Multilateral organizations like the Organization of American States (OAS) have a certain perceived impartiality because they are, in theory, controlled by a diverse group of nations. But sometimes a great power can wield a disproportionate influence.

After adjusting for prices, wages have risen 1.5 percent annually over the last five years. If we can continue this pace of wage growth, the Larson bill would take back much less than 10 percent of the pay increase in taxes.

November 2019, Guillaume Long, David Rosnick, Cavan Kharrazian, and Kevin Cashman

(This post originally appeared on my Patreon page.)

This summer, the Business Roundtable, a group that includes most of the country’s largest corporations, made big news. It issued a statement that its members would no longer be concerned exclusively with maximizing returns to shareholders. Instead, Roundtable members would take into account the well-being of their workers, the communities in which they do business, and the environment.

This statement was given a mixed reception. While some applauded the idea of moving away from a single-minded focus on shareholder value others questioned the sincerity of the commitment. After all, drug companies pushing opioids, oil companies lying about fossil fuels, and hotel and retail chains cheating workers out of their pay, always had the option to do the right thing, but chose not to. Did anyone believe this resolution from the Business Roundtable would change the way they operate? 

However, there is a more basic point that got almost no attention. There is little reason to believe that corporations are being run to maximize returns to shareholders. The reason for questioning this claim is that returns to shareholders have actually been low by historical standards in the last two decades, as shown in the figure below.

 

 

 

Source: Shiller 2019 and author's calculations.

The average real return over the last two decades has been just 2.8 percent annually. This compares to average returns of more than 7.0 percent, and sometimes in the double-digits, in the 1950s and 1960s, when corporations were supposedly less single-mindedly pursuing shareholder value. And, this weak return required considerable help from the government in the form of sharply lower corporate tax rates.

The data are very clear. If corporations are being operated to maximize returns to shareholders, they are failing badly in their efforts.

For over half a century, the United States has measured income poverty by comparing a family’s income to a standardized dollar amount (a “poverty line”) that varies by family size. For a family of four, this poverty line was initially set at $3,104 in 196

One of the tasks that are keeping economists employed these days is explaining the drop in labor’s share of Gross Domestic Product (GDP). This is supposed to be a major cause of concern since the vast majority of people get most or all of their income from working. 

A wide variety of theories have been put forward to explain the decline. However, there is a big problem these theories; it is not clear that there has been much of a drop in the labor share. 

Much of the decline in shares, before recent revisions, was simply due to an increase in the share of depreciation in GDP. Depreciation is the portion of output that is needed to replace worn-out capital. This is output that is neither profit nor wages; but the greater the depreciation share, other things being equal, the lower will be the labor share.

China passed the United States as the world's largest economy early in the decade.

The latest data on investment, GDP growth, the trade deficit and manufacturing employment all tell us the same thing. When it comes to producing gains for ordinary workers, Trump’s most-touted economic policies have failed badly.

November 1, 2019

Warren's proposal is not the final word. But it is an excellent first draft that provides a basis for future debate.

November 1, 2019

November 1, 2019 (Jobs Byte)

Last week, New York Times columnist Timothy Egan had a piece headlined “Why Doesn’t Mark Zuckerberg Get It?” The piece then goes on to document how Facebook has become a medium for spreading lies and nonsense all over the world, that many ill-informed users have come to believe.

This is what Egan wants Zuckerberg to “get.” While it would be nice if Zuckerberg understood the problems created by Facebook, and took effective measures to address them, the problem with Egan’s piece is that there is no reason to expect that Zuckerberg would get this point.

Zuckerberg is not a political philosopher concerned about the public good. There is a zero evidence he is a deep thinker of any sort. He is a Harvard boy who stumbled into a good idea and had the necessary connections to get very rich from it: end of story.

It is bizarre that so many people look to the country’s billionaires to tell us how the world should be constructed or think that these people have any great insight into such matters. Being a billionaire means that you were successful at getting very rich. There is no reason to believe that billionaires have any more insight into major policy issues than anyone else.

Imagine if we turned to LeBron James, a truly great basketball player, to get advice on how best to deal with global warming. LeBron is a smart guy, but no one would expect him to have special insights into dealing with global warming, in spite of his incredible skills on the basketball court.

In the same vein, why would anyone think that Zuckerberg would know or care about how Facebook should be run in a way that protects democracy? Zuckerberg runs Facebook to make to make money (lots of it), not to promote democracy. The way to fix the problems of Facebook is not to convince Zuckerberg of its harms, the way to fix Facebook is to change the law.