Tag Archives: political economy

Asset Seizures and Doing Business in Russia

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And the disingenuosity of corporate heads who are continuing to do business inside Russia.

Nestlé is still doing business there.

Ukrainian Prime Minister Denys Shmyhal tweeted that he had talked with Nestlé Chief Executive Mark Schneider, who he said showed no understanding of the side effect of continuing to sell in Russia.

Shmyhal is being generous. Schneider, having risen to the top of a large international corporation, knows full well the fungibility of money; he knows full well that money his company spends in Russia, even if it’s solely to support his employees there and the employees of Russian suppliers of his businesses there, allows other moneys to be reallocated to Russia’s barbaric invasion of Ukraine. Schneider knows full well that the taxes his Russian-domiciled companies pay go to supporting the Russian war machine.

Other businesses have said they are staying because their hands are tied by joint-venture or franchise agreements.

This is…mistaken. The disruptions caused by war are a perfectly legitimate business—and legal—reason to walk away from “joint ventures,” especially when one of the partners is domiciled in the war-starting nation and thereby (however unavoidably) supporting that war of aggression. These business’ managers know this full well; they’re simply hiding behind a transparent fig leaf in order to put their incomes ahead of what’s right.

Russian prosecutors have warned some companies of asset seizures if they withdraw from the country and threatened to arrest employees.

This is simply idiotic. By surrendering their companies to such threats, the business managers who so succumb already have surrendered their company assets to Russian authorities. Koch Industries COO, Dave Robertson, for instance:

We will not walk away from our employees there or hand over these manufacturing facilities to the Russian government so it can operate and benefit from them[.]

He already has, and they already are—whatever Koch’s facilities produce in Russia, those facilities now are producing only that which the Russian government permits.

PepsiCo, Unilever, Proctor & Gamble, Reckitt Benckiser, these are another small part of the extensive list of Western companies finding excuses to continue doing business inside Russia and thereby, however indirectly, supporting that nation’s barbaric war.

Maybe Western consumers should begin looking to other companies from which to buy things.

Update: Since I wrote this, Nestlé has agreed to limit its production in Russia to truly necessary items: baby food and other infant nutrition products, specialist veterinary meals and medical-nutrition products. Nestlé also has committed to donating such profits as it gets in Russia would be donated to humanitarian relief organizations.

A Tiny Step

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Senators Joni Ernst (R, IA), Chuck Grassley (R, IA), and Ron Johnson (R, WI) are proposing a law to modify how student loans are made. Their bill, the Student Transparency for Understanding Decisions in Education Net Terms, or STUDENT (aren’t we cute), Act

would provide student loan applicants with an estimate of the total amount of interest they would pay, based on a standard 10-year repayment plan, during or prior to taking out a loan….

It’s easy enough to calculate the amortization table, and the periodic and total interest paid, for any loan; there should be no problem in requiring the lender to include the tables in their student loan offers. But why wait until after the students have taken out the loan?

Aside from fixing that little fillip, though, more useful moves regarding the student loan industry include these:

  • get the government out of the student loan business altogether, including both extending the loan or guaranteeing one
  • privatize the student loan industry. Require the college/university that has the student who is taking out the loan in order to attend that college/university
    • co-sign the student loan, or
    • extend at least half of the total loan in partnership with the private lender

Of course, at the Federal level, enforcement of the second bullet would be limited to withholding Federal funds from those colleges or universities declining to satisfy either of the requirements. Further Federal enforcement would be limited to withholding a fraction of Federal transfers to those States who choose not to enact similar requirements and to otherwise publicizing and jawboning those States who choose not to go along. Those are strong incentives, though.

A Thought on Gasoline Production

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I had one. Take a breath.

California citizens pay a far higher price for a gallon of gasoline than even the average nation-wide: $5.79 against $4.29. Most of that difference comes from California’s State-unique regulations imposing, for instance, a low-carbon fuel standard and cap-and-trade taxes.

Separate from President Joe Biden’s (D) war on fossil fuel-sourced energy inflating the price of energy generally and gasoline in particular, that California price-inflating set of requirements also inflates the cost of gasoline nationally, since refiners are reluctant to produce separate kinds of gasoline for separate markets. Which brings me to my thought.

Refiners should produce a single type of gasoline related to carbon content, cap-and-trade taxes, and other froo-froo, based on the lower levels of regulatory interference in the rest of the nation, and sell that gasoline virtually nation-wide. Then they should offer to sell that single type to California buyers together with license(s) so those buyers can to modify the refiners’ product as they wish to bring that gasoline to within California desires.

In this way, drivers in the other 49 States would get a lower cost fuel from the refiners’ not having to impose some of that California cost on the rest of us, and the refiners would be able to recoup in the form of license fees most, if not all, of the putative costs of not selling directly into the California driver market.

It’s a Start

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The House, by an overwhelming bipartisan majority—424-8—passed a bill that would strip Russia and its satrap Belarus of Most Favored Nation status. The bill, if passed by the Senate and signed by President Joe Biden (or his veto overridden), would allow us to

raise tariffs on goods from Russia and Belarus and give President Biden power to impose even stricter import taxes on their exports amid the ongoing invasion of Ukraine. …
The bill also sets up strict guidelines for when the president can restore normal trade relations with Russia and Belarus based on the state of the Ukraine war.
The Biden administration will additionally be obligated to push for Russia’s removal from the World Trade Organization and oppose Belarus joining the group, which would subject both to higher tariffs and steeper trade barriers.

Eight Republicans voted against the bill; their concerns centered in part on their push to make President Joe Biden’s Executive Order barring importation of Russian oil statutory by including that in the bill.

The more we pile economic burdens onto Russia over its invasion of Ukraine and the atrocities Putin’s barbarians are perpetrating on Ukrainians, the better. However, we need to keep such moves in perspective: they’ve forced Putin to withdraw zero battalions from Ukraine, and they forced Putin to drop zero fewer bombs, rockets, or missiles on Ukrainian women, children, hospitals, schools,…. Weapons, ammunition, and medicines need to flow freely and rapidly to the Ukrainian military.

Political Disapproval of Private Enterprise Production

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The Wall Street Journal‘s editors are touting the withdrawal of Sarah Bloom Raskin from the nomination to the Federal Reserve Board’s Vice Chairman position, laying that defeat off to this:

But Ms Raskin’s most significant opponent was her oft-expressed view that the Fed and other regulators should deny credit to companies that produce or heavily consume fossil fuels.

It’s good that this one failed, but it’s just an early skirmish.

The problem is broader than this. It’s dangerous to our republican democracy that anyone would be nominated to the Fed or to any Executive Branch position who would willingly abuse that position’s authority to discriminate against any government-disapproved American enterprise.