Conservative Press 04aprjun

Previous Weeks' Conservative Press

From April 5 through June, 2004

     This review of the conservative press was started on the week of June 2, 2003. In the brief time since then, note the number and diversity of articles that were published in America's most respected conservative financial publications.

     In one way or another, they clearly demonstrate the hypocrisy of those conservatives who claim that:

     So, grab your barf bag and read on!

     (Note: the abstracts below are presented for purposes of criticism only. Because of copyright laws—and in the interests of brevity and readability—they are necessarily incomplete. Those who are interested in the investment or other implications of the articles should read the originals.)

The week of...

April 26

April 19

April 12

April 5

Week of April 26

      For a brief case study that demonstrates the real purpose of globalization, the following excerpt is a classic.

      It’s all based on the theory that an economy should be designed to benefit investors at the direct expense of labor. Investors should be a new class of aristocracy, and workers should grateful enough to have jobs that they will accept terrible working conditions and wages.

      That’s exactly what has evolved today. Investors have all the bargaining power, and workers have none.

From The Wall Street Journal, April 29, 2004.

Clock Ticks on Germany's 35-Hour Week

Seeking Flexible Conditions,
Employers Are Threatening
Labor Unions' Proudest Feat

…Germany's short work week and generally restrictive labor policies are often cited by economists as the main factors crippling its economy. Squeezing more flexible conditions out of workers would provide cost relief for many companies and benefit the economy as a whole. Germany's economy has been stagnating for the better part of the past decade….

As West Germany went through its "economic miracle" in the decades after World War II, unions managed to win ever more generous terms for workers across whole industries. The 35-hour work week, first introduced in 1995, counts as a crowning achievement.

Companies went along as long as they could compensate for the higher costs by improving productivity through automation. More recently, however, price pressure from foreign competitors has increased to such a degree that many German companies are giving their workers a simple option—work longer for the same pay or lose your job. Many German manufacturers already have operations in Eastern Europe and Asia, lending such threats enough credibility to make workers buckle….

"The threat is real and has to be taken seriously," says Heinz Cholewa, an IG Metall official who helped negotiate the Siemens deal. "The ability of companies to blackmail employees has increased."

Union officials and economists alike say Germany's flagging economy and globalization are giving companies the ammunition they need to chip away at the "social contract" between employers and workers that has made direct confrontations rare in the past.

"I think you're going to see these deals spread out, the worse the economy gets," says Mr. Fahrinkrug, the economist. "Perhaps we've passed a pain threshold where the social-contract model is becoming less meaningful."

Siemens Chief Executive Heinrich von Pierer, recently referred to as "Rambo" by an IG Metall official for his hard stance on working hours, says companies like his are only doing what is necessary to remain competitive….

      Remember, in the 1960s economists were predicting the explosion of productivity and technology that we are seeing today. They also predicted that work would be reduced to an 8-hour, 4-day workweek. Of course, those were the days that true Democrats were in control of Congress and the White House. After Republicans and conservative Democrats gained control of both, they made deals with their conspirators in other countries—and the results have been a disaster for workers throughout the world. Consider:

     Isn’t this a great economy that Republicans and conservative Democrats have given us?

     Same old story. Wages for workers receded, corporate profits skyrocketed, and the economy seems to be growing. Meaning: our federal government must raise the prime interest rate so that wages for America's workers won’t start to go up.

From Barron’s, April 26, 2004.

In Your Face

What had been tailwinds for stocks are shifting to headwinds

A 40% SURGE IN THE STOCK MARKET in one year can only happen with a little help from some big trends.

Whether characterized as fortuitous economic tailwinds, massive coordinated stimulus, a global reflation or just a "sweet spot" in the business cycle for equities, large economic forces have fostered a nearly ideal environment for stocks since the market bottomed in March 2003.

The Federal Reserve has squeezed interest rates to 40-year lows, encouraging investors to drive money into risky assets and allowing companies to reduce borrowing costs. Inflation has dripped lower. Government deficits—boosted by investor-friendly tax cuts—added hundreds of billions in stimulus. And all the while, labor costs receded and the dollar declined, driving tremendous growth in U.S. companies' profits….

Greenspan himself Wednesday cautioned against assuming that any move to boost rates would augur a rapid series of additional tightening moves. And Fed Governor Ben Bernanke set a high hurdle Thursday for the Fed to act, saying inflation should stay between 1% and 2% this year and monthly job additions would need to surpass 330,000 before indicating labor market "stability."…

Greenspan intimated to Congress that, at some point, companies will no longer be able to ride productivity gains to ever-higher earnings. "If history is any guide, competitive pressures, at some point, will shift in favor of real hourly compensation at the expense of corporate profits," he counseled.

     "If history is any guide, competitive pressures, at some point, will shift in favor of real hourly compensation at the expense of corporate profits." That about says it all. Eventually wages will start to go up and profits will go down. And before that happens, Greenspan feels that he will have to raise the prime.

     Republicans and their stooges in government simply cannot allow workers to share in the increases of their own productivity. All the benefits must go to investors and top corporate executives.

     Simple me. I used to thing that personal services such as health care would provide stable wages for doctors, nurses and the upper-middle, middle and low income Americans who supported them.

     Not so. It’s getting increasingly obvious that globalization can destroy any American’s standard of living.

From The Wall Street Journal, April 26, 2004.

India's New Coup
In Outsourcing:
Inpatient Care

…Since its start as a single hospital in 1983, Apollo has grown to 37 hospitals with more than 6,400 beds, making it one of the largest private hospital chains in Asia. Apollo's emergence as a global health-care provider in many ways tracks India's economic trajectory over the past three decades. The company has capitalized on the high cost of health-care administration in the U.S. and demands of patients elsewhere, for fast, inexpensive treatment.

Hundreds of Apollo's data processors work late-night shifts providing billing services and processing insurance claims for U.S. hospitals and insurers. Apollo laboratories perform clinical trials for Western drug companies, such as Pfizer Inc. and Eli Lilly & Co. Apollo even remotely evaluates X-rays and CAT scans.

Apollo's range of medical services—from the back office to the operating room—highlights the contradictions of the global outsourcing debate. In seeking to provide a wide range of services at a large discount to Western competitors, Apollo is yet another Indian company threatening jobs in the U.S. and other countries.

On the other hand, Apollo's relatively inexpensive medical services have benefited patients from numerous countries. It also has helped India's overburdened health-care system. India has fewer than one hospital bed per 1,000 people, compared with more than seven in developed countries….

The Indian government sees health care as a growth industry. Public and private Indian universities are churning out 20,000 doctors and 30,000 nurses a year, some of them destined for jobs in western countries. That is roughly triple the pace at which nurses were trained during the 1990s….

Mr. Salo warns that Westerners need to brace themselves for some real shocks. The sight of urchins and beggars roaming Madras's streets was disturbing, he says. The 100-degree heat was oppressive. He faced "real doubts" about his decision when he entered Apollo's emergency room and saw the ragged condition of local patients. Outside Apollo's hospitals, clean water and blood supplies aren't a given….

     Those who argue that the U.S. must share our affluence with poor third-world countries conveniently ignore two facts:

  1. The U.S. citizens who are doing all the sharing are people who actually work for a living, while investors and the established—both here and abroad—get incredibly much richer.

  2. There is no way the U.S. can influence the philosophies and values of other sovereign nations. If they have a caste system, well, that’s it. And no matter what we do, their rich will continue to get richer and the poor will get poorer. India is using its newfound wealth to benefit the wealthy and the educated—and to hell with the urchins and beggars.

     Could it be that The Wall Street Journal is beginning to lose all its pretensions that American CEOs are fairly and justly paid?

From The Wall Street Journal, April 26, 2004.

Cheese Ball

The issue about CEO pay isn't simply that chief executive officers are paid too much. It is that their pay isn't effectively linked to performance, despite the protests of companies that they try to do exactly that…. Data from Mercer Human Resource consulting, which tracks the pay of the Big Cheeses of 350 of the largest companies in the country, suggest there is little correlation between CEOs' pay and how their companies did.

During the past 10 years, the median pay of the country's top CEOs has steadily risen. The median annual "expected" pay, which includes such things as an estimated value for options grants, has risen to $6.21 million a year from $2.52 million in 1994. That is an increase of 146% in the past decade.

Not so, alas, for revenue, profit and median shareholder return. Median revenue crept up in 2003 to $6.26 billion from the year-earlier $6.14 billion. That still was down from 2001 and way down from the $7 billion level reached in the peak bubble year of 2000….

During the past several years, as median shareholder return has bounced around, from stellar to lackluster to outright disastrous, pay has risen. And that is the crux of the problem.

     Even with this damning admission that CEO pay has little to do with actual performance, note how skewed the Journal’s values are. Note that the only criterion it mentions for CEO performance is shareholder return and value. How the CEO impacts the local community, his workers, his consumers, etc. is irrelevant to the Journal.

     As a direct example of ridiculous pay for stupid, or even uthical, performance, note the following:

From The Wall Street Journal, April 26, 2004.

Fannie Increased CEO Pay in '03;
Ernst & Young to Consult on Probe

WASHINGTON—Fannie Mae announced a big increase in 2003 pay for its chief executive and enlisted more expertise to help the company respond to an examination of its accounting methods.

The mortgage-finance company's chairman and chief executive, Franklin D. Raines, received salary, bonus and other compensation last year of $5.4 million, up from $4.5 million for 2002, according to a proxy statement filed with the Securities and Exchange Commission.

In addition, Mr. Raines last year pocketed $11.6 million in payouts under Fannie Mae's long-term incentive plan. That was 61% more than the $7.2 million he collected for 2002, the proxy said.

The steep increase in pay came even as Federal Reserve economists and other critics are arguing that Fannie passes on to shareholders and executives too much of the effective subsidy it receives as a government-sponsored company charged with helping more people buy houses….

     So, the CEO fattens the paychecks of himself and his stooges, and his shareholders, and he gets a bigger bonus—while people get less of the help they supposed to get to buy houses.

     The following excerpt is just one more example of how the greediest members of our society watch the incomes of working-class Americans like predatory hawks.

From Business Week, April 26.

U.S.: Patience At The Fed May No Longer Be A Virtue

As growth accelerates, a 46-year-low fed funds rate is becoming untenable

It's beginning to look like the U.S. economy is on a tear. Business confidence soared to a 20-year high in the first quarter, and surveys of both industrial and service-sector companies show that business activity is at unusually high levels. Perhaps most important, jobs are coming back, maybe even faster than anyone had expected….

The fact is, the Fed's current policy stance is becoming increasingly untenable—especially now, when the job markets are looking stronger and when inflation appears to be turning the corner. The target for the federal funds rate is at a 46-year low of 1%, a rate designed for an economy on the brink of deflation. Even policymakers are saying 1% is inconsistent with the Fed's long-term goals for inflation and sustainable growth.

Weak labor markets had been the last restraint to a new cycle of Fed tightening. Now the central bank has the leeway to take interest rates back up to a level more consistent with a fast-growing economy. Fed watchers believe that if core inflation rises but stays below 2%, the Fed would like to move the funds rate up to a 3% to 3 1/2% range. That would put policy in a more "neutral" position, which neither helps nor hinders growth….

So far, the main factor allowing the Fed to be patient this year has been the economy's large amount of slack—unused labor and production capacity. However, if the economy is indeed growing significantly faster than the policymakers had anticipated, then whatever slack exists is going to get used up a lot faster as well.

     The key statement in the above article is: “That would put policy in a more "neutral" position, which neither helps nor hinders growth.” This is called the goldilocks theory: keep the economy hot enough so that corporate profits and the stock markets go up—but now so hot that working-class wages start to go up.

     "...when the job markets are looking stronger and when inflation appears to be turning the corner." This means that when its easier for workers to get jobs, their wages tend to go higher--and conservatives equate higher wages with inflation, commonly calling it "wage inflation." And that's the only inflation conservatives really worry about. (They certainly don't worry about how investors' and CEOs' incomes cause inflation.)

     And that kind of theory fits only in a totally class-war philosophy of economics. According to this philosophy, a capitalist system should be designed to benefit primarily investors and the established wealthy—and those who work for a living should be so grateful just to have jobs, that they will accept a marginal living standard.

     Who always supports “three strikes and you’re out,” and all the other provisions for severely punishing low-class crime? Conservatives, of course.

     And who comes to the defense of white-collar criminals? White-collar columnists for the conservative financial press, of course.

From Forbes, April 26, 2004.

Criminal Injustice System

By Neil Weinberg with Mary Ellen Egan

White-collar crooks deserve tough treatment. But 24 years for Dynegy's Jamie Olis? Politics has turned financial fraud into a worse crime than running drugs or killing someone.

…While most of the country wasn't paying attention, Congress cranked up the penalties for white-collar crimes. This is Washington's way of dealing with the terrible losses in your 401(k) plan. Next time a stock goes into the tank, prosecutors will be looking to see if they can get the chief executive behind bars and throw away the key.

Sentencing guidelines—despite their name, they give judges little discretion—have been around since 1987. But they were stiffened in 2002 as part of "emergency" measures in the wake of the Sarbanes-Oxley corporate reform movement. The maximum punishment for wire and mail fraud, the most common white-collar infractions, was increased from 5 to 20 years. A chief executive who makes a material misstatement that causes a 50-cent drop in his company's billion-share float now faces 11 years in jail….

"These sentences are outrageous for nonviolent, nondrug cases," says Preston Burton, a former federal prosecutor who, as a criminal defense attorney, serves on the U.S. Sentencing Commission's practitioners' advisory group….

As the law now stands, someone who artificially pumps up a stock with 100 million shares outstanding, and whose price subsequently falls $8 below where it was when the scam started, is treated as if he personally stole $800 million….

     "These sentences are outrageous for nonviolent, nondrug cases," Hey, white-collar criminals merely destroy the livelihoods of millions of Americans, so why should they really have to do hard time in jail?

     After all, they’re members of our good-ol’-boys club, and they just happened to get caught.

     The giant sucking sounds of jobs going to China—the last stage for the race to the bottom for workers’ wages—has become so commonplace, the following excerpt is from an article buried on page B5.

From The Wall Street Journal, April 27.

Alcatel Shifts Production to China

Alcatel SA will place its mobile-phone production business in the hands of TCL Corp., a leading maker of television sets and computers in China, marking the Chinese company's second takeover of a Western firm's manufacturing operations.

Five months ago, TCL forged a joint venture with Thomson SA to become the world's top maker of TV sets. The mobile-phone deal is considerably smaller for TCL, though it provides an entry to the European market it didn't previously have….

     Wealth is increasingly going from workers—who are ruthlessly pitted against each other—to investors, who are in total control of the world's markets. And this condition was deliberately caused by Republicans and conservative Democrats.

     Just what do you think is going to happen when most of the money in the world is held by the top 20% of the world’s population? Remember 1929?

     The insanity continues. Instead of malls in the U.S. staying open, new malls are being built in India to meet the needs of its more affluent citizens. That’s globalization for you.

     Of course, it doesn’t help India’s poor, because the condition of the poor is always determined by government policy, not the generosity of investors or business owners.

From The Wall Street Journal, April 28.

Influx of Tech Jobs
Ushers in Malls,
Modernity to Calcutta

…Now the rapid changes taking place here (in Calutta) show how outsourcing of jobs from the U.S. is helping to transform unexpected corners of India. Long neglected by investors, Calcutta is attracting technology companies ranging from International Business Machines Corp. to India's Wipro Ltd. thanks to its intellectual talent and low costs. Software engineers who went abroad for opportunity are returning. And the local state government, still communist, has called in consultants McKinsey & Co. to help lure tech firms….

The changes … here include brand-new offices springing up on vacant land outside the city, huge housing developments with names like "Silver Spring" and "South City," and new malls complete with cinemas and cafés. In a city where software jobs once were scarce, IBM now plans to double its staff in Calcutta to 4,000 by year's end, making the city the company's second-largest center in India after Bangalore.

That may not mean much for the city's poorest, however. The influx of tech companies is too new and too limited to one type of work—software development—to have had a tangible effect on the problem of poverty and joblessness in this city of more than 13 million people. Still, it is creating opportunities that didn't exist before for certain kinds of workers and adding to the demand for apartments, restaurants and even health clubs….

To bring in new companies and jobs, government ministers have publicly discouraged the city's infamous labor strikes and are actively courting fresh investment at home and abroad….

     It’s the usual story. A country agrees to clamp down on workers’ rights and give outsourcing corporations from the U.S. all kinds of financial incentives—and they attract new industry from those countries where workers previously had a decent standard of living.

      What’s wrong with the following story? It sounds like great news, but there is a wrinkle that ruins it. Can you spot it?

From The Wall Street Journal, April 29, 2004.

Tech Jobs Start to Come Back
In U.S. After Three-Year Slump

After a deep three-year slump that erased more than one million jobs, U.S. technology companies have begun hiring again, marking a so far modest but solid trend that could well brighten the country's economic outlook.

The gains to date are tiny—fewer than 20,000 jobs since late last year—and concentrated among smaller companies. Tech-job seekers still must fight strong headwinds, from continuing layoffs to outsourcing of jobs abroad. Executives remain cautious after the long downturn, and job gains could quickly evaporate if sales slip….

     The wrinkle: the labor market for tech jobs has been swollen by those hit by outsourcing. As a result, you can count on it, the new jobs are paying much less than the ones that were lost.

     After all, that is the whole point of globalization—investors get cheaper labor, even if it is skilled labor.

Week of April 19

     The following is a typical justification of globalization by one of our right-wing crackpots.

     Note Donlan’s unbelievable level of callousness in the way he describes the destruction of the standard of living for millions of Americans—while he, his fellow investors, and top corporate executives are becoming incredibly rich.

From Barron’s, April 19.


Profits in Motion

Economic progress requires the freedom to seek opportunities across borders

By Thomas G. Donlan

A BUS FULL OF DEMONSTRATORS pulled up to a town near Grand Rapids, Mich., a couple of weeks ago. Their signs demanded, "Show Us the Jobs." The 51 out-of-work bus riders hailed from every state plus the District of Columbia, and the AFL-CIO folks who hired the bus and organized the passengers hoped to impress upon the nation that Bush administration policies and attitudes are to blame for the loss of millions of jobs to other countries.

When they arrived at Greenville, Mich., site of an Electrolux refrigerator factory, they angrily denounced a company plan to close the plant and terminate 2,700 workers, while sinking $195 million over the next few years into the construction of a new plant in Juarez, Mexico, that will employ 3,000 Mexicans. Wages in Mexico will start at roughly one-tenth of the wages Electrolux pays in Michigan….

Without constant calculation of cost-effectiveness, companies don't survive and don't employ anybody. Focusing on the 2,700 workers in Greenville misses several points….

Other things, possibly of higher value and greater economic importance than refrigerators, will be made in the U.S. after the last refrigerator plant is gone. They will even be made in Greenville and by refugees from Greenville who move to places with more opportunities, and some will be paid more than they ever earned at Electrolux.

On average, Americans have gained much more from open markets and the free movement of capital than they have lost. Losses like those in Greenville are painful and easy to blame on others, while profits, like those earned when a Japanese car company moved to Michigan, are easily accepted as the just deserts paid to superior ability….

Complaining about outsourcing makes a political mountain out of an economic molehill. With the worst will in the world, critics of outsourcing cannot claim that export of jobs in America reaches even one million a year. Normal forces of creative destruction in the U.S. economy eliminate at least 15 million jobs a year in the best of times.

Because the American tradition of economic liberty is allowed to work, the U.S. economy also creates 15 million jobs a year and more, even in the worst of times. Unemployment grows only because of demographic pressure: A new generation is arriving on the job market in greater numbers than the cohorts of the past 20 years.

Abolition of the corporate income tax would make every profitable company in the U.S. more competitive at home and abroad. It would create private capital for investment. It would permit companies to lower prices on their American-made goods and services. Best of all, selecting the exact mix of all these potential benefits would be left to the market, rather than institutionalized by politicians with an industrial policy….


     What Republican and conservative Democrat politicians have caused to happen to one of the greatest economies ever developed by a large civilized society is simply unbelievable.

     And how could this be happening in a so-called Christian nation?

     The disastrous effects of globalization are becoming clearer daily.

From Forbes, April 19.

Copycats No More

India makes great knockoff drugs. Now one company is originating its own--squaring off against U.S. giants

After 21 year developing drugs for Bristol-Myers Squibb in Princeton, N.J., Rashmi Barbhaiya, who was born in India, decided to come home. He's now head of research at Ranbaxy Laboratories in New Delhi, India's largest drugmaker.

Critical timing. Most of Ranbaxy's $990 million in 2003 revenue (and $162 million in net profit) comes from producing generic medicines and cheaper clones of patented drugs….

Ranbaxy has a higher ambition: to become an innovator in its own right. "We're transforming our research skills from reverse engineering to engineering," says Barbhaiya….

One further wrinkle in its ambitions: a hint of intrigue within the founding Singh family. The sudden retirement of Chief Executive Davinder Brar has set off speculation in some corners that Tempest, a nine-year company veteran, is just warming the seat for Malvinder Singh, the founder's grandson. Along with his brother Shivinder, he controls 32% of Ranbaxy (market cap: $3.7 billion), which trades on the Bombay Stock Exchange. Tempest insists he's there for as long as it takes to turn the company into a research-based multinational.

     This article describes the trend:

     So, who benefits from his process? Investors and the first American corporate executives who betrayed their workers, and who forced other American competitors to do the same.

     Who makes all the sacrifices? Everyone who actually works for a living.

     Here is another excerpt that describes why our Social Security system should never be privatized and placed into the hands of our securities industry.

From Forbes, April 19.

A Bribe By Any Other Name

Belatedly, regulators are digging for dirt in the pension management business. They're going to need a big shovel.

The Santa Clara Valley Transportation Authority's pension board put out a tough-sounding memo in January, announcing that it was firing Putnam Investments as the manager of its $36 million international equity portfolio. The move had been recommended by the pension fund's adviser, Mercer Investment Consulting, in the wake of Putnam's poor returns and its indictment for securities fraud.

The board didn't mention that Mercer had originally sifted through hundreds of candidates and picked Putnam for a list of ten recommended managers in 2000. Nor did it note that Mercer and Putnam are part of the same firm—Marsh & McLennan. Another unmentioned fact: Mercer receives millions of dollars annually from many of the money managers it is supposed to objectively evaluate for clients like Santa Clara VTA.

Mercer apparently didn't do a very forceful job of communicating this conflict of interest to the board members in Santa Clara. "We're not aware Mercer is being paid by money managers," says Emmanuel Bagnas, investment program manager for the $240 million (assets) Santa Clara VTA fund, which covers 2,150 transport workers and retirees.

Wake up, Manny. That's the way this game is played. Experts like Mercer that collect fees for advising pension sponsors also pocket fees from the money managers to whom they refer pension business. That's legal, if the arrangement is disclosed (as Mercer says it is with every client). Mercer, whose public pension clients control a combined $434 billion, insists the dough it gets from portfolio managers doesn't influence its advice about which managers are the best. Its competitors in pension consulting make similar claims.

Anybody who remembers how analysts insisted they weren't influenced by their firm's underwriting assignments, or how auditors insisted that tax consulting assignments never clouded their judgments, may be a bit skeptical of such claims. One skeptic is the Securities & Exchange Commission, which put out a report six years ago describing a cozy "pay-to-play" system in the pension consulting industry. Money managers vying for pension fund assignments, said the report, buy services from a consultant "to curry favor … in his ranking and recommendations" to pension plans….

     If this is the way these modern barbarians manage the pension fund industry—it’s difficult to understand why even the Republicans who would profit from the process could be so callous as to recommend them.

     The intended effects of the economic policies of Republicans and conservative Democrats—especially with regard to globalization, tax policy, minimum wage levels, and the sharing of the rewards from increased productivity—are now quite evident.

From Business Week, April 19.

Where Wealth Lives

The productivity boom has made asset owners rich—and left many wage-earners behind

For the past three years, the U.S. has enjoyed an almost unprecedented boom in productivity. Yet these gains have been distributed unevenly. Household net worth has reached an all-time high, surpassing even the bubble-influenced peak of early 2000. That has mainly benefited the top half of families, who own virtually all of the country's assets such as stocks, bonds, and homes.

Meanwhile, high unemployment and glacial job growth have left many workers, especially at the bottom end, suffering. The share of the economic pie going to wages and salaries has plummeted to just over 50%, its lowest level in at least the past 50 years, and perhaps longer….

For the rest of this year—and perhaps into 2005—most of the productivity gains are likely to show up as increasing wealth, not as higher income for workers. For one thing, real wages, while picking up a bit, are growing at a very slow pace. Moreover, production and supervisory workers—about 80% of private nonfarm employees—are still seeing their real hourly earnings fall. That probably won't change until unemployment drops below 5%—and even at that level, pressure from cheap labor overseas may slow the revival of wage growth.

Meanwhile, asset owners should continue to profit from the combination of weak wage growth and strong productivity, which ought to lift corporate profits and the stock market….

The continued importance of wealth in the recovery has in many ways surprised economic forecasters, who have repeatedly—and wrongly—warned that the expansion was unsustainable without job growth….

…the changes in the tax code, under Presidents Bill Clinton and Bush, have tended to reduce the tax burden on wealth. For example, Bush's tax cut on dividends may have helped boost stock prices, making the U.S. richer. And Clinton's 1997 expanded tax exemption for capital gains on home sales may have helped spur the housing market....

Ownership of assets is highly concentrated, far more than income. The top 1% of families, as measured by net worth, receive about 15% of income but own 30% of the nation's assets—including stocks and bonds, homes, and closely held businesses. That's according to the Federal Reserve's Survey of Consumer Finances. The top 10% of families, as measured by net wealth, own 65% of assets, and the top 50% own a stunning 95% of assets. That means the gains from rising wealth have effectively left out half the population….

Remember, though, that even in the '90s, labor's share of national income—that is, the total of the wages, benefits, profits, rents, and interest generated by the economy--kept falling until 1997. That was when the unemployment rate dropped below 5% and stayed there for several years. Similarly, real wages were stagnant until 1997 even though job growth picked up as early as 1994….

     Business Week is totally wrong in the assertion that “The continued importance of wealth in the recovery has in many ways surprised economic forecasters, who have repeatedly—and wrongly—warned that the expansion was unsustainable without job growth.” That’s only true of the conservative economists, who deliberately lie about the intended effects of their policies.

     Real economists have been telling us that globalization would inevitably lead to economic expansion without job growth and without increases in wage rates for workers. Indeed, that’s the whole point of globalization.

     Again, we’re seeing the real intent of globalization. Workers benefit from it only until their wages start to go up. Then, no matter where they are located, they will lose their jobs and standards of living to people who are worse off in the world.

     The goal of globalization is to make rich people richer—not to improve the lives of workers.

From Business Week, April 19.

Job Exports: Europe's Turn

It's following the offshoring trend—and much of it is white-collar

…Attention, European white-collar workers: Your job could be next. By 2008, Deloitte Research estimates, more than 800,000 financial-services and high-tech jobs will migrate from Western Europe to cheaper labor markets—principally India, but also Eastern Europe, China, and even Africa and Latin America….

The white-collar offshoring wave is hitting Britain and Ireland first because English-speaking workers can be easily replaced in India. But it's moving fast across the Continent. That's scary. Unlike in Britain, where a flexible economy could quickly create jobs, the Continent, with its rigid labor rules, is terrible at generating new employment for displaced workers. And lots of good jobs are going. With high value-added activities such as management and research and development moving abroad, "the transfer of jobs is taking on a whole new dimension," says Martin Wansleben, president of the German Industry & Trade Assn….

The job losses are a bitter pill for Ireland. During the 1990s, the country lured tens of thousands of call-center and back-office jobs from the U.S. But Ireland's average wages have risen since then and are now five times higher than those in Poland….

     And you can take it to the bank: if the wages in Poland start going up, those jobs will go to some other country.

     Who are the real beneficiaries of the Republican and conservative Democrat economic policies of the past two decades?

     This excerpt tells it all: investors, and their top corporate executives who are richly rewarded for cutting labor costs (the equivalent of destroying their own workers’ incomes and standards of living).

From Business Week, April 19.

Executive Pay

Top CEO paychecks in 2003 were, as usual, off-the-charts amazing. But the pace of overall raises for execs slowed considerably

Top executive paychecks in 2003 were, as usual, off-the-charts amazing….The chief executives in BusinessWeek's 54th annual Executive Pay Scoreboard saw their average salary, bonus, and long-term compensation increase 9.1% last year, to $8.1 million, a far cry from the double-digit gains that were common in the 1990s.

And they had better get used to it. A combination of increasingly independent boards, angry shareholders, and a likely rule change that would make it easier for big investors to oust clueless directors has many boards revamping pay packages in ways that should keep a lid on massive paydays far into the future….

Cendant Corp.'s (CD ) Henry R. Silverman, who took home $54.4 million last year, came in at No. 4, marking his second appearance on the list. Hot on his heels: Citigroup (C ) Chairman Sanford I. Weill, who stepped down as CEO in October, had a $54.1 million payday—placing him among the nation's highest-paid executives for the fourth time in five years.

To some extent, perks are built into a CEO's retirement package; Company contributions to 401(k) plans and life insurance are tied to salary. But others reflect rights accorded today's corporate nobility. Not only does Coca-Cola Co.'s (KO ) Douglas N. Daft get to use the company aircraft for personal travel but Coke also picks up taxes on the perk. In 2001, Wells Fargo & Co.'s (WFC ) Richard M. Kovacevich got $67,044 to cover mortgage interest on the purchase of his house in San Francisco.

Paul Hodgson of corporate governance watchdog The Corporate Library explains that such power perks have been increasing for some time, in what he describes as a case of keeping up with the Joneses. "There's a 'he's getting it, so why shouldn't I?' aspect to it," says Hodgson. "It's a badge of merit."…

     "There's a 'he's getting it, so why shouldn't I?' aspect to it," This all reminds me of a past Wall Street Journal article about how the very rich are so envious of the richest. And these are the same hypocrites who tell low-income workers that they shouldn’t be envious of the rich.

     The following is incredibly bad news for working-class Americans:

From Fortune, April 19.

Borrowing From Bubba

With the help of Bill Clinton's old advisors, John Kerry's economic plan is taking shape. But does it add up?

As John Kerry took to the stump in Detroit in late March to promote his economic plans, one of the people by his side was someone most campaign watchers hadn't seen there before. Gene Sperling, the former director of President Bill Clinton's national economic council, was doing all the things that high-profile campaign advisors do: huddling with the candidate between speeches; doing TV interview after TV interview; taking cellphone call after cellphone call with the press and other campaign officials.

Sperling's appearance proved that Kerry, the Democratic nominee presumptive, is no longer trying to stoke his party's base. He's trying to soothe the broad, sensible center of American politics. And that means one thing above all: It's time to channel Bill Clinton.

When it comes to domestic policy in general and economics in particular, Kerry's general election campaign is going to try to wrap itself in Clintonomics—both the policies and, more critically in political terms, the results of the former President's years in office….

     This is unbelievably bad news. The same economic advisors to Clinton, who gave us NAFTA, the WTO, and fast track legislation—now have the ear of the likely Democrat candidate for President.

     And anytime Fortune magazine refers to “the broad, sensible center of American politics”—you know they are referring to Republicans masquerading as Democrats.

     If Kerry continues on this course, we’ll have an economy that continues to deteriorate for working-class Americans—and Democrats will have shot themselves in the foot again.

Just another in the endless series of articles that confirm the utter degradation of our securities industry:

From Fortune, April 19.

The Secrets of Eddie Stern

If you think you know how bad the mutual fund scandal is, you're wrong. It's worse.

In the summer of 2002, Brean Murray, a small, obscure brokerage house, threw a dinner party in the Hamptons. It was a dismal time for investors, two years into a brutal bear market. But the doom and gloom that permeated Wall Street was largely missing on the back lawn of the tony Southampton Club, where the 100 or so guests sipped drinks from an open bar and munched on barbecued steak and ribs while taking in the sea breezes.

If they were a happy bunch, they had good reason. Several of Brean Murray's clients were in a new and enormously profitable line of business—one that the average investor knew nothing about. They were market-timing mutual funds….

There was just one problem: Under the rules in place at most mutual fund firms, market timing was forbidden. The fund industry has long acknowledged that market timers—that is, investors who rapidly trade in and out of mutual funds—hurt buy-and-hold shareholders. As a result, most fund prospectuses contained language bluntly declaring timers unwelcome.

Market timing of mutual funds is no longer a secret. Instead it has become a full-blown scandal—the biggest in the history of the $7 trillion fund business. Today virtually the entire industry is under investigation—by New York State attorney general Eliot Spitzer and other state regulators, by the Justice Department, and—belatedly—by the SEC.

Many of the business's biggest names stand tarnished, including Pimco, Janus, Strong Capital, Putnam, MFS, Franklin Templeton, PBHG, and Alliance. Former executives at Bank of America, Fred Alger, and CIBC have been led away in handcuffs. And investigators say there is more to come. "Every time we turn over a rock in the mutual fund business," declares Spitzer, "we find vermin crawling beneath it."…

The industry has long marketed mutual funds as stable, long-term vehicles, ideal for small investors and run by decent, honorable people like Peter Lynch, the great former Fidelity Magellan manager. Industry executives reveled in the contrast between their business and the rest of Wall Street, with its reputation for skinning small investors instead of helping them….

      “Wall Street, with its reputation for skinning small investors instead of helping them.” What a fine description of our securities industry, and it’s by one of our most prestigious, conservative, financial publications.

     And that’s the industry, by the way, that Republicans want to handle your retirement funds by privatizing Social Security.

     For those who don’t understand how the federal government deliberately pursues economic policies to keep working-class wages from going up, read the following excerpts from two of our most prestigious conservative financial publications.

From The Wall Street Journal, April 19.

Fed Might Lean to Higher Rates,
Likely Won't Act Before August

Job Growth, Price Gains
May Alter Patient Stance;
Will Increases Be Gradual?

WASHINGTON -- When U.S. Federal Reserve officials meet in two weeks, they are likely to conclude that the economic outlook has strengthened and inflation is a little less quiescent.

During the past few weeks U.S. government reports have shown much stronger job growth and retail sales and bigger increases in consumer prices than private economists and Fed officials expected….

The most likely changes to the Fed's statement are a recognition that U.S. job growth is improving following March's 308,000 jump in nonfarm jobs, a four-year high, and that the inflation rate has stopped falling. So, Fed policy makers will probably say the risks of inflation are balanced, unlike recent statements that warned of a small risk of it falling too far….

Meanwhile, the number of hours worked at manufacturers fell during March, implying that output per hour—productivity—actually rose a healthy 0.4%. That is faster than the 0.2% increase in hourly wages, so adjusted for productivity, factory labor costs declined in March. Indeed, while manufacturers continue to report buoyant sales gains, high unemployment has put a lid on manufacturing wage increases, which have slowed to 1.9% from 3.2% a year earlier….

While job creation in the U.S. has picked up, more than a million workers stopped looking for jobs in recent years, many of whom will now resume the hunt, holding up the unemployment rate. Unused factory capacity, high unemployment and healthy increases in "productivity will help keep inflation under control for the next couple of years," Fed governor Ben Bernanke said last week….

From Barron’s, April 19.

Fed Alert

Odds of a rate hike climb after CPI jump

But many economists and strategists believe jobs, not inflation, will be the most important determinant of Fed policy in the months ahead, especially against the backdrop of an election year.

"If we 'print' payroll growth of 200,000 or more on May 7 [when the April jobs numbers are released], the Fed has to go in August," says James Bianco of Bianco Research. "If we print 75,000 jobs, then it will be the biggest 'up' day in the history of the bond market" in terms of prices, he adds.

     Note how these modern barbarians coldly discuss the levels of employment and wage increases—as if they are cancers to be attacked at the first sign that they are getting better for workers.

     It never ends. The documented skullduggery of Corporate America is a neverending spectacle.

From The Wall Street Journal, April 19.

Northrop Papers Indicate Coverup

Documents From '80s Show
Accounting Irregularities
Were Hidden From Pentagon

LOS ANGELES—Posing fresh legal and financial problems for a company that has worked hard to cleanse its image, internal documents show that Northrop Grumman Corp. covered up major accounting irregularities during the late 1980s to stay in the Pentagon's good graces….

Documents show that Northrop managers in Rolling Meadows held a meeting on Feb. 21, 1986, a day after the Pentagon's Defense Contract Audit Agency cited their unit for accounting failures that had cost the government an extra $27 million. The minutes of the meeting include a memo that counseled lying about so-called problem-analysis reports dealing with accounting lapses under scrutiny by the Pentagon.

"What will the customer accept as reasons," the memo asked, adding, "We should train the [cost-accounting managers] to violate the system" within certain guidelines. In parentheses, the memo stated, "We can't tell the truth." In sworn statements, former Northrop officials have said that internally, the term "customer" referred to the government….

     These lying corporate executives are in the same club as those morally superior Republicans who wanted to crucify Clinton for lying about sex. Their only morality is in adhering to the good-ol-boys standard of supporting each other’s accumulation of wealth—no matter what it takes to do it.

     Periodically, The Wall Street Journal comes out with a great opinion piece that suggests that its values are in the right place.

     Carol Hyowitz’s article below is right on the mark. However, it is totally inconsistent with the values that the Journal demonstrates when it continues to fight any legislation that would support those values—such as full reporting to shareholders and consumers, governmental regulation of highly unethical behaviors, severe punishments of those white collar criminals who violate the law, and so on.

From The Wall Street Journal, April 20.


By Carol Hymowitz

Good Leadership
Requires Executives
To Put Themselves Last

…Good governance depends primarily on leaders who put integrity and the interests of their companies ahead of their self-interests. These executives are willing to grapple with difficult decisions that may involve personal sacrifice.

Consider Michael Leven, chairman and CEO of US Franchise Systems, Atlanta, which owns and operates three hotel brands. When he realized that he wasn't going to meet this company's year-end earnings forecast in 1999, he told his top executives that he wanted to publicly announce it. They urged him to check with the company's lawyer, who told him that because the year-end results were four months away, he wasn't obligated to say anything.

"You don't know what's going to happen yet," the lawyer told him.

"But I know I'm not going to be able to meet the forecast," Mr. Leven replied, then went ahead with the announcement.

The company's stock dropped on the news, but Mr. Leven never second-guessed his decision. "Not to have made the announcement because the law said I didn't have to would have been wrong," he says….

Ken Freeman, chairman of Quest Diagnostics, agrees that CEOs often mistakenly believe "they are entitled to enormous rights and benefits," or prohibit criticism by surrounding themselves with yes people. He sought to avoid that when shaping a board by recruiting directors he didn't know, and who didn't know each other.

"Friends can often feel reluctant to challenge me and each other," he says.

     This all sounds great, doesn’t it? But if you want an example of today’s corporate reality, checkout the following excerpt:

From The Wall Street Journal, April 20.

Former Shell Officials Clashed
As They Hid Reserves Problems

The former top executive and his deputy at Royal Dutch/Shell Group feuded bitterly over how to handle evidence the oil giant had greatly exaggerated its oil and natural gas reserves, even as they both acted to keep a lid on the information, according to documents revealed during an internal investigation.

Long before the company disclosed the overstatements, shocking the oil industry and sending shares of its two parent companies tumbling, Walter van de Vijver, then chief of exploration and production, urged a housecleaning in his department. Philip Watts, Shell's then-chairman and Mr. van de Vijver's predecessor, resisted. On Nov. 9 last year, Mr. van de Vijver's frustration boiled over.

"I am becoming sick and tired about lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/optimistic bookings," Mr. van de Vijver wrote to his boss, Sir Philip, according to an excerpt of an e-mail released by the company….

Mr. van de Vijver emerges in the report as a sharp executive who wanted to reveal the controversy to investors, repeatedly complaining about the problem internally to his boss. Yet he ultimately failed, the report finds, by going along

with Sir Philip and neglecting to take his complaints outside the executive suite. In one note to senior Shell executives, Mr. van de Vijver warns of the trouble executives were confronting in trying to keep the market "fooled," according to the report….

The often-revealing correspondence shows executives at the very top echelons of the world's third-largest publicly traded oil company were aware of serious reserve-accounting problems for years but didn't come clean to regulators, the public or their own boards. The report paints a vivid portrait of a tug-of-war over how to handle the debacle between the two strong-headed executives who ran Shell….

     This is representative of what’s going on today. The glorification of greed and materialism that permeates the pages of our most prestigious conservative financial publications have created this kind of ethical environment throughout corporate America.

     Sure, there are ethical executives throughout corporate America. However, increasingly, they are not the ones who make it to the top of their organizations. Or, if they do, they must fiercely battle those who have succumbed to the modern moral standards of: do whatever it takes to get rich.

     What’s most significant in the following excerpt is not what it covers, but what it doesn’t cover.

     If the Journal’s conclusions are correct—about how there are “good-ol’-boy” pressures in corporate America for executives to deliberately violate the law—how about all those ethical situations that corporations face, and which don’t reach the level of a crime?

From The Wall Street Journal, April 21.

Raising a Red Flag Isn't Enough

…As prosecutors take a harder line on corporate fraud, it has become increasingly clear that raising red flags internally isn't enough to avoid criminal charges. Prosecutors have signaled again and again that they will go after anyone who is complicit or participates in fraud, even if they did so kicking and screaming under protest.

Executives need look no further than the spate of guilty pleas and indictments of lower-level workers in connection with frauds at WorldCom (now MCI), Enron Corp. and elsewhere. Some of these employees questioned accounting practices while carrying out the fraud. Others alerted the authorities, but did so too late for prosecutors' tastes.

That can make reporting wrongdoing to higher-ups a Catch-22. If executives raise concerns about something without stopping it, they have given prosecutors damning evidence of their knowledge. The other options aren't always very attractive: quitting or blowing the whistle to regulators, lawyers say….

The choice sometimes boils down to this: Either quit or join the conspiracy, lawyers say. "Employees with knowledge the financial statements are false can't stay," says Jan Handzlik, a former federal prosecutor….

     Just think of all the decisions that a corporate management makes that have moral, if not legal, implications—treatment of workers, the environment, consumers, patients, the welfare of communities, and on and on.

     Today’s pressures for profits and a soaring stock price have truly created a good-ol’-boys club atmosphere throughout corporate America. It’s them and their personal financial interests—against everyone else.

     With the constant stream of news reports of unethical and even illegal behaviors of the general run of America’s corporate executives—it’s amazing how anyone, other than right-wing crackpots—can claim that corporate bureaucrats have a more positive influence on our society than “government bureaucrats.”

From The Wall Street Journal, April 23.

U.S. Suit Alleges
Philip Morris Hid
Cigarette-Fire Risk

Ex-Company Scientist Says
He Warned That Product
Meant to Be Safer Wasn't
Manufacturer Denies Hazard

In the summer of 2000, Philip Morris USA introduced a new cigarette that was supposed to save lives.

The product, sold under the company's Merit brand, was designed to cause fewer fires if left unattended. Company executives hoped the safety angle—played up in advertising—would boost sales as well.

But then the executives got bad news. A company scientist assigned to analyze the new Merits says he found that they were more of a risk for fire and injury than conventional cigarettes.

Philip Morris took action. In early 2002, it fired the in-house scientist. The company has continued to market the purportedly safer Merit, although without the special advertising.

Now, for the first time, the Merit affair is about to get a public airing. A U.S. Department of Justice lawsuit accuses Philip Morris, the nation's biggest tobacco company, of getting rid of the scientist as part of a broader effort to conceal the dangers of what was supposed to have been a safer smoke. And the dissenting scientist, Michael Lee Watkins, has turned on his former employer to become a government witness….

     It’s about time we gave up the fiction that our society would be better off if we would privatize everything we can, from constructing and maintaining prisons to building and staffing schools.

     The total lack of moral standards in corporate America is proved almost daily—even in our most prestigious, conservative financial publications.

     The following two excerpts go together. They demonstrate the continuing trend of managing our economy in such a way as to benefit investors and top corporate executives at the direct expense of workers.

From The Wall Street Journal, April 23.

Companies Regain Pricing Power,
Brightening the Profit Picture

Corporate executives are beginning to see glimmerings of a long-lost ingredient in their efforts to boost profits: pricing power….

For some companies, the brighter price picture has contributed to a thus far robust corporate earnings season. The stock market gained sharply yesterday after several anemic finishes. The Dow Jones Industrial Average jumped 143.93 points, or 1.4%, to 10461.20, while the Nasdaq composite surged 37.28, or 1.9%, to 2032.91….

Renewed pricing power could be good news for workers, because it could give executives the confidence to hire more aggressively. Still, there are few signs that workers' wages are rising along with prices. That means many households could find themselves in the months ahead paying higher prices without much change in their income….

From The Wall Street Journal, April 23.

EEOC Votes to Let Employers
Cut Retirees' Health Benefits

WASHINGTON—The Equal Employment Opportunity Commission approved a rule that would let employers reduce or eliminate company health benefits to retirees eligible for Medicare.

Under the proposal, which must be reviewed and approved by several other federal agencies before taking effect, a company that cuts its benefits to Medicare-eligible retirees wouldn't be in violation of employment-discrimination law. The decision was immediately attacked by AARP, the older Americans' lobby, which threatened to sue to block the rule's implementation.

This is a reversal of the EEOC's prior policy, which concluded that reduction in retiree benefits as a result of Medicare eligibility was an illegal, age-based distinction under the Age Discrimination in Employment Act….

     It’s the norm nowadays. Raise prices, increase corporate profits, create a roaring stock market—and don’t share the benefits with the people who originally produced the wealth: America’s workers.

     And if you can get your Republican stooges in government to cut workers retirement benefits, that’s just icing on the cake.

Week of April 12

     Finally, the truth comes out. All the propagandists for and against globalization now must rely on common sense instead of phony “Labor Department Statistics show…” to make their points.

     I once talked to two top members of the Labor Department about the statistics on outsourcing of jobs, and both said that the Labor Department makes it a specific point not to draw conclusions from their data. They leave that up to the politicians and economists.

     Note the violations of common sense in the excerpt below:

From The Wall Street Journal, April 12.

Behind Outsourcing Debate:
Surprisingly Few Hard Numbers

Counting Jobs Moving Abroad
Is a Complicated Task…

…The government doesn't keep count of jobs leaving the country, and the statistics available on outsourcing are sketchy. Election-year politics is only turning up the volume on the debate. Though U.S. companies have been shifting jobs overseas for decades, the latest wave has been especially scary to some because it includes well-paying white-collar jobs, not just factory workers….

The actual number of jobs lost to outsourcing and its impact are a lot less clear than the politicians and media jumping on the issue acknowledge. Many economists estimate that roughly 100,000 white-collar jobs migrate overseas each year. That is a substantial number, though actually relatively small when measured against the size of the labor market and job losses that occur for others reasons….

"There is a great deal of partial telling of the story," says Jitendra Singh, a management professor at the University of Pennsylvania's Wharton School, who has studied outsourcing. "It is understandable given the political season that we are in."

The great unknown is how much outsourcing will accelerate in the years ahead. While uncertain about absolute numbers, many economists agree that it probably will pick up….

Economists aren't free of the biases that accompany such debates. Most were reared on the theories of David Ricardo, a 19th century economist who laid out the principles of free trade. Mr. Ricardo believed that countries should specialize in areas in which they were relatively more advantaged than their international trading partners. He argued that when countries lowered trade barriers, everyone would benefit because they would be able to buy and produce goods more cheaply….

In the 1980s and '90s, two-thirds of workers who lost jobs in manufacturing industries hit by overseas competition earned less on their next job, according to a study by Lori Kletzer, an economist at the University of California Santa Cruz. A quarter of workers who lost their jobs and were re-employed saw income fall 30% or more….

     The Journal states that “Many economists estimate that roughly 100,000 white-collar jobs migrate overseas each year. That is a substantial number, though actually relatively small when measured against the size of the labor market and job losses that occur for others reasons.” But when those 100,000 people enter the job market, it has a depressing effect on 100% of the workers in their income class. And that’s the whole point of outsourcing—and why top corporate executives and investors are so enamored with it.

      “The great unknown is how much outsourcing will accelerate in the years ahead. While uncertain about absolute numbers, many economists agree that it probably will pick up.” PROBABLY pick up. We KNOW it will pick up. That’s how corporations eliminate their labor costs and improve profits.

     And check out the last paragraph again. That is what tells the whole story.

     Sometimes it’s difficult to tell the difference between deliberate liars and hypocrites—and people who are just plain stupid.

     Does Business Week actually believe that workers are eventually going to benefit from their own productivity improvements without government intervention?

From Business Week, April 12.

U.S.: Job Seekers' Foe Is Also Their Best Hope

Productivity is lifting incomes and that, eventually, will boost hiring

Job scarcity always worsens the great divide between the well-off and the strugglers. But in the high-productivity economy of recent years, the chasm is even wider. In 2004—the third year of recovery—many willing workers without jobs face another long slog of searching as companies strive to boost efficiency and cut costs. In contrast, if you have a job and belong to the growing investor class, the rewards are great: Rapid productivity growth means low inflation and interest rates, rising real incomes, and surging profits.

And therein lies the hope for a brighter job outlook. Productivity creates more demand by generating new income and wealth, and strong demand creates jobs. Those forces have been at work during the past three years of economic disappointment, but they are finally starting to assert themselves much more vigorously….

Although the jobs issue remains the overarching force influencing current perceptions of the economy's performance, measuring the country's economic health entails more than just taking the temperature of the labor markets. And the latest data on incomes are telling us that working households are finally starting to enjoy some of the rewards of increased productivity….

Through February, real income generated by wages and salaries increased 2.1% from the year before, the fastest pace in more than three years.

So far though, the benefits of productivity gains have shown up primarily in profits….

In addition, consumers who own stock, about half of all households, are benefiting from productivity's boost to corporate profits. Despite the sell-off on Wall Street in March, the Wilshire index of 5,000 stocks is still up 2.2% since the start of the year, following its 26% gain in 2003. Households have regained all of their wealth lost during the stock market meltdown….

     Business Week states that:

     The charade continues. When will the general public wake up to the fact that Republicans and conservative Democrats are destroying the greatest economy that any large civilization has ever created?

     And it’s all the result of the insatiable greed of those at the top.

     If you ever had any confidence left whatsoever in the ethical standards of modern corporations, just read the excerpt below.

From Forbes, April 12.

Trading With the Enemy

If you want to get around export controls, just sell the product to a front company in Dubai. The middlemen will take it from there.

…No matter how hard the U.S. tries to keep dual-use commodities like gas monitors, software and nuclear triggers out of transshipment hubs like Dubai, stuff gets through. The lure is quick profits. Traders easily pocket 40% markups just by flipping goods, illicit and otherwise. "Businesspeople [here] are like cats," says Abbas Bolurfrushan, chairman of the Dubai-based Iranian Business Council. "They find their way out of any dilemma."

The open secret is that Dubai buys far more than it keeps. More than a quarter of its $23 billion in annual nonoil imports are reexported, and Iran gets the biggest share. Interviews with private businesspeople and U.S. officials, along with court documents, reveal a simple scheme. Companies located around the world sell goods--from cigarettes to medical devices and PCs—to buyers in the U.A.E. Dubai traders repackage the items and send them along by air or ship to agents in, say, Tehran, Pyongyang, Damascus or Islamabad.

Smoking out the offenders is tough. Outside of free zones foreigners are not permitted to own a majority of a business in Dubai, and local partners aren't subject to export-control laws….

Today American companies are downright brazen about dodging the sanctions….

Halliburton, for example, manages to do business with Iran obliquely. Its Dubai-based affiliate, Halliburton Products & Services Ltd., allegedly has no Americans on staff; the Houston oil services company claims it has no direct ownership of the operation. Nevertheless, FORBES has obtained documents showing how Kala Ltd., the British arm of the National Iranian Oil Co., solicited at least 17 separate bids from the affiliate during 1997 and 1998 (when Vice President Cheney was Halliburton's chief executive)….

Halliburton is far from the only brand that shows up in Tehran. Hewlett-Packard, Dell and Microsoft, among many other U.S. companies, keep Dubai offices and are favorites these days among Iranian traders in Dubai. Reason? Strong demand for "anything high-tech for military or oil services," says Bolurfrushan of the Iranian Business Council….

     Think of it. The executives of these corporations are among our most vocal "patriotic" supporters of the disastrous war with Iraq.

     The never ending mystery: How can these conservative publications report these kinds of news stories and still support globalization in their editorials?

From Forbes, April 12.

A Tale of Two Cities

From techie to truck driver in Silicon Valley. From tea broker to techie in Bangalore. The wave of jobs heading offshore causes wrenching loss—and produces enticing gains.

…Crushed by the tech-spending crash that began in 2000, many of Silicon Valley's giants and dozens of companies elsewhere have imposed layoffs at home and hired cheaper talent in India, China and elsewhere….

America is at war with itself. Firms here need the latitude to compress costs by shipping labor and production to ever-cheaper markets offshore. Yet American workers need to protect their livelihoods. Caught in the middle--and exploiting the hell out of it—are outsourcing firms in bootstrap markets, eager to serve U.S. companies and their customers….

Catherine Mann of the Institute for International Economics makes the case in favor of offshoring: High-tech hardware would have been 20% more expensive in the 1990s if not for offshoring. This spurred investment in more high-tech gear, boosting productivity and freeing up cash to plow into still more innovation. Plus, for every dollar spent on offshoring, the U.S. gets back $1.12 (and the global economy reaps another 33 cents), says a report from McKinsey consultants. Think about it: As more workers in India land higher-paying jobs, they can afford to buy more U.S. products, from processor chips to Hollywood films. By spreading the wealth, offshoring makes life a little better in some of the poorest regions of the world….

In three years the U.S. has lost 400,000 service and 1 million manufacturing jobs to offshoring, Goldman Sachs says. Some 3.3 million white-collar jobs (and $136 billion in wages) will flee the U.S. in the next ten years, Forrester Research says. All told, up to 14 million U.S. jobs are vulnerable to offshoring, say researchers at the University of California, Berkeley.

Another problem: Even when American employers don't move jobs to India, they have virtually stopped creating them in the U.S. when the tasks can be done more cheaply abroad. The U.S. service sector is 6.2 million jobs shy of the hiring that typically accompanies an economic recovery at this stage, in part because of the move overseas, says Stephen Roach, chief economist at Morgan Stanley….

Meanwhile, what should workers in America do? Nilekani recommends pursuing careers in specialties that cannot be delivered over a wire. "If someone is a cardiac surgeon, he will not be displaced. But if you are a radiologist, somebody from Bangalore is liable to check X rays." That is cold comfort to a laid-off engineer in Silicon Valley; retraining to become a surgeon would take another nine years.

     I guess, as long as the rich are getting richer—and you’re one of the rich ones—it’s possible to become willfully blind to what’s going on.

     Give Forbes credit, it’s doing a fantastic job of seeking out threads of hope for the creation of good jobs in the U.S. It sounds ominously like kids whistling to themselves as they walk through a graveyard.

From Forbes, April 12.

Made in America

Millions of manufacturing jobs are headed overseas. So how is it that, in the U.S., GE's medical-gear factories are thriving?

…General Electric's medical-equipment business hasn't imposed a major factory layoff in five years, holding the manufacturing payroll steady at 3,200 people….The company makes its most sophisticated and highest-priced gear—CT scanners, MRI machines, PET scanners, portable X-ray machines—at 15 factories in the U.S. GE used to debut just one new CT product each year; now it unveils eight. It manufactures here because the U.S. has the highest-skilled engineers, designers and production workers in the world….

Thus GEHealthcare offers a blueprint for the U.S. manufacturing base and how it must adapt to survive. The GE business moves up the food chain to make pricey, complex products that are beyond the ken of factories overseas; it relentlessly pursues ways to innovate in both features and production methods to stay out in front. It uses factory clusters to tie suppliers more closely, geographically, to GE plants for instant delivery. And GE continually trains and retrains workers and, even after a new product is perfected, forms troubleshooting committees that scrutinize how all of it might be done better next time….

As China and India gain more expertise, they could threaten high-end manufacturing in the U.S., but GE Healthcare aims to keep accelerating the cycle of innovation. "It isn't just a labor-cost play. This is about speed to market, the right product and operational efficiencies," Mellor says. "We have a huge market here in the U.S. that's growing. We're going to be here to serve it."

     Of course, the most important sentence in the above article is: “As China and India gain more expertise, they could threaten high-end manufacturing in the U.S.” It’s already happening, and it’s accelerating.

     Just as “GE Healthcare aims to keep accelerating the cycle of innovation,” you can count on it—The Chinese will also, and they’ll be able to do it cheaper.

     Globalization isn’t an exchange in which poor jobs are switched to better jobs for the world’s workers. It’s a forced competition among those who work in a race to the bottom—and all for the benefit of investors and the established wealthy.

     Again, another article that gives the lie to the claim that higher education and advancing skills are the worker’s assurance of a decent standard of living—in an economy where workers, of ALL skill levels, are pitted against each other in the race to the bottom.

From The Wall Street Journal, April 12.

Another Lure
Of Outsourcing:
Job Expertise

…While companies often outsource jobs for lower wages, many are also going to China, India and other emerging economies for brain power and product ideas. The trend raises the specter of stiffening global competition involving innovation as well as cost.

The shift is particularly striking for the chip industry. It began moving labor-intensive assembly operations to Southeast Asia nearly 40 years ago. But American chip companies kept their control of many industry segments by designing key products at home.

Now, many of these companies are nurturing a growing pool of designers in Asia and Eastern Europe. Locally owned chip-design companies are also springing up, particularly in China….

But the rising number of engineers emerging from universities in Asia and Eastern Europe, and their increasing sophistication, points to the possibility that tech companies in the U.S. and other established economies could eventually lose their dominance in chip innovation….

      “the rising number of engineers emerging from universities in Asia and Eastern Europe, and their increasing sophistication.” That says it all. How an economy is managed determines the standards of living for classes of people.

      Advanced education and how hard one works can increase an individual's standard of living, but for classes of people, it's all in who the politicians decide to favor.

     Below is another in the long series of articles that accurately describe the tax priorities and biases of Republicans and conservative Democrat politicians.

From The Wall Street Journal, April 12.

IRS Audits of Corporations
Continued to Decline in 2003

WASHINGTON—Internal Revenue Service audits of corporations continue to drop, despite a recent turnaround in enforcement against individual taxpayers, said a report by Transactional Records Access Clearinghouse, a government watchdog group….

The IRS enforcement budget has declined in recent years, squeezing the agency's efforts. "You've got hard choices to make, and corporations were not the top priority in making those hard choices" for the IRS, said Susan Long, a Syracuse University professor and co-director of TRAC, a research organization with offices in Washington and Syracuse that is associated with the university.

The study adds to recent evidence that many corporate taxpayers are benefiting from the lax federal tax environment. Last week, the General Accounting Office, the investigative arm of Congress, reported that on average more than 60% of U.S. corporations—and more than 35% of large corporations—paid no federal corporate income tax in 1996 to 2000. Much of that avoidance is legal, thanks to deductions and credits provided by Congress. But some of it is due to improper tax shelters and other dodges, investigators believe.

IRS enforcement statistics for both corporations and individuals declined sharply from the early 1990s until the past year or two. Budget constraints have been a factor. A congressional restructuring also led the agency to shift enforcement personnel into taxpayer service….

     When conservatives say they want to get government out of your hair—they actually mean that they want voters to help them get government out of the hair of corporations and the established wealthy.

     They don’t give a tinker’s damn about working-class taxpayers, who have uncomplicated tax returns that are hard to doctor.

     Speaking of taxes, check out the hypocrisy in the editorial below.

From Barron’s, April 12.


Fair or Simple?

Americans exhausted by the quest for tax fairness should demand simplicity

By Thomas G. Donlan

…What Congress should be working on now is a new, simple tax system -- and a new resolve to let it be somewhat unfair in principle so as to be simple and efficient in effect. America needs a flat-rate tax, on income or on consumption, with the lowest possible rate and the broadest possible base….

     To Barron’s and its readers, fairness means that you tax only income or consumption—which are the pet theories of today’s Republicans. That automatically means that: First, you don’t tax capital gains that are just either held and accumulated (which only the rich are able to do)—or you don’t tax income that is accumulated but not spent (again, which only the rich are able to do).

     If you’re in the income bracket where you are unable to save money, and must spend all you earn for basic necessities—then you have no wealth sheltered and you get fully taxed.

     Don’t Republicans have great family values, or what?

     If you really want to understand the real tax agenda of the Bush Administration, you need to read an impeccable conservative source that tells it like it is.

From The Wall Street Journal, April 13.

Outside Audit:
Corporate Tax Burden
Shows Sharp Decline

The corporate tax burden over the past few years has dropped sharply, figures gathered by the Commerce Department and amplified by public-company filings show.

The new data also suggest that shrinking effective corporate tax rates have helped boost corporate profits to record levels. Investors who have come to expect—and in some cases even demand—that corporations perform acts of tax diminution may be in for disappointment from here because, short of an act of Congress, it is hard to see how the corporate tax tally could get much smaller.

Corporate taxes have become a hot-button issue on the presidential campaign trial this year, fueled by a recent Government Accounting Office report that showed less than 40% of U.S. companies paid any federal taxes in each of the four years from 1996 to 2000 as well as a separate study showing that Internal Revenue Service audits have continued to drop under President Bush….

Finally, many suspect that, with a drop off in tax-law enforcement, there has been an increase in the use of tax shelters….

     The Bush strategy is as old as corruption itself. If you want your corporate supporters to pay less in taxes, just pass laws that benefit corporations, and, in addition, starve the IRS so that those who want to cheat can do so safely.

     Here’s another example of how corporations screw the public—and blame the government for what they are doing.

From The Wall Street Journal, April 13.

The Spread of Hidden Fees

Rate Increases That Look Like Taxes
Hit High-Speed Internet, Cellphone Bills

An irksome billing practice—adding new fees and blaming the government—is spreading to new parts of the telecommunications industry.

These fees, often with the word "regulatory" somewhere in the title, have for some time showed up on cellphone and regular phone bills. But now they're turning up on bills for high-speed Internet service, too. And despite their names, the fees are not required by the government. In fact, critics say the addition of such charges is effectively a hidden rate increase….

"Wireless companies are calling them regulatory recovery fees, but in fact the money is going directly to the companies to spend on whatever they need," says Morgan Jindrich, a researcher at the Center for Public Integrity, and author of a report on the issue that is scheduled to be released today….

"If a customer even looks at information regarding the surcharge, they're going to be confused over what the surcharge is."

     And so much for any pretense that corporations, generally, have any semblance of moral standards in dealing with either customers or the government.

Week of April 5

    Greedy, selfish, unrealistic American workers. After working hard until they are 65, they expect to be able to retire.

    The Wall Street Journal sets them straight.

From The Wall Street Journal, April 5.

Workers Harbor
Unrealistic Hopes
For Retirement

By Kelly Greene

An annual snapshot of workers' plans for retirement finds that many Americans are overly optimistic about their retirement prospects, reflecting unrealistic expectations about pension and health benefits, as well as a continued lack of understanding about future financial needs.

The report—the Retirement Confidence Survey, scheduled to be released today by the Employee Benefit Research Institute and others—also finds that workers expect to stay on the job longer to make up for any savings shortfall. Those plans, however, don't match the experience of current retirees….

Those expectations don't reflect the experience of many current retirees. The average retirement age is 62, and the survey, done 14 years in a row, consistently has found that about two in five retirees—37% in this year's study—consistently have left the work force before they planned, mainly because of health problems or layoffs. Only 32% of retirees surveyed this year said they have worked for pay at any point in retirement….

When it comes to health benefits, 35% of current workers surveyed said they expect to get retiree health insurance through work. Companies, though, have been slashing retiree health benefits….

    Imagine. After being promised for decades that they would have pensions and decent medical care when they retired—these totally unrealistic workers actually believed that the promises would be honored by corporate America.

    They were totally unaware of how political influence with Republicans and conservative Democrats could allow corporations to callously change the rules of the game.

    Finally, someone has figured out how investors—even the ones who are not corporate insiders—can profit from the special favors that corporations get by contributing vast amounts of money to Republicans and conservative Democrats.

From Barron’s, April 5.

Go, Grease!

Our Greased Palm Index trounces the market

A possible solution to the election-year conundrum is our remarkably straightforward Greased Palm Index, which we launched in May 2003. The GPI is like no other index, in that it tracks stocks that are rich in political capital—an important item left off most annual reports.

To get into the GPI, a company must be among the top 100 donors in an election cycle, as reported by the Center for Responsive Politics; it also must be publicly traded….

Companies legally can't make contributions to candidates; rather, the list seeks to reflect total contributions to congressional and presidential candidates by a company's officers, directors, and employees. (This information is available because individuals often supply the names of their employers when making contributions.)

The current GPI contains just 45 stocks, and on an annualized basis they have returned 40.7%, versus 34.9% for the Standard & Poor's 500 index, according to our research associate Teresa Vozzo.

When we first looked at the GPI a year ago, it also had outperformed the S&P 500 on an annualized basis. If its outstanding performance continues, it might begin to look a little less like roulette and more like craps, which has better odds….

The top 10 publicly traded companies in the GPI are, in order of the size of political contributions: Goldman Sachs Group, whose stock is up 54.6% for the year; Wal-Mart, up 15.5%; Lehman Brothers Holdings, up 44.4%; Citigroup, up 53.8%; Time Warner, up 55.2%; SBC Communications, up 28.1%; Morgan Stanley, up 51.9%; United Parcel Service, up 24.3%; Merrill Lynch, up 70.1%; and Microsoft, up 3.6%....

    As you read the above list of companies, just think of all the recent legislation that has favored them.

    For a quick lesson in political economics, the following excerpt is a classic. It clearly describes how the our federal government manipulates the prime interest rate to keep the unemployment level just right.

    It’s called the Goldilocks strategy: keep the economy just hot enough so that the economy grows, corporate profits explode (upward), Wall Street booms, and investors make tons of money.

    But as soon as unemployment starts to go down, and wages look like they are about to go up, it’s time for the Fed to raise the prime interest rate and cool off an “overheated” economy.

From The Wall Street Journal, April 5.

Jobs Report Is So Positive,
Investors Clap—Then Fret

…Investors learned that the U.S. economy created 308,000 jobs last month, the largest monthly increase in four years and more than twice the expected number. That muzzled, at least temporarily, talk of a jobless recovery. It raised hopes that first-quarter corporate earnings, to be announced over the next few weeks, will be strong.

Within minutes of the opening bell, the Dow Jones Industrial Average leapt 100 points and traders started looking forward to a big day. Then they looked over their shoulders at the bond market.

Heavy selling was going on there, sending the 10-year Treasury bond down more than two points in price—something it rarely has done. Its yield, which rises when the bond's price falls, jumped to 4.142% from 3.879%, the biggest daily increase in almost eight years.

The problem: The job-creation data were almost too strong, reawakening fears that the U.S. Federal Reserve might have to start raising short-term interest rates sooner than investors had thought—perhaps by summer….

"When employment numbers are well over the forecast it can lead to an overstimulated economy and therefore to inflation," says Peter Wall, chief investment officer for Chase Personal Financial Services, a brokerage firm and money-management arm of J.P. Morgan Chase….

"Unless there is a substantial revision next month, I think this jobs number is likely to cause the Fed to raise rates this summer instead of after the election, which is what people had expected," says Kevin McClintock, chief investment officer for stocks at money-management firm David L. Babson in Cambridge, Mass….

Aside from stoking fears of inflation, heavy job growth also would feed worries that corporate productivity rates, which have soared as staffing levels have stayed low, would decline as more people are hired. "Large gains in profits at the expense of labor (italics not in the original) last year are likely to gradually fade," says Steven Wieting, senior economist at Smith Barney, a brokerage arm of Citigroup, in a report to clients….

    And remember, the fabulously rich people who write articles like this—and the ones who read them—are the same people who say that you shouldn’t be envious of the rich.

    If you ever wondered how tax breaks for corporations and businesses become an endless stream—and tax breaks for working-class Americans only come along rarely—just read the following.

From The Wall Street Journal, April 5.

House Approves Highway Bill,
Setting Stage for Tax-Break Fight

WASHINGTON—The House of Representatives overwhelmingly approved a six-year, $275 billion highway bill that the White House has threatened to veto as too expensive, setting the stage for a potentially prolonged election-year fight over the deficit and business tax breaks….

Highway bills are notorious magnets for pork-barrel projects and this one-with about $11 billion in funding for 3,000 pet projects-is no different. But lawmakers also quietly added a little something extra for businesses: tax breaks totaling about $12 billion over the next four years….

"Talk about free riders. They have no place in the highway bill," said Robert Bixby, executive director of the Concord Coalition, a taxpayer watchdog group. Lawmakers, he said, "just snuck them in there."…

Administration officials say the bills are too costly. They particularly are unhappy with a House provision that would allow lawmakers to reopen highway funding talks in as little as two years….

    The shame of it is—we really need to improve our roads, bridges, and so on. Not only are they needed, their construction would provide much needed jobs for working-class Americans.

    Of course, because of Bush’s tax cuts for the wealthy, his administration considers any expenditures for necessary services for Americans in this country to be an extravagance.

    Since business and corporations will get still more tax breaks—totally unrelated to the legislation—however, there’s a chance he won’t veto the bill.

    The excerpt below demonstrates what many writers have pointed out elsewhere: America’s tax burden is being shifted from corporations who donate money to both political parties—to individuals, especially middle-class citizens who are not in the top 5% of income earners.

From The Wall Street Journal, April 6.

Many Companies Avoided Taxes
Even as Profits Soared in Boom

WASHINGTON—More than 60% of U.S. corporations didn't pay any federal taxes for 1996 through 2000, years when the economy boomed and corporate profits soared, the investigative arm of Congress reported….

The GAO analysis of Internal Revenue Service data comes as tax avoidance by both U.S. and foreign companies also is drawing increased scrutiny from the IRS and Congress. But more so than similar previous reports, the analysis suggests that dodging taxes, both legally and otherwise, has become deeply rooted in U.S. corporate culture….

"Too many corporations are finagling ways to dodge paying Uncle Sam, despite the benefits they receive from this country," said Sen. Carl Levin (D., Mich.), who requested the study along with Sen. Byron Dorgan (D., N.D.). "Thwarting corporate tax dodgers will take tax reform and stronger enforcement." A 1999 GAO study on corporate tax payments reached similar results.

latest report has given new ammunition to the campaign of Democratic presidential challenger Sen. John Kerry, who has criticized President Bush for failing to crack down on corporate tax dodgers….

To be sure, Mr. Kerry has supported some of the most recent big corporate breaks, such as those contained in a 2002 economic stimulus bill. And the latest GAO report focused on tax avoidance that took place entirely during the Clinton years….

    With both our major political parties on the take, where does one go to reform the system?

    Just another in the dreary series of stories of a totally broken compensation system:

From The Wall Street Journal, April 6.

Tenet's Ex-Chief
Gets $1.3 Million
In Severance Pay

Tenet Healthcare Corp. disclosed a $1.3 million severance payment to its former chief executive, Jeffrey C. Barbakow, and said that three of its 11 directors are stepping down before the annual meeting next month.

Mr. Barbakow resigned as CEO last May under pressure from the board. The reputation and stock price of the nation's second-largest hospital company had plunged sharply in the wake of government investigations into many company practices, including an aggressive pricing policy that improperly boosted hospital revenue….

Mr. Barbakow's compensation has been a lightning rod for criticism of Tenet since its troubles emerged in November 2002. Earlier that year, as its stock price was soaring, he reaped about $111 million from the exercise of options and sale of underlying stock….

The $1.3 million severance payment he received last year was roughly equal to his annual salary when he left. He also received $585,231 in pro-rated salary for 2003 and $59,666 for automobile use….

    The company overbills for its services, among other things, the shareholders eventually get screwed, and this jerk and the next 20 generations of his family become a new aristocracy as a result.

    Is this a great economy or what?

    For a classic example of bait-and-switch, read this excerpt defending corporate and investor greed.

    The bait—lower prices for consumers and “jobs” for communities.

    The switch—the low prices don’t allow middle and low income consumers to come close to making up for the decreased wages and worse working conditions that result.

    The biggest beneficiaries: the investors, who don’t pass along nearly enough of the benefits from workers’ own productivity to make up for their sacrifices. (Six members of the Walton family were among the richest 400 Americans in the U.S. last year.)

From The Wall Street Journal, April 7.


The War on Wal-Mart

By Steven Malanga

Here is a story you're unlikely to read in the spate of press attacks on Wal-Mart these days:

When Hartford, Conn., tore down a blighted housing project, city officials hatched an innovative redevelopment plan: Lure Wal-Mart to the site, entice other retailers with the promise of being near the discount giant, and then use the development's revenues to build new housing. After Wal-Mart agreed, city officials and residents celebrated the idea of better shopping, more jobs and new housing in one of America's poorest cities….

The real issue in this battle is union wages. Unions argue that supermarkets in California pay store workers from $18 to $25 an hour (though Wal-Mart says those wages represent the high end of the union scale), while Wal-Mart pays its California store associates about $10 on average. The effect of Wal-Mart entering the market, union advocates say, would be a vast reduction in the wage pool.

"While charging low prices obviously has some consumer benefits . . . these benefits come at a steep price for American workers," alleged a recent diatribe by California Democratic Congressman George Miller. Instead, union think tanks argue, Wal-Mart should be made to pay "sustainable" or "self-sufficiency" wages, a popular idea with the left, which holds that wages should be based on an area's cost of living. In many parts of California, liberal economists estimate, that means up to $38,000 a year for a worker supporting a spouse.

But the left's case ignores the greater benefit that an efficient operator like Wal-Mart brings to an entire economy by driving down prices and forcing other stores to perform better….

Not surprisingly, the press downplays Wal-Mart's virtues: that it has never been accused of funny accounting; that it doesn't reward its executives with exorbitant salaries or perks; that not only do other executives call it the most admired company in America, but shopping surveys show it is the consumer's favorite store.

But acclaim from common folk may not protect a company when elite opinion turns against it, influencing legislators, regulators and the courts. That's why Wal-Mart has become the chief private-sector target of trial lawyers, sued more than any other company, as the plaintiff's bar and its allies seek to achieve through litigation what activists struggle to accomplish in organizing drives. And every battle they win will cost the American consumer.


    Face it. This article is a defense of an aristocracy. Mr. Malanga believes that investors and the rich should live lives of luxury, and those at the bottom should be so grateful just to have jobs that they will willingly work their asses off—for below poverty wages—for those who provide them.

     General Electric used to make stoves and refrigerators, and a whole host of things. Increasingly it’s becoming a financial company.

     And it’s not its purely financial operations that are at issue here. As are our other previous manufacturers, like GM, Ford, Motorola, etc.—instead of manufacturing products, they are increasingly becoming investment bankers. Instead of hiring manufacturing workers, they are contracting their manufacturing out to others who hire workers.

     Result: instead of having to be good managers of people and producing actual products—they are simply creating an environment where they pit other manufacturers against each other in bidding for their business.

From The Wall Street Journal, April 8.

The Light Is On

When the economy is bad, General Electric is a financial company. But with the economy fairly strong and the conglomerate raising its earnings estimates (though only slightly), GE is an industrial company in the minds of investors and analysts.

Of course, GE is both, generating roughly half its earnings from making stuff and the other from financial activities. It is investor attention that shifts. Investors and analysts now tend toward optimism, and they are becoming increasingly so. The company issues its first-quarter earnings today….

     Again, remember: Even when GE reports that it is “making stuff,” it is actually getting others—who have no regard for worker justice or the environment—to make stuff that is sold under GE’s name.

     Here’s just another example—as described by one of our most prestigious CONSERVATIVE financial publications—of how our Congress (with Republican leadership and compliant conservative Democrat members) caves in to their corporate supporters who pay them money.

From The Wall Street Journal, April 8.

Pension Bill to Clear Congress
In Big Win for Business Lobby

WASHINGTON—A stopgap pension bill valued at billions to major employers is poised to clear Congress today after Senate Democrats agreed to allow a final vote despite their continued unhappiness over the scant relief the bill provides to union-sponsored retirement plans.

The action represents a long-sought victory for the business lobby, which has pressed hard for enactment before April 15, when employers must make their first quarterly plan contributions for 2004….

At the urging of Sen. Norman Coleman, a Republican freshman from Minnesota, the steel language would also benefit Cleveland-Cliffs Inc., an iron-ore miner with large operations in his state.

By contrast, union-sponsored multiemployer plans, most important to the construction and trucking industries, will get little relief despite their own investment losses in recent years….

"Why should some industries get relief and not others? Why should the Fortune 500 companies get the help and not the thousands of small contractors and trucking companies of America?" complained Sen. Edward Kennedy.

However, the Massachusetts Democrat was up against not only the Republican leadership and business lobby but also fellow Democrats from Illinois and Michigan as well as industrial unions whose members wanted the core bill swiftly enacted….

     How often do you see these terms together: Republican leadership, and victory for the business lobby?

     The evidence continues to mount: globalization is a disaster for everyone who works for a living. It’s all designed to benefit investors, top corporate executives, and the established wealthy.

From The Wall Street Journal, April 9.

Manufacturers Cite
Productivity for Lack of Hiring

More than a quarter of executives in part of a manufacturing survey say shifting production offshore and buying more parts and products from abroad are among the factors "most responsible" for their unwillingness to add U.S. workers.

But productivity gains remain the key factor keeping them from hiring.

The survey, by Manufacturers Alliance/MAPI, an Arlington, Va., association of large manufacturing companies, included responses from 37 executives at companies that aren't hiring about the factors impairing employment. While 27% cited the movement of production offshore and the same percentage cited the sourcing of more parts and finished goods from abroad, 84% pointed to productivity gains….

     And what happened to all the promises that were made to workers throughout the last century: that productivity and technology improvements would benefit everyone, and not just investors? It’s certainly not happening now.



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