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It's refreshing for me to see an article from a modern conservative outfit that actually seems to understand the adversarial relationship between the finance se

by ex3xu 7y ago

It's refreshing for me to see an article from a modern conservative outfit that actually seems to understand the adversarial relationship between the finance sector and the principles of economic conservatism. I particularly liked the section talking about historical precedents and bipartisan support for initiatives: > Believe it or not, America has been here before. In the 1920s and 1930s, the American defense industrial base was being similarly manipulated by domestic financiers for their own purposes, retarding innovation and damaging the nation’s ability to defend itself. And American military readiness was ebbing in the midst of an increasingly dangerous world full of rising autocracies. > Within the defense base itself, every example—from TransDigm to L3 to Chinese infiltration of American business—has drawn the attention of members of Congress. Representatives Ted Budd and Paul Cook are Republicans and Representatives Jackie Speier and Ro Khanna are Democrats. They are not alone. Democratic Senator Elizabeth Warren and Representative Tim Ryan have joined Khanna’s demand for a TransDigm investigation. Outside of this article, the best writing I've seen on this topic of short-term incentives is from British economist John Kay's book "Other People's Money", for example when he compares the annual reports from chemical company ICI in 1987 and 1994. 1987: ICI aims to be the world's leading chemical company, servicing customers internationally through the innovative and responsible application of chemistry and related science... 1994: Our objective is to maximise value for our shareholders by focusing on businesses where we have market leadership, a technological edge and a world competitive cost base. Kay goes on to explain how ICI, a leading British chemical company since its founding in the 1920s, attracted a short term flurry of investment activity but ultimately sold in 2007 just about a decade after their change of priorities. Kay primarily blames an over-expansion of the finance sector and the revolving-door culture on Wall Street, fairly consistent with the premises of this article.

Theodores 7y ago
Agreed, this was a truly refreshing article. Not least due to the 'conservative' perspective and the view of the finance sector. The finance sector is the enemy! Globalisation has been a big thing in the arms trade for the last twenty years. Obviously sales have always gone on but what happens if you end up with one monopoly defence contractor that sells to both sides in every conflict in every corner of the globe? In the UK the government used to make its own stuff. The shipyards were state owned and the Royal Navy really did rule the waves. The bullets and shells were made in state owned factories. This provided an anchor to the rest of the industry that needed and went through a lot of consolidation in the post war years. Projects and costs did over-run but a project could be put out to tender with 3-4 competing concerns submitting proposals. If the proposals were no good the government could do it in house. But then when everything gets sold off to private finance and then resold to giant trans-national mega corporations, the giant mega corporations get to be bigger and more powerful than the governments. They then become in charge so democracy isn't for the people and by the people. A similar thing has happened with property in the UK. The government and local councils used to own a large part of the housing estate. This provided an anchor in the marketplace so people could afford to rent affordable housing. When this was sold off it meant that prices skyrocketed and nowadays the government has to give a lot of tax revenue to private property owners to put up benefit claimants. Again the speculators and the interests of finance capital get to be in charge. I will take up your John Kay recommendation. Anyway, the article was most interesting as normally it is a left-wing anti-militarist, anti-capitalist viewpoint that sees finance capital as the enemy, not any view with 'conservative' in the name.
thelittleone 7y ago
Wow thank you for this comment. I look forward to reading John Kay's "Other People's Money". Are there any proposed models that could potentially replace the current consumerist / capitalist model that results in these monopolies or other effects such as maniacal focus on short term gains? While a company is hot and innovative, growth comes from value creation. Then innovation slows, but the executives need to give shareholders growth, so it's extracted in any way possible such as making employees work more hours no increase in income, or buying out smaller innovative emerging competitors and either shelving their innovations or destroying them through staff attrition when integrating after acquisition (like being assimilated by the borg).
- AnthonyMouse 7y ago
  > While a company is hot and innovative, growth comes from value creation. Then innovation slows, but the executives need to give shareholders growth, so it's extracted in any way possible such as making employees work more hours no increase in income, or buying out smaller innovative emerging competitors and either shelving their innovations or destroying them through staff attrition when integrating after acquisition (like being assimilated by the borg). What actually causes this is the tax code. Shareholders want to make money and in general are pretty agnostic as to whether it comes from dividends or increases in share price, outside of the taxes. But the US income tax creates a major preference for share price increases. If a corporation pays a dividend, it first pays corporate income tax on the money it earned, then the shareholder pays personal income tax on the dividend. But if the corporation instead uses the same money for "growth" it doesn't get taxed at all -- many forms of expansion are tax deductions. Switch from income tax to, say, VAT and that no longer happens. (The immediate objection would be that VAT is less progressive, but that can be solved by combining it with a UBI.)
- deleted 7y ago
  [deleted]
asark 7y ago
Perhaps notably, Graeber blames the infiltration by finance folks of management tiers of non-finance companies, the the influence of the finance sector generally, for a good part of the 20th century expansion of his titular "Bullshit Jobs". I'm not sure I buy his timeline, exactly, but it's probably worth a more thorough investigation. Incidentally, the rise of tech and trying to make everything measurable and data-entry-able—where the cost of doing so is low-visibility or even, to certain players, desirable, but the benefits are high-visibility—is another thing he blames.
jessaustin 7y ago
I can't say I've read much from this publisher (although I appreciate the sidebar articles on Gabbard and Gorsuch, two of the rare public figures I admire), but I wonder how much of this skepticism of neoclassical dogma can be credited to our Orange Leader's determined protectionism? After a century of kowtowing to country club Republicans, conservatives are finally allowed to question the price of "anything goes". The Orange One is no fan of regulation, but he cannot possibly stick to a consistent ideology and besides he probably has been pissed off at lots of Wall Street reptiles.
- HeWhoLurksLate 7y ago
  The Great Cheeto can say "I don't like regulation, but I don't like China more" and be consistent. As a conservative leaning US citizen, things like these have me seriously questioning what the point of all this is- our nation obviously needs to do this differently, but as someone who ostensibly believes in a "free market" / laissez-faire economics, this is a hard problem to swallow. Personally, I've found that anti-trust regulation, Government involvement [iterference, if you don't like it], and forbidding horizontal consolidation, is necessary to the maintaining of a free market, because as companies grow huge (IE Google) they seem to always become anti-competive to keep growing. Maybe the thing to do is change the way that companies report financial gains to promote a more long-term approach- just as China has been operating on the basis of four- and five-year plans, it might be better for everyone (except Wall Street's HFT bots) if the financial structure of the US was changed to encourage longer-term planning.
  - api 7y ago
    > they seem to always become anti-competive to keep growing. They also tend to sort of merge with government. At some point they figure out there is better ROI in buying government influence and using it to insulate themselves from competition than in investing in a better product. Libertarian idealism says that economy and state should be separate, but I don't think that's entirely possible in practice. The trouble is that sufficiently large concentrations of wealth are able to easily buy access to state power or even tend to become indistinguishable from the state.
  - 7y ago

by ex3xu 7y ago

Theodores 7y ago

Agreed, this was a truly refreshing article. Not least due to the 'conservative' perspective and the view of the finance sector. The finance sector is the enemy! Globalisation has been a big thing in the arms trade for the last twenty years. Obviously sales have always gone on but what happens if you end up with one monopoly defence contractor that sells to both sides in every conflict in every corner of the globe? In the UK the government used to make its own stuff. The shipyards were state owned and the Royal Navy really did rule the waves. The bullets and shells were made in state owned factories. This provided an anchor to the rest of the industry that needed and went through a lot of consolidation in the post war years. Projects and costs did over-run but a project could be put out to tender with 3-4 competing concerns submitting proposals. If the proposals were no good the government could do it in house. But then when everything gets sold off to private finance and then resold to giant trans-national mega corporations, the giant mega corporations get to be bigger and more powerful than the governments. They then become in charge so democracy isn't for the people and by the people. A similar thing has happened with property in the UK. The government and local councils used to own a large part of the housing estate. This provided an anchor in the marketplace so people could afford to rent affordable housing. When this was sold off it meant that prices skyrocketed and nowadays the government has to give a lot of tax revenue to private property owners to put up benefit claimants. Again the speculators and the interests of finance capital get to be in charge. I will take up your John Kay recommendation. Anyway, the article was most interesting as normally it is a left-wing anti-militarist, anti-capitalist viewpoint that sees finance capital as the enemy, not any view with 'conservative' in the name.

thelittleone 7y ago

Wow thank you for this comment. I look forward to reading John Kay's "Other People's Money". Are there any proposed models that could potentially replace the current consumerist / capitalist model that results in these monopolies or other effects such as maniacal focus on short term gains? While a company is hot and innovative, growth comes from value creation. Then innovation slows, but the executives need to give shareholders growth, so it's extracted in any way possible such as making employees work more hours no increase in income, or buying out smaller innovative emerging competitors and either shelving their innovations or destroying them through staff attrition when integrating after acquisition (like being assimilated by the borg).

AnthonyMouse 7y ago
> While a company is hot and innovative, growth comes from value creation. Then innovation slows, but the executives need to give shareholders growth, so it's extracted in any way possible such as making employees work more hours no increase in income, or buying out smaller innovative emerging competitors and either shelving their innovations or destroying them through staff attrition when integrating after acquisition (like being assimilated by the borg). What actually causes this is the tax code. Shareholders want to make money and in general are pretty agnostic as to whether it comes from dividends or increases in share price, outside of the taxes. But the US income tax creates a major preference for share price increases. If a corporation pays a dividend, it first pays corporate income tax on the money it earned, then the shareholder pays personal income tax on the dividend. But if the corporation instead uses the same money for "growth" it doesn't get taxed at all -- many forms of expansion are tax deductions. Switch from income tax to, say, VAT and that no longer happens. (The immediate objection would be that VAT is less progressive, but that can be solved by combining it with a UBI.)
deleted 7y ago
[deleted]

asark 7y ago

Perhaps notably, Graeber blames the infiltration by finance folks of management tiers of non-finance companies, the the influence of the finance sector generally, for a good part of the 20th century expansion of his titular "Bullshit Jobs". I'm not sure I buy his timeline, exactly, but it's probably worth a more thorough investigation. Incidentally, the rise of tech and trying to make everything measurable and data-entry-able—where the cost of doing so is low-visibility or even, to certain players, desirable, but the benefits are high-visibility—is another thing he blames.

jessaustin 7y ago

I can't say I've read much from this publisher (although I appreciate the sidebar articles on Gabbard and Gorsuch, two of the rare public figures I admire), but I wonder how much of this skepticism of neoclassical dogma can be credited to our Orange Leader's determined protectionism? After a century of kowtowing to country club Republicans, conservatives are finally allowed to question the price of "anything goes". The Orange One is no fan of regulation, but he cannot possibly stick to a consistent ideology and besides he probably has been pissed off at lots of Wall Street reptiles.

HeWhoLurksLate 7y ago
The Great Cheeto can say "I don't like regulation, but I don't like China more" and be consistent. As a conservative leaning US citizen, things like these have me seriously questioning what the point of all this is- our nation obviously needs to do this differently, but as someone who ostensibly believes in a "free market" / laissez-faire economics, this is a hard problem to swallow. Personally, I've found that anti-trust regulation, Government involvement [iterference, if you don't like it], and forbidding horizontal consolidation, is necessary to the maintaining of a free market, because as companies grow huge (IE Google) they seem to always become anti-competive to keep growing. Maybe the thing to do is change the way that companies report financial gains to promote a more long-term approach- just as China has been operating on the basis of four- and five-year plans, it might be better for everyone (except Wall Street's HFT bots) if the financial structure of the US was changed to encourage longer-term planning.
- api 7y ago
  > they seem to always become anti-competive to keep growing. They also tend to sort of merge with government. At some point they figure out there is better ROI in buying government influence and using it to insulate themselves from competition than in investing in a better product. Libertarian idealism says that economy and state should be separate, but I don't think that's entirely possible in practice. The trouble is that sufficiently large concentrations of wealth are able to easily buy access to state power or even tend to become indistinguishable from the state.
- 7y ago