Pluralistic: 20 Nov 2021

pluralist
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Originally published at: Pluralistic: 20 Nov 2021 – Pluralistic: Daily links from Cory Doctorow


Today's links


A WWI-era anti-profiteering editorial cartoon featuring an obese Uncle Sam sitting on a throne holding a whip labeled 'wage slavery'; Sam's belly once bore the words 'Fattened by the horrors of war,' but 'war' has been covered by a white rectangle containing the word 'covid.'

Inflation or price-gouging? (permalink)

You can't turn around these days without bumping into scary inflation talk, and with good reason: asset bubbles, supply chain shocks and energy geopolitics are on their way to wiping out most or all of the wage gains eked out by low-waged workers during the pandemic's labor shortage.

The underlying message of this scare-talk is that we've been too generous with "essential workers," by allowing them to inch a little closer to a living wage, and now it's time to roll that back, for their own good. What's the point of making $0.50/h more if it costs you $1/h more just to eat, sleep and breathe?

https://www.washingtonpost.com/opinions/2021/11/15/inflation-its-past-time-team-transitory-stand-down/

The last time this happened, finance ghouls like Larry Summers made the call to sacrifice Americans' savings and homes to keep the finance sector fat an happy. Today, he's a major player in the Manchin Synematic Universe, insisting that we can't save the planet or the people who do the essential work of keeping us alive. No one should listen to anything Larry Summers says. To (mis)quote Mary McCarthy, "Every word he writes is a lie, including 'and' and 'the'."

And yet, prices are going up, and people are feeling the pain. If it's not being caused by giving essential workers a minuscule raise after 40 years of wage-stagnation, what's really going on?

In a word: Profiteering. Giant companies are hiking prices because they know that they have a monopoly, and because they know that their customers will accept higher prices because "everyone knows we have an inflation problem."

That's not a conspiracy theory. Corporate execs are bragging about this stuff on their earnings calls, as Dominick Reuter and Andy Kiersz write for Insider.

https://www.businessinsider.com.au/corporations-using-inflation-as-excuse-to-reap-fatter-profits-reich-2021-11

Colgate-Palmolive CEO Noel Wallace: "What we are very good at is pricing. Whether it’s foreign exchange inflation or raw and packing material inflation, we have found ways over time to recover that in our margin line."

https://www.fool.com/earnings/call-transcripts/2021/10/29/colgate-palmolive-company-cl-q3-2021-earnings-call/

"Good at pricing" is my new favorite euphemism for profiteering.

Unilever CFO Graeme Pitkethly: "Consumer-facing price is the last lever we normally use to manage inflation. We find that taking several small price increases is more effective than one large price jump."

https://www.fool.com/earnings/call-transcripts/2021/10/30/unilever-plc-ul-q3-2021-earnings-call-transcript/

Unilever was already staggeringly profitable before the pandemic; it has increased its profits by 4-5% since.

Its archrival, Proctor and Gamble, has also figured out how to raise prices rather than taking a narrower margin, as CFO Andre Schulten puts it: "We have not seen any material reaction from consumers, so that makes us feel good about our relative position."

Retailers are getting in on the act. Kroger CFO Gary Millerchip: "We’ve been very comfortable with our ability to pass on the increases that we’ve seen at this point, and we would expect that to continue to be the case."

https://www.wsj.com/articles/u-s-companies-bet-shoppers-will-keep-paying-higher-prices-11635067802

In other words, we don't face higher prices because of supply shocks or labor demands – supply shocks and labor demands are the pretense that corporate America is using to hike prices.

https://www.businessinsider.com.au/big-companies-keep-bragging-to-investors-about-price-hikes-2021-11

Corporate America has a lot of room to absorb prices; across the board, the historically unprecedented fat margins these firms extracted before the crisis have grown. Two thirds of US public companies have increased their profits since 2019. 100 of the top US companies have grown their profits by 50%.

There's a simple reason companies are able to pass these price hikes onto us: they face no competition. Most industries are dominated by five or fewer companies:

https://www.openmarketsinstitute.org/learn/monopoly-by-the-numbers

As Reuter and Kiersz write, when an industry is dominated by just a few companies, they don't have to explicitly collude to prices – Coke and Pepsi don't need to meet in a smoke-filled room to coordinate their price-hikes. Their C-suites are filled with people who used to work for their arch-rivals. They see each other at dinner parties and weddings and funerals. They're executors of each others' estates and godparents to each others' kids.

A lot of people were horrified by the sight of all the tech leaders gathered around a table at the top of Trump Tower for a 2017 meeting and photo-op. They wanted to know why the leaders of these companies were all meeting with a racist compulsive liar and authoritarian like Trump.

Fair question, but if you want to ask a more important question, you should wonder how it is that all the tech leaders fit around a single table. Once an industry is concentrated enough that all its leaders will fit around a table, it's inevitable that they will gather around a table, somewhere.

We treat the leaders of these concentrated industries like they're archrivals, separated by unbridgeable gulfs. My grandmother used to say, "Does Macy's tell Gimbal's?" The implication being that these two bitter enemies couldn't even exchange a polite word, much less collude on a combined commercial strategy.

But then you get Sheryl Sandberg walking out of Google's executive row and into a top role at Facebook. If the storied rivalry between the ad-tech duopoly was real, that would be like the CEO of Perdue Farms quitting his job to run PETA. But no one batted an eye.

Or take the Disney-Fox merger. As I wrote in my July Locus column: "From their longstanding rivalry, you’d think they were the Montagues and Capulets, but if that’s so, then that means Rupert Murdoch and Bob Iger were Romeo and Juliet, star-crossed lovers whose desire for one another was so deep and sincere that they brought peace between their warring great houses."

"Or, you know, maybe it was all bullshit."

https://locusmag.com/2021/07/cory-doctorow-tech-monopolies-and-the-insufficient-necessity-of-interoperability/

I know which one I believe.

Inflation scare-talk is a whip that corporations and corporate leaders use to justify falling wages, rising mortality, and the race to the bottom in public services. As Bernie Sanders said when he voted against giving the fraud-riddled, bloated US military another $778b in public money, no one talks about inflation or budget constraint when we're talking about the Pentagon's baby-killer budget.

https://vermontbiz.com/news/2021/november/16/sanders-statement-778-billion-defense-spending-bill

To understand the real relationship between monetary policy, fiscal policy and inflation, you need to understand where money comes from (governments spend it into existence) and what taxes do (annihilate money to create fiscal space for public programs). Modern Monetary Theory, in other words.

One of the best MMT explainers is Stephanie Kelton, and she just did a superb hour-long podcast on this with Michael Moore:

https://www.michaelmoore.com/p/an-inflated-sense-of-inflation-w

This day in history (permalink)

#15yrsago GeekCorps builds cantenna WiFi TV network in Mali https://web.archive.org/web/20061213100911/http://www.geekcorps.org/2006/11/the-geekcorps-cantv/

#1yrago Google's monopoly rigged the ad market https://pluralistic.net/2020/11/20/sovkitsch/#adtech

#1yrago We're already (badly) forgiving student debt https://pluralistic.net/2020/11/20/sovkitsch/#student-debt


Colophon (permalink)

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My problem with MMT isn’t that it doesn’t make sense. It does. I find the central ideas, as you summarise them and as I understand them, clear, simple and intuitive. It makes sense.

My problem is that, as far as I can tell, the majority of experts in the field disagree, and the shape of MMT advocacy feels in many ways like that of Flat Earth Theory, Climate Denialism or Anti-Vax.

And when I say “experts”, I’m not talking about political pundits, or even the one fringe but genuine academic that a politician has dug up and wheeled out to defend a position. The fact that an elected politician can find a contrarian scientist to say that the planet isn’t warming, or even that it isn’t round, isn’t proof of anything. If a politician can find a university professor to say that MMT is wrong - well, they might be doing that in order to defend a personal ideology, or the bank balances of their backers, or just to pander to a specific group of ignorant voters, and that doesn’t bother me.

But when 97%0 of academics with no political skin in the political game look at a “theory” that is clear, simple and intuitive to people with no training in the field and say “no, it doesn’t work that way”; while the people pushing it are internet ideologues claiming that the majority of experts are wrong, or knowingly covering the truth up, and here’s “secret” knowledge that “they” don’t want you to have, and don’t you feel special now that you know how the world really works? - well, that just pushes my bullshit detector all the way into the red zone and sets off the klaxons and flashing lights.

MMT feels right. A large part of me wants to accept it. But as someone with a degree in the sciences, when a layperson comes along and says that the majority of people who’ve studied a subject academically for decades all have it wrong, and I look at how that plays out in the area I do know something about, I just can’t.

0 As in the 97%. The number for economists might not be that high, but I get the impression it’s still pretty high.

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I think you’ll find that the majority of orthodox economists agree with MMT’s core tenet - about where money comes from and where it goes when we tax it. It’s not a theory, it’s an accounting identity, and you can just look at the order of operations in government spending to verify it.

As to the rest, I’m comfortable with holding a heterodox view on economics, since the orthodox view is so lavishly and visibly wrong so often. Take the consumer welfare theory of antitrust - it’s been an absolute failure and yet a large number of economists say that there is no alternative, that without an “objective” consumer welfare yardstick, enforcement is impossible.

This is one of those demands-dressed-up-as-observations. “There is no alternative” usually means, "I will tolerate no discussion of alternatives so don’t even try to raise the subject.

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Karellen,
If anyone described the spending taxing sequence as anything other than spending preceding taxing or described Treasury sales (borrowing) as anything other than people with dollars moving those dollars from a checking account to a savings account, then regardless of their economic training, they would be wrong. Much of MMT is the description of Fed accounting. See Mosler’s White Paper MMT White Paper - Mosler Economics / Modern Monetary TheoryMosler Economics / Modern Monetary Theory
“Secret knowledge” is a straw man that anyone with an understanding of the basic ideas of MMT would not claim or rely on. See Kelton’s Can Taxes and Bonds Finance Government Spending? | Levy Economics Institute.
Thank You

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