need another measure. We have different Ms for money supply and different Us for unemployment. We don’t need go after problems, I.e., low capital investment, if it is not a problem.
@Michael Blazin Reread the article. Software is considered and classified as investment. Classification is not the problem. This is the claim by the article:
For example, more of the investment of modern corporations takes the form of intangible capital, like software and patents, rather than machines and other physical goods. That may be a reason low interest rate policies by central banks over the past decade didn’t prompt more capital spending, said Nicolas Crouzet and Janice Eberly of Northwestern University in a paper presented at the conference.
Banks are generally disinclined to treat intellectual property or other intangible items as collateral against loans, which could mean interest rate cuts by a central bank have less power to generate increased investment spending.
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The article and your quote, to my eyes, says software spending not considered capital investment. The complaint is various business practices, .e.g., short term focus , buybacks, create a dearth of capital investment. If we redefine capital investment to include software, do we have a problem?
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I am not an economist nor am I in government, but here is my consumer perspective. Monopsony power is indeed the crux of this problem.
I think what we are seeing is a gradual wearing away of the effectiveness of government tools--either of law or of fiscal policy--to ensure our rights and welfare. Conservative Neoliberalism and its view of government as the problem has been successful beyond its wildest dreams. For a broad swath of society government and all its associated rules and institutions is and remains THE problem. The answer is a free and unregulated capitalism. Thus business (e.g. Amazon) MUST be allowed to behave as it wishes and it cannot be regulated or impeded in any way. To too much of the world only unregulated capitalism can provide prosperity, happiness. We are living with the consequences of that choice.
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@Hazlit
Excellent comments. I too think about the bog boys . With that said I admit I buy Apple toys. I like Home Depot, I use Googles search engine. Many folks like WalMart. Point is they offer products and services people like. Unfortunately if the government gets involved they would ruin these services.
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@Dan Green I use many of these services often because I can't find any alternatives. Home Depot is inexpensive but the choices offered are not very interesting but I go to Lowe's and no real difference. Amazon's prime service has turned out to actually be more expensive than some alternatives from some things I buy but if I didn't know about the alternatives already Google wouldn't reveal them to me. I know because I've tried, it always takes me to Amazon first. Uber is killing the local taxi services, Star Bucks has become the standard for coffee, I can't compete with Airbnb if I want to rent my house or room out occasionally etc. In short what used to be local has become international and it's not all good. I go to Walmart largely because the local places that used to offer the same things are long gone to the point that we've forgotten what that world was like.
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It is 'monopsony power' coupled with stock buybacks:
https://www.nytimes.com/2018/08/23/opinion/ban-stock-buybacks.html
and:
https://www.theatlantic.com/business/archive/2018/07/are-stock-buybacks-...
adding in the perverse fact so many pension funds are heavy market investors, and those pension funds (many of which are union owned) need a certain R.O.I., so even they are apparently reluctant to pressure managements to raise fixed costs by raising wages.
The fact that John Boehner proudly explained in Sept. 2011 that 'capital' was on strike in the Obama years unless massive tax cuts were extorted:
https://www.huffingtonpost.com/robert-s-mcelvaine/capital-strike_b_96540...
even more clearly laid things out.
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P.S. - It should not go unmentioned that there have been very few times in capitalism when so little in profits ha been rewarded so richly in share price, especially in our days of Greed is God (um, er, Good) Vulturedom:
https://twitter.com/bill_gross/status/960340400740315137
When capital gravitates to monopsony paradigms where R.O.I. is neither expected nor demanded over a long time period (for whatever reasons), that attitude can't help but bleed over to influence the wage market(s).
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