Category Archives: cpe blog

The Pay’s The Thing: How America’s CEO’s Are Getting Rich Off Of Taxpayers

By Susan Holmberg

It’s proxy season again, and we will soon be deluged with news profiles of CEOs living in high style as our ongoing debate on CEO pay ramps up. The floodgates opened on April 12th, when the New York Times released its annual survey of the 100 top-earning CEOs. Lawrence Ellison from Oracle Corporation led the list again with over $78 million in mostly stock options and valued perks, an 18 percent drop in pay from last year. Poor Larry. Read more

Can The Federal Reserve Chair Take On Wall Street?

By Danish Khan

YellenStiglitz

The recent speech by the new Chair of the Federal Reserve, Janet Yellen, was remarkable in multiple ways. First of all, Ms. Yellen acknowledged that working people are still suffering from the recent economic crisis and the recovery is at best incomplete. She also gave a precise number of the unemployment rate that can be sustained while maintaining a stable inflation rate, and in her estimates that number is around 5.2 percent to 5.6 percent. This number is simply too high, it should not be more than 4.0 percent. In simple terms, by accepting 5.2 percent to 5.6 percent, she is saying that if the number of unemployed people gets down to 8 million people out of the 155 million who are in the labor force, then the Federal Reserve will have achieved its ultimate target. I think the Madame Chair should be reminded that the primary task assigned to the Federal Reserve, as far back as the 1940’s, is to achieve full employment. Read more

The Path Forward for Worker Cooperatives

By Ricardo Fuentes-Ramírez

Day_90_Madison_Worker_Cooperatives_(5720017275)

Many activists have turned to developing and supporting Worker Cooperatives as a fundamental part of building alternatives to our current system. In one of his recent books, economist Richard Wolff explains that there are many types of cooperatives, and activists should specifically coalesce around those that are “workers’ self-directed enterprises,” or WSDEs. Not all worker-owned enterprises, worker-managed enterprises, or cooperatives are necessarily WSDEs. In some worker-owned enterprises, worker/owners simply leave the directing of the enterprise in the hands of a board of directors. Worker-managed enterprises are usually firms in which owners give more control to workers while expecting more profits or growth, serving the interests of the former, not the latter. Finally, cooperatives include a wide variety of institutions, including firms for cooperative purchasing or selling. Many cooperatives are simply groups of small capitalists purchasing inputs cooperatively. To be considered a WSDE, the appropriation and distribution of the product of the workers’ labor has to be done cooperatively, and the workers who cooperatively produce it are identical to those who cooperatively appropriate and distribute it. In these firms, workers collectively determine what the enterprise produces, the appropriate technology, the location of production, and all related matters. For Wolff, these types of worker cooperatives are the building blocks for a future alternative system. Read more

Matrix Algebra: How to Be Human in a Digital Economy

By Sara C. Kingsley and Dr. Mary L. Gray

Ray and Charles Working on a Conceptual Model for the Exhibition Mathematica, 1960, photograph.  Prints & Photographs Division, Library of Congress (A-22a)

Ray and Charles Working on a Conceptual Model for the Exhibition Mathematica, 1960, photograph.
Prints & Photographs Division, Library of Congress (A-22a)

“Certainly the cost of living has increased, but the cost of everything else has likewise increased,” H.G. Burt, the President of the Union Pacific Railroad, asserted to railroad company machinists and boilermakers.  For Burt, the “cost of everything else” included the cost of labor. His remedy: place “each workman on his [own] merit.”  In 1902, “workman merit” to a tycoon like H.G. Burt squarely meant equating the value of labor, or the worth of a person, to the amount of output each individual produced.  Union Pacific Railroad eventually made use of this logic by replacing the hourly wages of workers with a piece rate system.  Employers switched to piecework systems around the turn of the 19th century largely to reduce labor costs by weeding out lower skilled workers, and cutting the wages of workers unable to keep apace with the “speeding up” of factory production.   Read more

Kshama Sawant Is Right About Boeing

By Matson  Boyd

This past November, after Boeing threatened to leave Washington State, the state passed a bill to give Boeing the largest tax break any state has ever granted a company: $8.7 billion from now until 2040. Boeing wasn’t in financial difficulty. In fact, in December they gave $10 billion back to shareholders in the form of a stock buy-back. Instead it was relatively routine extortion, part of the accelerating race to the bottom that has transferred massive wealth from communities to corporations. Most analysts acknowledge that this is an absurd situation, the only divide is between those who think there is nothing we can do, and those who say it is time to take a stand.

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Seattle City Councillor Kshama Sawant (Wikimedia Commons)

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Build Schools, Not Drones

By Danish Khan

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Most economists would describe contemporary times as an epoch of austerity. Whether it is public education or healthcare, enormous pressure has been exerted by the right wing to cut government spending in order to reduce the budget deficit. But interestingly, advocates of austerity always pick those social programs for spending cuts which are directly related to the lives of working people in America, e.g. unemployment insurance, food stamps, subsidized student loans, etc.. The supporters of the austerity try to portray themselves as sincere in ensuring the reduction in government spending but the reality is they are only interested in waging class war against working people of America. Read more

What’s going on in Venezuela? Media Manipulation and Economic War

By Ricardo Fuentes-Ramírez

A burning street barricade (Roberto Gil)

A burning street barricade (Roberto Gil)

The violent opposition protests that erupted during February 2014 in Venezuela are difficult to comprehend relying only on the mainstream media. One of the main sources of this difficulty is the significant number of exaggerated, manipulated, or uncorroborated social media postings. These postings are best exemplified by the number of images from police brutality from other countries that are shared claiming they are from Venezuela in order to discredit the current government. Steve Ellner’s article on Green Left and Pablo Vivanco’s article on BASICS News are recommended in order to give some context on these protests and their aftermath. However, another complicated subject is the economic problems that are mentioned as the causes of these protests, specifically inflation and basic good shortages. Therefore, it is useful to go over some articles that discuss these issues in more depth. Read more

A Higher Minimum Wage WILL Help the People It is Intended to Help

by David Kotz

Whenever someone proposes a measure to benefit working people, the establishment has the same reply: “That would only hurt the very people you are trying to help.” This applies to proposals to raise the minimum wage, now just $7.25 an hour at the federal level. Of course, the opposition of the rich and powerful to a higher minimum wage could not be because it would redirect part of the profits to hard-working, low-wage workers. No, they insist that raising the minimum wage would only cause low-wage workers to lose their jobs. When rich folks tell such tales, there is reason to be skeptical. Read more

The Trouble with Comcast (and what we should do about it)

by Anders Fremstad

Comcast, America’s largest cable provider, is acting in a way that should worry consumers and citizens.  First Comcast announced its plans to merge with Time Warner, America’s second largest cable provider. Paul Krugman opposes the merger, but its not like the cable providers currently compete.  As Comcast’s CEO notes, Comcast and Time Warner “do not operate in any of the same ZIP codes.”  That’s old news to just about anyone who has “shopped around” for cable and internet services and found that they have little choice.  Now, Comcast has announced a deal with Netflix to provide the site with a faster connection, for an unknown price.  Comcast’s recent actions highlight the problem of monopoly in the media industry.  It also provides an opportunity for discussing a solution.  There is a good economic case for forming a public utility, regulated or run by government, that would provide Americans with a better and cheaper internet access and free streaming of television and film.

Netflix has transformed how we watch television and movies, liberating subscribers from advertisements and the channel guide.  The website for streaming videos has helped usher in a golden age in TV dramas, building up fan bases for shows like Breaking Bad, and producing its own like House of Cards. Netflix recently produced The Square, a documentary about the Egyptian revolution, which has given independent filmmakers some hope that the Netflix might provide both an audience and funding for their films.

But there are real limits to how much Netflix can and will change the media industry on its own.  Comcast and the other local cable monopolies own the connection between Netflix and its subscribers.  A court recently struck down the FCC’s net neutrality rules, allowing the cable companies to slow down internet speeds for sites that don’t pay up.  And even if citizens win back net neutrality, cable companies can charge so much for internet-only access that consumers save little by ditching cable television.  

Moreover, although Netflix is innovative, it is motivated by the same monopoly profits as Comcast and Time Warner.  The company has amassed huge wealth for its investors.  Netflix stock is now valued at over $430 a share last Friday, up from less than $100 in Jan 2013.  Netflix only buys streaming rights for shows and movies that cost less than they will generate for the company, so most films aren’t available online.  (A recent headline from The Onion jokes: “Netflix Instant Thinking About Adding Good Movie”.)  And, of course, Netflix is only available to those families that can afford a subscription, on top of the price of broadband internet.

So what is to be done about our media monopolies?  Economics provides a good idea of how to provide people with internet service and quality content at a good price, despite what some people might think.

The first element of an efficient utility policy would be for the government to regulate or run internet providers like Comcast and Time Warner.  We shouldn’t let these companies charge rates far above the actual cost of the service.  How do we know these monopolies are gouging consumers?  First, they generally lure consumers with teaser rates and then jack up the prices once you’re hooked.  Second, in the handful of cities where internet providers actually compete, Google Fiber offers regular broadband internet for free (after an one-time installation fee).  It’s not rocket science.  Local cable monopolies don’t provide Americans with a good service, because they have almost no competitors.  However, if we regulate these monopolies or set up our own public internet utility, there is absolutely no reason that we cannot provide our homes with reliable, affordable internet in the same way they provide our homes with reliable, affordable electricity, gas, or water.

The second element of a rational utility policy is using public dollars to fund content providers.  Traditional, ad-funded television is technologically obsolete, and we should now build on the Netflix model and create a public streaming service.  It should provide all Americans free access to all shows and movies, since the marginal cost of watching any video, once it has been produced, is zero.  Everyone would be able to watch whatever they like, whenever they like, without wasting our time watching commercials.  The public utility could compensate content providers based on how many people view the content, maintaining (and probably intensifying) competition among them.  

But how much would this all cost?  The answer is, not that much, especially when we compare  it to how much Americans currently pay for restricted, ad-ridden content.  For example, Hollywood earns about $30 billion annually from American consumers.  Right now, Hollywood earns its revenue through intricate price discrimination: first it shows movies in the cinema, then it releases them on DVD, and finally it sells them to TV channels, which usually break them up with plenty of commercials.  Hollywood charges big fans much more watch films on Blu-Ray or in 3D.  A public streaming service would liberate Hollywood and movie lovers from this madness.  Let studios and independent filmmakers upload their movies, and the public service could compensate the producers based how many people watch the film (and, perhaps, how they rate it).  We can keep paying moviemakers $30 billion a year.  But for that price — which comes to $8 per person per month — every American would be able to indulge in Hollywood’s contribution to mass culture on their own terms.

Of course, enacting a rational utility policy will be politically difficult.  There would certainly be losers, from the current cable providers to merchants of pirated media.  But there would be many, many more winners.  So let not just fight Comcast’s plan to gobble up Time Warner and extort Netflix.  Lets start a conversation around designing an efficient utility policy for the 21st century.

 

Secessionism of the Techno-Riche

By Matson Boyd

800px-Dubai_workers_angsana_burj

Fed up with the encumbrances of working in the United States, many in Silicon Valley have taken to dreaming of seceding or leaving to create their own state. Its not hard to imagine that someday the Techno-Riche could succeed in carving out or purchasing their own state. But what would such a society look like? Perhaps Dubai is the best comparable.

Like Dubai, such a techno-utopia would have to rely on a vast supply of imported labor to build the structures and keep society functioning. And like Dubai, Silicon Valley speaks a language that erases the contributions of those workers. At a recent conference, Balaji Srinivasan spoke “We need to build opt-in society, outside the US, run by technology.” Nevermind that labor is necessary even in our most technologically advanced places, Balaji has already removed it from the picture.

And his “opt-in society” is hardly a new idea, libertarians have long dreamt of such a world. Conveniently, in libertarian “opt-in” societies no company has to help take care of its workers after it uses them up, or help in the education of the next generation. It’s optional and forgotten.

The increasing techno-wealth in the Bay Area is contributing to a rise in class tensions, with the techno-riche less and less willing to stomach sharing the world with the rest of us. Former AngelHack CEO Greg Gopman apologized earlier this year for a series of posts on Facebook in which he said that homeless “trash” had no place in the “heart of our city,” San Francisco. He wrote:

The difference is in other cosmopolitan cities, the lower part of society keep to themselves. They sell small trinkets, beg coyly, stay quiet, and generally stay out of your way. They realize it’s a privilege to be in the civilized part of town and view themselves as guests. And that’s okay.

Thankfully Gopman apologized, but one can find many examples of these sentiments in his community, where the techno-riche press ahead to build their “opt-in” world. Let’s not let them build it.

 

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