8 ms·

People and jobs? Or wealth? The government has to decide which to prioritise

41 points by ivarv 6y ago

ivarv 6y ago
Submission statement: "Richard Murphy lays out the case for whose interests need to be sacrificed for the economy to have any hope of surviving under the conditions being imposed on businesses to keep workers and customers safe. Unfortunately, his well-reasoned recommendation, that landlords, banks, and pensioners need to take hits to save jobs and businesses, is not likely to find support in official circles. But Murphy’s argument, in essence, is that these groups are toast under any scenario, and they can’t be allowed to weigh down the productive sectors of the economy." (summary courtesy https://www.nakedcapitalism.com/2020/05/people-and-jobs-or-wealth-the-government-has-to-decide-which-to-prioritise-and-there-is-only-one-right-answer.html https://www.nakedcapitalism.com/2020/05/people-and-jobs-or-w...)
renewiltord 6y ago
The UK has triple lock pensions. Knew it was time to quit the UK when that happened. Took a while but I managed it. Pensioners everywhere are powerful. You'll never sacrifice them. They'll eat the young whenever they get a chance. Your only hope is to get in as close to the ground floor and then eat as many young yourself.
- NotSammyHagar 6y ago
  If the govt pays pensions (or social security here in the us), they can just print money in the event of an emergency like now. That makes sense. The problem in the us is that we stubbornly refuse to set aside enough money (I mean warring political parties find it advantageous to put off taxing and blaming the other side till later).
  - Retric 6y ago
    US social security is fine as a pension program. It’s disability payments that became a problem. Because high income earners don’t pay for SS, it’s politically very tempting to use that money to pay for vaguely related social programs which then grew over time.
    - nickff 6y ago
      Social security is also being used to subsidize government borrowing (by increasing apparent demand for low interest rate bonds), which makes those vaguely related social programs appear cheaper.
      - lotsofpulp 6y ago
        What should be done with social security funds instead? I’ve never heard anyone provide a better option.
        nickff 6y ago
        Social security could be run more like the large sovereign wealth funds, CalPERS, or as (possibly restricted) private savings accounts. The account statements make Social Security appear to be a private account system, even though it's not true. I doubt any of these alternatives are politically viable, and I am not sure they are all necessarily better, just suggesting that there are alternatives.
        makomk 6y ago
        Funds like CalPERS typically have a good chunk of their money invested in real estate. They are the landlords this article is calling for us to sacrifice, along with endowments for charities and universities and probably a whole bunch of other pensions (maybe including personal pensions).
        deleted 6y ago
        [deleted]
  - SkyMarshal 6y ago
    I'm not sure if any other governments besides the US can just print their way out of shortfalls. And the US won't be able to forever either, but our politicians will just keep doing it until it's no longer viable.
- dharma1 6y ago
  UK state pension is quite small, max ~£175/week. The "triple lock" just means it's being increased annually by 2.5%, CPI or average earnings growth, whatever is highest. There is talk about scrapping the triple lock - but it doesn't have a huge impact - difference in cost is 1% of GDP by 2060. It will be a difficult balancing act for the next couple of years, trying to bring the economy back, keep employment up and figure out how to pay for the increased borrowing as a result of the pandemic. I think large scale debt relief will be the only way out of this.
claudeganon 6y ago
The idea that landlords should be bailed out in any fashion seems folly to the extreme and I’m glad to see it argued against here. Collecting rents from people without the capital to own housing, in addition to increases in land value, is about as textbook an example of parasitism as one could imagine. Let them all take a bath and keep people housed.
- save_ferris 6y ago
  The problem is that it’s not folly to those who own the land, who are also typically in a better position to influence this kind of policy.
- innocentoldguy 6y ago
  You do realize that many property owners would be rendered homeless if we did as you’re suggesting, right? Why should the owners lose everything they have so that their renters don’t (at least in the short term, until the property gets foreclosed on and everyone is homeless)?
  - amiga_500 6y ago
    Yes that's right, they destroy the houses when landlords have to sell up. And then they remove the land. It's just a void.
  - claudeganon 6y ago
    It’s a pretty simple calculus. The damage caused by kicking everyone out of their homes far exceeds the landlords losing out, from both an individual and public health perspective.
    - jackcosgrove 6y ago
      > The political damage caused Renters outnumber landlords. Easy peasy.
    - pb7 6y ago
      What part of this is calculus?
mark_l_watson 6y ago
I am in the USA, but similar situation. I believe that if, big if!!, the public would cooperate, that a plan like Hong Kong’s makes a lot of sense. Sure businesses are less profitable and some will not survive, but it would get things restarted quickly. Trouble in the USA is a lack of patriotism: people are into their own selfish thing and they feel put upon and don’t do what is right for both public health and starting up the economy again. It seems to be mostly young people in my town who act irresponsibly and will thus likely ruin the economy for a long time. A long term failed economy is full-stop the fault of people unwilling to be decent human beings and do what needs to be done, and, of course, the fault of our federal government leadership which has so far been poor. We are just getting started with changing health practices and public interactions and we are just getting started understanding what the long term economic consequences will be. There is no quick fix here. But for sure, we need less selfish and entitled behavior, and protect people who need extra protection, and be willing to pay a little more to businesses and totally cooperate with more distancing in public places and businesses and of course apply maximum social shaming pressure on people who are so incredibly selfish as to not wear masks when appropriate. It is like some people have no sense of shame.
- matthewdgreen 6y ago
  People in America don’t exactly lack patriotism. They’re quite capable of making sacrifices in the name of their country or their community if need be. It’s just that many were led to believe that they were being forced into something for no reason. This was an active effort. There wasn’t just a lack of leadership, there was leadership in the direction of sabotaging a coordinated response.
  - mark_l_watson 6y ago
    You may not agree with my comments, but I agree with yours: federal leadership was so bad that I have to wonder if it were on purpose. But, that doesn’t exempt people from blame if they don’t do their part.
- ch4s3 6y ago
  This is ridiculous. People in NYC stopped going to public places in mass almost a full week before the lockdown order. Had the CDC not lied about masks, they'd have likely used them. On top of that, the FDA and CDC have 100% botched testing from the beginning. Americans are highly pragmatic, but we want good information not orders.
skybrian 6y ago
There are a lot of empty hotels, and it seems like prices will need to go down. Who is going to live there?
save_ferris 6y ago
This is a such an epic situation that I'm sure we'll be talking about for the rest of our lives. Pick two or three groups to save: workers, landlords, bankers, or businesses? Not everyone can be saved, and the political positioning of these classes makes this battle all the more impactful. This author chooses to sacrifice the banks and the landlords, and makes a pretty good case for why. The wrong answer could spell the end of capitalism, at least as we understand it today. Maybe "wrong" isn't the correct word here, I don't know. I've never seen such huge decisions laid bare like this before.
- joeraut 6y ago
  > This is a such an epic situation that I'm sure we'll be talking about for the rest of our lives. The word "epic" is overused a lot - but not here. It's chilling to think about how historically significant each passing day is going to be.
- amiga_500 6y ago
  Workers. Businesses. The UK doesn't really have capitalism, it has financialisation.
- seph-reed 6y ago
  This is a bit off-topic, but I've been wanting to speak it for a while... >The wrong answer could spell the end of capitalism I've been seeing a lot of Capitalism/Socialism stuff, and 100% of the time it feels like the concepts aren't fully developed in the speakers mind. They aren't binary opposites, they're gradient opposites. Essentially private vs public empowerment. If I trade vegetables with my neighbor, that's private and therefor capitalist. If the gov builds a road, that's public and therefor socialist. If you add up everything the people and their government do, you'll find where things are on the spectrum. Every single government is a mix of capitalist and socialist. You literally can not have so much as a tribe before the two begin to exist. Neither of them are going away ever, and they're both good for different things. Literally the only way for capitalism or socialism to end would be for there to be no communicating humans left.
roenxi 6y ago
This debate is harder than usual because nobody knows what is happening right now, therefore nobody can claim to know why. How many people are suffering, and what of? What is the supply chain about to do? What are the long term effects? Nobody knows. We're in uncharted territory. Problems can't be solved if nobody knows what they are and why they are happening. The policies that are implemented in this environment will not be thought out. Until this crisis ends it will be an ugly free-for-all to find out who has political power at the moment and can implement all their long-standing agendas with no special regard for current circumstances apart from some extraordinarily big handouts.
- atypicbiped 6y ago
  Policies aren’t being “thought out” in the eyes of the status quo of the old system. There’s potentially a great deal of thinking to be done, towards something new. Ugly free-for-all or not, was what was beautiful?
mydongle 6y ago
There's a reason why it used to be that only landowners could vote. The powerful typically owned land and they knew if non-landowners could vote, they would outvote the landowners. When the right to vote became available to everyone/most people, the landowners shifted to using their wealth in order to influence government/politics in their favor. This has worked out well for them, since as a general rule people either are too naive or politically apathetic to come together to outvote the landowners. Despite being grounded into dust by them, the common person still feel that they have much to lose by going against them. This reminds me of a fictional gambling game from an anime I've watched called E Card. "The game is starts with each player holding five cards, four of which are Citizens and the last being either a Slave or an Emperor. Who holds which card is decided beforehand, and is played like that for three turns before switching. The game lasts for a total of twelve turns, meaning each side gets to play Emperor twice. The players choose one card from their hand (Emperor side lays first) and place them face-down on the table. They are then flipped over to reveal the winner of the match. The three card types are Citizen, Emperor and Slave. The Citizen card represents the common man, and cannot defeat the Emperor who sits at the top. It can, however, defeat the Slave, who resides at the very bottom of the system. Two citizen against each other results in a tie. The Emperor represents the one at the top of society. This card can defeat the citizen, but will lose to the Slave. The Slave is presented as the one at the very bottom of society. Seeing as how it has nothing to lose, it can overthrow the Emperor in one last attempt at revenge. This card will lose to a Citizen, but will win against the Emperor card." My thought is that we have a large population of people who have been fooled into thinking they are the Citizen, when they are little more than Slaves. They believe that they are different, more than Slaves. So they have something to lose. Thus they can never go against the Emperor, and in fact, play their role as the Citizen in keeping down the actual Slaves who could do something about that Emperor if they actually got together. Now do I think people will wake up and realize they are the Slave? Probably not, but there's a non-zero chance, depending on how the government decides to act during this crisis. Most likely though, the Citizens are going to be given some scraps, just enough that they have something to lose and keeps them under the illusion that they are more than a Slave.
- deleted 6y ago
  [deleted]
jackcosgrove 6y ago
Since the late 70s consumption growth has outpaced productivity growth. The gap was plugged with debt. You cannot roll that debt over forever, even if you are Jerome Powell. The older people who hector young graduates about paying back their student loans are precisely the people who voted for deficits with no intention of ever paying off the debt.
- cannabis_sam 6y ago
  > Since the late 70s consumption growth has outpaced productivity growth. Really? It seems more like companies been capturing more of the productivity gains since the 70s, and paying it to shareholders...
  - jackcosgrove 6y ago
    Total US debt to GDP was stable at around 150% until 1980 when it began to rise, topping out at 400% in 2009 and settling around 360% since then. This debt increase partially masked both slowing GDP growth due to demographics at the national level, and slowing productivity growth at the individual level. Regardless of the internal cause of slowing productivity growth, it did slow and maintaining the same debt to GDP ratio as before 1980 would have required accepting a standard of living that rose more slowly than it did. (GDP growth slowdown due to demographics washes out on a per capita basis.) It seems the most likely cause for the 1970s productivity slowdown was the oil shocks and the most likely cause for the 2000s productivity slowdown is the falling marginal return on research expenditures.
jhwang5 6y ago
What is this guy smoking? He presents a false dichotomy of saving "labor" vs "assets". Look, if assets depreciate, it affects balance sheets of everyone, including corporates, and induce a balance sheet recession which reduces reinvestment into the economy. Everyone's fked then, too. It's all connected.

41 points by ivarv 6y ago

Submission statement: "Richard Murphy lays out the case for whose interests need to be sacrificed for the economy to have any hope of surviving under the conditions being imposed on businesses to keep workers and customers safe. Unfortunately, his well-reasoned recommendation, that landlords, banks, and pensioners need to take hits to save jobs and businesses, is not likely to find support in official circles. But Murphy’s argument, in essence, is that these groups are toast under any scenario, and they can’t be allowed to weigh down the productive sectors of the economy." (summary courtesy https://www.nakedcapitalism.com/2020/05/people-and-jobs-or-wealth-the-government-has-to-decide-which-to-prioritise-and-there-is-only-one-right-answer.html https://www.nakedcapitalism.com/2020/05/people-and-jobs-or-w...)

renewiltord 6y ago

The UK has triple lock pensions. Knew it was time to quit the UK when that happened. Took a while but I managed it. Pensioners everywhere are powerful. You'll never sacrifice them. They'll eat the young whenever they get a chance. Your only hope is to get in as close to the ground floor and then eat as many young yourself.

NotSammyHagar 6y ago
If the govt pays pensions (or social security here in the us), they can just print money in the event of an emergency like now. That makes sense. The problem in the us is that we stubbornly refuse to set aside enough money (I mean warring political parties find it advantageous to put off taxing and blaming the other side till later).
- Retric 6y ago
  US social security is fine as a pension program. It’s disability payments that became a problem. Because high income earners don’t pay for SS, it’s politically very tempting to use that money to pay for vaguely related social programs which then grew over time.
  - nickff 6y ago
    Social security is also being used to subsidize government borrowing (by increasing apparent demand for low interest rate bonds), which makes those vaguely related social programs appear cheaper.
    - lotsofpulp 6y ago
      What should be done with social security funds instead? I’ve never heard anyone provide a better option.
      - nickff 6y ago
        Social security could be run more like the large sovereign wealth funds, CalPERS, or as (possibly restricted) private savings accounts. The account statements make Social Security appear to be a private account system, even though it's not true. I doubt any of these alternatives are politically viable, and I am not sure they are all necessarily better, just suggesting that there are alternatives.
        makomk 6y ago
        Funds like CalPERS typically have a good chunk of their money invested in real estate. They are the landlords this article is calling for us to sacrifice, along with endowments for charities and universities and probably a whole bunch of other pensions (maybe including personal pensions).
        deleted 6y ago
        [deleted]
- SkyMarshal 6y ago
  I'm not sure if any other governments besides the US can just print their way out of shortfalls. And the US won't be able to forever either, but our politicians will just keep doing it until it's no longer viable.
dharma1 6y ago
UK state pension is quite small, max ~£175/week. The "triple lock" just means it's being increased annually by 2.5%, CPI or average earnings growth, whatever is highest. There is talk about scrapping the triple lock - but it doesn't have a huge impact - difference in cost is 1% of GDP by 2060. It will be a difficult balancing act for the next couple of years, trying to bring the economy back, keep employment up and figure out how to pay for the increased borrowing as a result of the pandemic. I think large scale debt relief will be the only way out of this.

claudeganon 6y ago

The idea that landlords should be bailed out in any fashion seems folly to the extreme and I’m glad to see it argued against here. Collecting rents from people without the capital to own housing, in addition to increases in land value, is about as textbook an example of parasitism as one could imagine. Let them all take a bath and keep people housed.

save_ferris 6y ago
The problem is that it’s not folly to those who own the land, who are also typically in a better position to influence this kind of policy.
innocentoldguy 6y ago
You do realize that many property owners would be rendered homeless if we did as you’re suggesting, right? Why should the owners lose everything they have so that their renters don’t (at least in the short term, until the property gets foreclosed on and everyone is homeless)?
- amiga_500 6y ago
  Yes that's right, they destroy the houses when landlords have to sell up. And then they remove the land. It's just a void.
- claudeganon 6y ago
  It’s a pretty simple calculus. The damage caused by kicking everyone out of their homes far exceeds the landlords losing out, from both an individual and public health perspective.
  - jackcosgrove 6y ago
    > The political damage caused Renters outnumber landlords. Easy peasy.
  - pb7 6y ago
    What part of this is calculus?

mark_l_watson 6y ago

I am in the USA, but similar situation. I believe that if, big if!!, the public would cooperate, that a plan like Hong Kong’s makes a lot of sense. Sure businesses are less profitable and some will not survive, but it would get things restarted quickly. Trouble in the USA is a lack of patriotism: people are into their own selfish thing and they feel put upon and don’t do what is right for both public health and starting up the economy again. It seems to be mostly young people in my town who act irresponsibly and will thus likely ruin the economy for a long time. A long term failed economy is full-stop the fault of people unwilling to be decent human beings and do what needs to be done, and, of course, the fault of our federal government leadership which has so far been poor. We are just getting started with changing health practices and public interactions and we are just getting started understanding what the long term economic consequences will be. There is no quick fix here. But for sure, we need less selfish and entitled behavior, and protect people who need extra protection, and be willing to pay a little more to businesses and totally cooperate with more distancing in public places and businesses and of course apply maximum social shaming pressure on people who are so incredibly selfish as to not wear masks when appropriate. It is like some people have no sense of shame.

matthewdgreen 6y ago
People in America don’t exactly lack patriotism. They’re quite capable of making sacrifices in the name of their country or their community if need be. It’s just that many were led to believe that they were being forced into something for no reason. This was an active effort. There wasn’t just a lack of leadership, there was leadership in the direction of sabotaging a coordinated response.
- mark_l_watson 6y ago
  You may not agree with my comments, but I agree with yours: federal leadership was so bad that I have to wonder if it were on purpose. But, that doesn’t exempt people from blame if they don’t do their part.
ch4s3 6y ago
This is ridiculous. People in NYC stopped going to public places in mass almost a full week before the lockdown order. Had the CDC not lied about masks, they'd have likely used them. On top of that, the FDA and CDC have 100% botched testing from the beginning. Americans are highly pragmatic, but we want good information not orders.

skybrian 6y ago

There are a lot of empty hotels, and it seems like prices will need to go down. Who is going to live there?

save_ferris 6y ago

This is a such an epic situation that I'm sure we'll be talking about for the rest of our lives. Pick two or three groups to save: workers, landlords, bankers, or businesses? Not everyone can be saved, and the political positioning of these classes makes this battle all the more impactful. This author chooses to sacrifice the banks and the landlords, and makes a pretty good case for why. The wrong answer could spell the end of capitalism, at least as we understand it today. Maybe "wrong" isn't the correct word here, I don't know. I've never seen such huge decisions laid bare like this before.

joeraut 6y ago
> This is a such an epic situation that I'm sure we'll be talking about for the rest of our lives. The word "epic" is overused a lot - but not here. It's chilling to think about how historically significant each passing day is going to be.
amiga_500 6y ago
Workers. Businesses. The UK doesn't really have capitalism, it has financialisation.
seph-reed 6y ago
This is a bit off-topic, but I've been wanting to speak it for a while... >The wrong answer could spell the end of capitalism I've been seeing a lot of Capitalism/Socialism stuff, and 100% of the time it feels like the concepts aren't fully developed in the speakers mind. They aren't binary opposites, they're gradient opposites. Essentially private vs public empowerment. If I trade vegetables with my neighbor, that's private and therefor capitalist. If the gov builds a road, that's public and therefor socialist. If you add up everything the people and their government do, you'll find where things are on the spectrum. Every single government is a mix of capitalist and socialist. You literally can not have so much as a tribe before the two begin to exist. Neither of them are going away ever, and they're both good for different things. Literally the only way for capitalism or socialism to end would be for there to be no communicating humans left.

roenxi 6y ago

This debate is harder than usual because nobody knows what is happening right now, therefore nobody can claim to know why. How many people are suffering, and what of? What is the supply chain about to do? What are the long term effects? Nobody knows. We're in uncharted territory. Problems can't be solved if nobody knows what they are and why they are happening. The policies that are implemented in this environment will not be thought out. Until this crisis ends it will be an ugly free-for-all to find out who has political power at the moment and can implement all their long-standing agendas with no special regard for current circumstances apart from some extraordinarily big handouts.

atypicbiped 6y ago
Policies aren’t being “thought out” in the eyes of the status quo of the old system. There’s potentially a great deal of thinking to be done, towards something new. Ugly free-for-all or not, was what was beautiful?

mydongle 6y ago

There's a reason why it used to be that only landowners could vote. The powerful typically owned land and they knew if non-landowners could vote, they would outvote the landowners. When the right to vote became available to everyone/most people, the landowners shifted to using their wealth in order to influence government/politics in their favor. This has worked out well for them, since as a general rule people either are too naive or politically apathetic to come together to outvote the landowners. Despite being grounded into dust by them, the common person still feel that they have much to lose by going against them. This reminds me of a fictional gambling game from an anime I've watched called E Card. "The game is starts with each player holding five cards, four of which are Citizens and the last being either a Slave or an Emperor. Who holds which card is decided beforehand, and is played like that for three turns before switching. The game lasts for a total of twelve turns, meaning each side gets to play Emperor twice. The players choose one card from their hand (Emperor side lays first) and place them face-down on the table. They are then flipped over to reveal the winner of the match. The three card types are Citizen, Emperor and Slave. The Citizen card represents the common man, and cannot defeat the Emperor who sits at the top. It can, however, defeat the Slave, who resides at the very bottom of the system. Two citizen against each other results in a tie. The Emperor represents the one at the top of society. This card can defeat the citizen, but will lose to the Slave. The Slave is presented as the one at the very bottom of society. Seeing as how it has nothing to lose, it can overthrow the Emperor in one last attempt at revenge. This card will lose to a Citizen, but will win against the Emperor card." My thought is that we have a large population of people who have been fooled into thinking they are the Citizen, when they are little more than Slaves. They believe that they are different, more than Slaves. So they have something to lose. Thus they can never go against the Emperor, and in fact, play their role as the Citizen in keeping down the actual Slaves who could do something about that Emperor if they actually got together. Now do I think people will wake up and realize they are the Slave? Probably not, but there's a non-zero chance, depending on how the government decides to act during this crisis. Most likely though, the Citizens are going to be given some scraps, just enough that they have something to lose and keeps them under the illusion that they are more than a Slave.

deleted 6y ago
[deleted]

jackcosgrove 6y ago

Since the late 70s consumption growth has outpaced productivity growth. The gap was plugged with debt. You cannot roll that debt over forever, even if you are Jerome Powell. The older people who hector young graduates about paying back their student loans are precisely the people who voted for deficits with no intention of ever paying off the debt.

cannabis_sam 6y ago
> Since the late 70s consumption growth has outpaced productivity growth. Really? It seems more like companies been capturing more of the productivity gains since the 70s, and paying it to shareholders...
- jackcosgrove 6y ago
  Total US debt to GDP was stable at around 150% until 1980 when it began to rise, topping out at 400% in 2009 and settling around 360% since then. This debt increase partially masked both slowing GDP growth due to demographics at the national level, and slowing productivity growth at the individual level. Regardless of the internal cause of slowing productivity growth, it did slow and maintaining the same debt to GDP ratio as before 1980 would have required accepting a standard of living that rose more slowly than it did. (GDP growth slowdown due to demographics washes out on a per capita basis.) It seems the most likely cause for the 1970s productivity slowdown was the oil shocks and the most likely cause for the 2000s productivity slowdown is the falling marginal return on research expenditures.

jhwang5 6y ago

What is this guy smoking? He presents a false dichotomy of saving "labor" vs "assets". Look, if assets depreciate, it affects balance sheets of everyone, including corporates, and induce a balance sheet recession which reduces reinvestment into the economy. Everyone's fked then, too. It's all connected.