Tag Archives: economics

There are Bribes

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…and there are bribes.  Hong Kong Chief Executive Carrie Lam tried to bribe the good people of Hong Kong the other day.  She gave her annual address on her policies for the coming year, and in it she “promised” (because we’ve seen the value of her commitments in her promise to completely withdraw and rescind her draft extradition law, a promise on which she has since welched)

to boost the supply of low-cost homes, offer mortgage assistance for first-time buyers, and increase mass-transit fare subsidies

if only Hong Kong’s people would just shut up, go home, and submit.

Those folks didn’t, and don’t, believe her.

Mrs Lam’s speech this week “has not really focused on the protest itself,” a 26-year-old demonstrator…said Sunday.

And tens of thousands of Hong Kong’s finest hit the streets again Sunday, to be met with tear gas and water cannon firing abrasive, dyed liquids shot at them by Hong Kong’s increasingly thuggish police.  It’s true enough, some demonstrators also have resorted to violence—lighting fires in street intersections, trashing some store fronts, the rare Molotov cocktail tossed at those police.  It’s also true enough that incitement to violence, even when the incitement comes from police, is not, by itself, an excuse for responding with violence.

However, given that Lam and her city government have utterly ignored the desires of the people over whom she reigns as PRC President Xi Jinping’s satrap, their increasing frustration and violence are completely understandable.

Lam’s bribes, which insult those citizens’ integrity and intelligence, only add fuel to that frustration.

Costs of a Strike

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There’s a lot of discussion about the costs of the UAW’s strike against GM.  The Wall Street Journal is an example:

Economists say the cascading effect of lost wages, production, and employment will likely linger even if the strike ends….

And

…suspended work at another two dozen company-owned parts warehouses and distribution centers and led to temporary layoffs of nearly 10,000 GM factory workers not represented by the UAW….

And

Striking GM workers also are pulling back on spending, having now lost a month’s worth of company paychecks. Many are trying to get by on $275 a week, the strike pay offered by the UAW to provide some financial assistance. That figure is a fraction of their regular pay, which ranges from $630 to $1,200 for a 40-hour week.

And

120 of GM’s direct suppliers furloughed some 17,000 workers in the US during the strike….

And the damage from the UAW’s action has spread even farther, as this example illustrates:

Sam Kassab, 65, owns the Chene Trombly market where he sells food and liquor close to GM’s Detroit assembly plant. The strike is costing him between 10% to 15% of his usual business, Mr Kassab said, with most of that caused by layoffs at the supplier factories nearby.

No one, though, is talking about the cost of the strike to the union—not the workers, but the UAW itself.  Who, or what, is propping up the UAW, covering its costs, as it prosecutes it blockage of GM’s ability to function at all unless the union gets its way (with all the resulting collateral damage to suppliers, about which the UAW so plainly cares not a whit)?

And another discussion not being held: how will the UAW make whole those collaterally damaged suppliers and their workers?

Lack of Understanding

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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

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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

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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.