Category Archives: Economics

Miscellaneous economy stuff

A Thought on Brexit

Posted on by
Reply

Supposedly, Great Britain and the EU are close to agreement on a deal governing the former’s departure from the latter. Absent a deal, Great Britain will leave the EU on its own terms.  That last is, I maintain, the best way out.

However.

There remain, as of Wednesday morning, three sticking points to any sort of deal, according to EU Chief Negotiator Michel Barnier.

  • Customs arrangements for the island of Ireland
  • The issue of giving Northern Irish authorities a greater say over regulatory arrangements, and the ability to veto them
  • Guarantees of a level playing field—that Britain will not be at an unfair advantage when it comes to business regulation

Customs arrangements for the entire island—even though one part of the island is a sovereign nation and EU member and the other part is a member country of the United Kingdom.  There should be nothing to discuss here. A major reason for the successful Leave vote was for Great Britain to regain control over its own borders—including its national border across the island of Ireland.

Giving Northern Ireland—that part of Great Britain—veto authority over the national government’s “regulatory arrangements”—devolution hasn’t gone that far, nor should it. This sticking point is nothing more than a naked early step in dismantling Great Britain in punishment for its effrontery in voting to leave the Holy Brussels Empire.

Guarantees of a level playing field—Great Britain is justified in seeking such guarantees, but it won’t get them, unless it accedes to what Brussels will define as “fair.”

These…sticking points…illustrate with crystalline clarity the EU’s bad faith in dealing with Great Britain—and they illustrate with equal clarity why a no-deal-Brexit is optimal for Great Britain.

Unfortunately, British PM Boris Johnson, in an agreement just concluded with Barnier, appears to have surrendered to the EU on the matter of Great Britain’s border with the Republic of Ireland:

Northern Ireland will remain part of the UK’s customs territory and will be an entry point into the EU’s single market. No customs checks will be done on the border between [the Republic of] Ireland and Northern Ireland.

Johnson surrendered on the second sticking point, also:

The Northern Irish assembly will have to give consent after Brexit for the region’s continued alignment with the EU regulatory regime every four years.

This cedes control of the British border to the EU, with all that that portends for the nation’s future. British sovereignty now hangs, ironically, on whether Labour MFWIC Jeremy Corbyn can deliver his party’s no vote.  Nigel Farage, Brexit Party head and strange bedfellow of Corbyn’s on this, also has come out against the deal, as have the Democratic Unionist Party, which in coalition with the Tories give Johnson a one-vote majority on most things, and the Scottish National Party, which have been NeverLeaveNoWay all along.

It could be, of course, that Johnson has included these poison pills so as to get this last minute agreement rejected by Parliament, and he can get his no-deal exit from the EU. That raises the question, though, of whether Johnson is that Machiavellian.

Johnson wants an up-or-down vote from Parliament Saturday.

Lack of Understanding

Posted on by
Reply

This is demonstrated in the lead paragraph of a recent Wall Street Journal article.

Chief executives are taking vocal stands on issues like gun control, climate change, and immigration, but global affairs bring a different complexity and calculation, especially for companies doing business in China*.

After all,

In the aftermath of Houston Rockets general manager Daryl Morey’s now-deleted tweet, the National Basketball Association has found the consequences of even implicitly criticizing Chinese policy can be swift and sizable.

Not to pick on the NBA in particular (although its behavior has been especially public, cowardly, and so reprehensible), Apple and Alphabet, among lots of others, also have sacrificed principle for company “security” in the PRC, while favoring yuan, also, over principle.

No, taking principled positions don’t get complexified by the environment in which they’re taken. The fundamental tenets of ethics, of morality, are universal and constant; the only adjustments are in the manner of their implementation.  There’s nothing at all complex about that. Company personnel are either principled, ethical, moral, or they are not. These are not matters of situation or convenience.

And this:

Executives have to thread a needle when a company’s commercial and financial interests clash with the CEO’s personal values and the cultural values of an enterprise and its home country, said Jeffrey Sonnenfeld, a leadership expert at the Yale School of Management. “One of the rarely discussed downsides of globalization is you get caught in those crosscurrents,” he said.

Those “cross-currents” are irrelevant. Either the CEO or the enterprise have principles worth standing by and sacrificing for, or the CEO or the enterprise have no principles. It’s that simple.

Another misunderstanding is this one by Paul Argenti, Dartmouth College’s Tuck School of Business Professor of Corporate Communication:

The job of a CEO is not to save the world or make the world safe for democracy[.]

No, but it is a core part of his job to be, at all times and in all circumstances, ethical, moral, and not hypocritical.  An example of business’ glaring hypocrisy: the Business Roundtable. That group is carefully and with deliberation silent on the NBA’s, et al., meek acquiescence to the PRC’s tyrants.

One last misunderstanding, this one by Rick Wartzman, Drucker Institute’s Director of the KH Moon Center for a Functioning Society [paraphrased by WSJ]:

The fracas sparked by ephemeral statements can distract from more substantive questions of social responsibility[.]

And

“What concerns me is whether statements, while important, become a substitute for the more meaningful work around what it means to be a responsible company and take care of all your stakeholders[.]”

Again, no. The only way such things can distract is if the statement maker chooses to be distracted. Staying focused on the business of the company in such a circumstance may be hard to do, but being hard means it’s eminently possible.

 

*The WSJ, like most of the NLMSM, refers to the People’s Republic of China as though it were the one and only. They ignore the nation just across a narrow straight from the mainland, the Republic of China that sits on the island of Taiwan.

An Elizabeth Warren Demand

Posted on by
Reply

Progressive-Democratic Party Presidential candidate and Senator Elizabeth Warren (D, MA) has begun issuing her orders to our private business executives.  And she’s not even the Progressive-Democratic Party nominee for the office, much less the President [bold face emphasis added].

I write in regard to the Business Roundtable’s (BRT) new Statement on the Purpose of a Corporation issued on August 19, 2019. … I write for information about the tangible actions you intend to take to implement the principles, including whether, to make good on your commitment, you will implement the steps laid out in the Accountable Capitalism Act I plan to reintroduce in the coming weeks.

And

If you, and the other 181 corporate executives who signed the BRT’s new Statement on the Purpose of a Corporation, plan to live up to the promises you made, I expect that you will endorse and wholeheartedly support the reforms laid out in the Accountable Capitalism Act to meet the principles you endorse.

And so on.

A key part (among several key parts) of Warren’s Accountable Capitalism Act is her requirement that all businesses above a minimum size must get Federal—not State—charters to continue to operate.

Do what I tell you to do with the corporations you run in my Government’s name, if you know what’s good for you.

This is the core aspect of socialism: Government ownership of an economy’s means of production—the businesses operating in that economy—or Government direction of what nominally privately owned businesses will be permitted to do.

Warren’s letter to those executives can be read here.

WTO, Tariffs, and the EU

Posted on by
Reply

The WTO ruled in favor of the US regarding a 15-yr-old dispute over French subsidies of Airbus that directly harmed The Boeing Company, to the tune of $7.5 billion.  The ruling allows the US to impose those $7.5 billion as tariffs, and the Office of the US Trade Representative says that we’ll apply

a 10% tariff on aircraft imported from Europe and apply a 25% import tax on other agricultural and industrial items on October 18….

France says they’ll respond with retaliatory tariffs if we go through with this.  French Finance Minister Bruno Le Maire:

If the American administration rejects the hand that has been held out by France and the European Union, we are preparing ourselves to react with sanctions[.]

EU Trade Commissioner Cecilia Malmstrom agrees with Le Maire:

If the US decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same[.]

Couple things about that.  One is that the US has already proposed both no-tariff-at-all and no-tariffs-on-autos trade régimes, but the EU has refused to discuss either, despite then-European Commission President Jean-Claude Juncker’s promise to take the matters up.

The other thing is that, under WTO rules, it’s illegal to apply retaliatory tariffs in response to tariffs applied pursuant to a WTO judgment.  The French and EU threats regarding the WTO-permitted tariffs on the Airbus affair clearly demonstrate EU (and French) bad faith by themselves. Coupled, though, with the Eu’s refusal to discuss the no-tariff offers already on the table, it’s clear that the EU has no intention at all in dealing honestly with us on trade.

Our own effort at good-faith negotiation is just as clear:

The WTO had approved up to 100% tariffs, but the US decided to limit the tax.

Raise the Price

Posted on by
Reply

…of a product, and with that, lower demand for it.  This is the sort of thing taught in high school introductory economics courses.  One way to raise the price is to raise taxes related to it, and to reduce tax deductions related to it.

The Manhattan real estate market [a generally hgh-end market] stumbled in the third quarter of 2019, new reports show, as prices plunged and fewer buyers were willing to purchase higher-priced properties in the wake of two recent tax increases.
The median sales price for properties fell 17% from the same quarter last year…. The average sales price dropped 12%….
Condo sales fell 8%….

Maybe this had something to do with it:

In July, New York City increased its mansion tax—a progressive tax that applies to home sales of more than $1 million—to a maximum of 3.9%, up from a flat-rate of 1%. The tax rates vary from 1.25% for $2 million sales, to 3.9% for sales of $25 million and higher. The city also increased a one-time charge on properties worth more than $2 million—known as the transfer tax.

And maybe the $10,000 cap on state and local tax (SALT) imposed by the 2017 tax reform bill is having an impact.