5 ms·

I wish I had something more productive to add, but I want to say is that I love this article. It is absolutely the state of things... but I'm unsure what the so

by dimgl 3y ago

I wish I had something more productive to add, but I want to say is that I love this article. It is absolutely the state of things... but I'm unsure what the solution (or solutions) are.

EatingWithForks 3y ago
I have a suspicion that the solutions would be incredibly radical to how we as humans are socialized to perceive justice, worthiness, and equality, such that we would immediately reject it as immoral, unethical, or otherwise unacceptable. [Consider for example that, not too long ago, many of us were socialized to oppose the idea women should vote.] I also wish that the status quo is different, but I actually have no idea if I'd be able to stomach what different looks like based on my current upbringing which is thoroughly enmeshed in the systems that enable this.
- mordae 3y ago
  Vast majority of people who lived through revolutionary periods lived on. You'd manage.
- deleted 3y ago
  [deleted]
Animats 3y ago
We know what the solutions are. Because they were implemented in the 1930s, and removed in the 1980s and 1990s as "deregulation". - The US needs Glass-Stegall back. That's the requirement that banks and brokerages must be completely separate companies. The argument for repealing Glass-Stegall was that banks were now so smart that they didn't need such severe restrictions to prevent collapse from bad investment decisions. The banks were wrong. - Companies should only be allowed one class of voting stock. The New York Stock Exchange used to require that, back when the NYSE had real power. Allowing multiple classes of voting stock is what gives us President for Life CEOs such as Google and Facebook have. - No stock buybacks. Illegal in the US from the 1930s to 1981. The US recently banned stock buybacks for 12 months for companies which received coronavirus funding.[1] But that was a one time thing. During periods of low interest rates, companies tended to buy back their own stock with borrowed money to prop up the stock price. This mostly benefits executives with stock options. - Limits on complexity of corporate organization. This was a thing for utility companies until a decade or so ago. They were limited to a tree depth of 3 in ownership. This was to make regulation easier and reduce the risk of bankruptcy cascades. See "Enron". - Utility deregulation. Regulated utilities used to be standard. They got a monopoly in exchange for regulation. Since they were allowed a fixed rate of return on investment for rate-setting purposes, they were not hugely profitable but were very stable. The argument in the 1980s for deregulation is that utilities tended to overspend on infrastructure, building about 10% more stuff than they really needed. With deregulation, that money could go to stockholders. When Pacific Gas and Electric was deregulated, the company went bankrupt in only a few years, leaving the stockholders with nothing. And consumer prices went up in deregulated states vs regulated ones.[2] - Tax law favors debt, where interest is deductible as a business expense, over dividends, which are not deductible. This encourages taking on too much debt. - US bankruptcy law allows "secured creditors" too much security. Bankruptcy is too easy on lenders and too hard on accidental creditors. What we need is a return to conservative financial principles. [1] https://smartasset.com/financial-advisor/stock-buyback-ban https://smartasset.com/financial-advisor/stock-buyback-ban [2] https://ceepr.mit.edu/deregulation-market-power-and-prices-evidence-from-the-electricity-sector/ https://ceepr.mit.edu/deregulation-market-power-and-prices-e...
- kortilla 3y ago
  Banning buybacks without banning dividends is pure stupidity. The only reason the former is preferred is because of the tax effect on the shareholders. If you ban buybacks it will just go back to dividends with the exact same outcome (companies giving money to shareholders).
  - photonbeam 3y ago
    Dividends mess with incentives for executives less. Buybacks can make stock price pumps when stock option contract clauses are nearing.
  - harshreality 3y ago
    Huh? Buybacks give money to shareholders who sell. Dividends give money to shareholders who don't sell. That's a big difference. Furthermore, the primary reason stock is worth what it is, originates from actual or potential dividends (if they stopped reinvesting or hoarding) companies (could) pay. That money has to go somewhere. Either it's hoarded or reinvested in infrastructure or spent frivolously on sweetheart contracts to friends of corporate management. But, crucially, without dividends, none of that can be recaptured by current shareholders. In theory, if shareholders of a company wanted an actual, not virtual, dividend, a stable material return on their investment, currently they could force a change in management that would pay out a dividend. In what you propose, that's not an option. The value of a stock without dividends is almost purely speculative: who's going to be holding the stock when the company's assets are liquidated and returned (minus liabilities) to the stockholders, and what those net assets will amount to when the company is voluntarily or involuntarily shut down—neither of which is a particularly good sign for the state of the company when that happens. Doing away with dividends seems like it would lead to more instability: all the craziness of VC-style investing, but for public companies that are no longer early-stage growth. How could you have stable businesses or an economy when stockholders are driven, not by the promise of a share of profits this quarter or even an easily countable number of years from now, but by a share of the company's assets when the company is no longer a viable entity? How are those kinds of shareholders going to make good decisions about corporate governance? I'm mostly on board with the essay, and the need to change things. However, getting rid of dividends (along with buybacks) without radically restructuring everything else... how does that work? How could it? What am I missing?
abdullahkhalids 3y ago
Every company above a certain employee count (100ish)/annual world wide revenue must be at least 51% [1] owned 1/n by all existing employees. Obviously taking care of loopholes like contractors is implied. If you want the economy to serve the people, it must be controlled by the people. [1] I personally would advocate 67% as the number. So the 33% capital owning class needs at least half the employees to agree that their plans are best for the company.
- Temporary_31337 3y ago
  Clearly you have not witnessed communism first hand.
  - EdwardDiego 3y ago
    That's not Communism.
  - drpixie 3y ago
    "You keep using that word. I do not think it means what you think it means."
    - HDThoreaun 3y ago
      The proletariat owning the means of production by law is exactly what communism means.
      - abdullahkhalids 3y ago
        In communism, all of the people collectively own all the means of production. What I am suggesting is very different from that. Companies are owned only by their employees and the capital investors. There is still competition, there is no central planning as in the USSR, people are free to work in whatever field and company they want to (unlike the USSR), etc. This is barely different from modern capitalism.
        3y ago
cardy31 3y ago
Agreed. I don’t have a lot to add or a good solution, but that is one of the best articles I’ve read in a long time.
forgetfreeman 3y ago
A lot of really smart people are going to propose really intelligent, market-focused solutions, all or most of which are evidence-based. Without exception these proposed solutions will fail to address regulatory capture. Given one flavor or another of feudalism has been the norm for the majority of recorded human history, evidence suggests the only way to prevent the ultra-wealthy from owning everything (with ruinous results) is to delete wealth accumulation on this scale from society. How to best accomplish this feat is left as an exercise.
spaceman_2020 3y ago
Modern monetary policy has failed. Tying the currency to something real and finite - say, gold - is the only way to rein in the nonsense. The value of things becomes much clearer when you can’t simply conjure up money out of thin air.

by dimgl 3y ago

I wish I had something more productive to add, but I want to say is that I love this article. It is absolutely the state of things... but I'm unsure what the solution (or solutions) are.

EatingWithForks 3y ago

I have a suspicion that the solutions would be incredibly radical to how we as humans are socialized to perceive justice, worthiness, and equality, such that we would immediately reject it as immoral, unethical, or otherwise unacceptable. [Consider for example that, not too long ago, many of us were socialized to oppose the idea women should vote.] I also wish that the status quo is different, but I actually have no idea if I'd be able to stomach what different looks like based on my current upbringing which is thoroughly enmeshed in the systems that enable this.

mordae 3y ago
Vast majority of people who lived through revolutionary periods lived on. You'd manage.
deleted 3y ago
[deleted]

Animats 3y ago

We know what the solutions are. Because they were implemented in the 1930s, and removed in the 1980s and 1990s as "deregulation". - The US needs Glass-Stegall back. That's the requirement that banks and brokerages must be completely separate companies. The argument for repealing Glass-Stegall was that banks were now so smart that they didn't need such severe restrictions to prevent collapse from bad investment decisions. The banks were wrong. - Companies should only be allowed one class of voting stock. The New York Stock Exchange used to require that, back when the NYSE had real power. Allowing multiple classes of voting stock is what gives us President for Life CEOs such as Google and Facebook have. - No stock buybacks. Illegal in the US from the 1930s to 1981. The US recently banned stock buybacks for 12 months for companies which received coronavirus funding.[1] But that was a one time thing. During periods of low interest rates, companies tended to buy back their own stock with borrowed money to prop up the stock price. This mostly benefits executives with stock options. - Limits on complexity of corporate organization. This was a thing for utility companies until a decade or so ago. They were limited to a tree depth of 3 in ownership. This was to make regulation easier and reduce the risk of bankruptcy cascades. See "Enron". - Utility deregulation. Regulated utilities used to be standard. They got a monopoly in exchange for regulation. Since they were allowed a fixed rate of return on investment for rate-setting purposes, they were not hugely profitable but were very stable. The argument in the 1980s for deregulation is that utilities tended to overspend on infrastructure, building about 10% more stuff than they really needed. With deregulation, that money could go to stockholders. When Pacific Gas and Electric was deregulated, the company went bankrupt in only a few years, leaving the stockholders with nothing. And consumer prices went up in deregulated states vs regulated ones.[2] - Tax law favors debt, where interest is deductible as a business expense, over dividends, which are not deductible. This encourages taking on too much debt. - US bankruptcy law allows "secured creditors" too much security. Bankruptcy is too easy on lenders and too hard on accidental creditors. What we need is a return to conservative financial principles. [1] https://smartasset.com/financial-advisor/stock-buyback-ban https://smartasset.com/financial-advisor/stock-buyback-ban [2] https://ceepr.mit.edu/deregulation-market-power-and-prices-evidence-from-the-electricity-sector/ https://ceepr.mit.edu/deregulation-market-power-and-prices-e...

kortilla 3y ago
Banning buybacks without banning dividends is pure stupidity. The only reason the former is preferred is because of the tax effect on the shareholders. If you ban buybacks it will just go back to dividends with the exact same outcome (companies giving money to shareholders).
- photonbeam 3y ago
  Dividends mess with incentives for executives less. Buybacks can make stock price pumps when stock option contract clauses are nearing.
- harshreality 3y ago
  Huh? Buybacks give money to shareholders who sell. Dividends give money to shareholders who don't sell. That's a big difference. Furthermore, the primary reason stock is worth what it is, originates from actual or potential dividends (if they stopped reinvesting or hoarding) companies (could) pay. That money has to go somewhere. Either it's hoarded or reinvested in infrastructure or spent frivolously on sweetheart contracts to friends of corporate management. But, crucially, without dividends, none of that can be recaptured by current shareholders. In theory, if shareholders of a company wanted an actual, not virtual, dividend, a stable material return on their investment, currently they could force a change in management that would pay out a dividend. In what you propose, that's not an option. The value of a stock without dividends is almost purely speculative: who's going to be holding the stock when the company's assets are liquidated and returned (minus liabilities) to the stockholders, and what those net assets will amount to when the company is voluntarily or involuntarily shut down—neither of which is a particularly good sign for the state of the company when that happens. Doing away with dividends seems like it would lead to more instability: all the craziness of VC-style investing, but for public companies that are no longer early-stage growth. How could you have stable businesses or an economy when stockholders are driven, not by the promise of a share of profits this quarter or even an easily countable number of years from now, but by a share of the company's assets when the company is no longer a viable entity? How are those kinds of shareholders going to make good decisions about corporate governance? I'm mostly on board with the essay, and the need to change things. However, getting rid of dividends (along with buybacks) without radically restructuring everything else... how does that work? How could it? What am I missing?

abdullahkhalids 3y ago

Every company above a certain employee count (100ish)/annual world wide revenue must be at least 51% [1] owned 1/n by all existing employees. Obviously taking care of loopholes like contractors is implied. If you want the economy to serve the people, it must be controlled by the people. [1] I personally would advocate 67% as the number. So the 33% capital owning class needs at least half the employees to agree that their plans are best for the company.

Temporary_31337 3y ago
Clearly you have not witnessed communism first hand.
- EdwardDiego 3y ago
  That's not Communism.
- drpixie 3y ago
  "You keep using that word. I do not think it means what you think it means."
  - HDThoreaun 3y ago
    The proletariat owning the means of production by law is exactly what communism means.
    - abdullahkhalids 3y ago
      In communism, all of the people collectively own all the means of production. What I am suggesting is very different from that. Companies are owned only by their employees and the capital investors. There is still competition, there is no central planning as in the USSR, people are free to work in whatever field and company they want to (unlike the USSR), etc. This is barely different from modern capitalism.
      - 3y ago

cardy31 3y ago

Agreed. I don’t have a lot to add or a good solution, but that is one of the best articles I’ve read in a long time.

forgetfreeman 3y ago

A lot of really smart people are going to propose really intelligent, market-focused solutions, all or most of which are evidence-based. Without exception these proposed solutions will fail to address regulatory capture. Given one flavor or another of feudalism has been the norm for the majority of recorded human history, evidence suggests the only way to prevent the ultra-wealthy from owning everything (with ruinous results) is to delete wealth accumulation on this scale from society. How to best accomplish this feat is left as an exercise.

spaceman_2020 3y ago

Modern monetary policy has failed. Tying the currency to something real and finite - say, gold - is the only way to rein in the nonsense. The value of things becomes much clearer when you can’t simply conjure up money out of thin air.