Posts Tagged ‘profits’

160503115816-airline-fees-780x439

A couple of weeks ago, I discussed a recent study about class and air rage. In the meantime, things have only gotten worse—on the ground.

Most people attempting to fly these days are forced to endure long security lines, all the while knowing that airlines are raking in enormous profits ($25.6 billion last year, a 241-percent increase from 2014) with low fuel costs, lots of additional fees (for baggage, reservation changes, food and drink, and much else), and shoe-horning economy-class passengers into tighter and tighter spaces.

Gail Collins is absolutely right:

The airlines have maximized profits by making travel as miserable as possible. The Boeing Company found a way to cram 14 more seats into its largest twin-engine jetliner by reducing the size of the lavatories. Bloomberg quoted a Boeing official as reporting that “the market reaction has been good — really positive.” We presume the market in question does not involve the actual passengers. . .

Rather than reducing the number of bags in security lines, the airlines would like the government to deal with the problem by adding more workers to screen them. And the perpetually beleaguered Transportation Security Administration is going to spend $34 million to hire more people and pay more overtime this summer. Which, it assured the public, is not really going to solve much of anything.

(Who, you may ask, pays for the security lines anyway? For the most part you the taxpayer do. Also you the passenger pay a special security fee on your tickets. Which Congress tends to grab away from the T.S.A. for use in all-purpose deficit reduction. I know, I know.)

A spokesman for Delta Air Lines, which took in more than $875 million on baggage fees last year, told The Atlanta Journal-Constitution that bowing to the extremely modest Markey-Blumenthal request for a summer suspension of the baggage fee wouldn’t “really help alleviate a lot.” It would also, he said, require a “considerable change to the business model.”

Heaven forfend we mess with the business model.

So, this summer, we can expect more rage not only in the air, as economy-class passengers are forced to put up with physical inequality on airplanes, but even before they get on the plane, knowing the extra fees they pay and the long security lines they’re compelled to endure are part of the airlines’ “business model.”

And that model is not about people, but only about profits.

1ef3644f364462985d74b740914f4e8d

The clear reemergence of and spreading interest in anti-establishment politics in the United States (together with the electoral success of left-wing and right-wing parties in a growing number of European nations) can be blamed squarely on capitalism.

As I see it, it’s the combination of the failures of capitalism and the unwillingness of the existing economic and political elites to effectively deal with those failures that explains the rejection of mainstream (center-right and center-left) candidates and policies and the turn to alternatives. The failures of capitalism go back some four decades—including stagnant wages, rising indebtedness, and growing inequality—and culminated in the crash of 2007-08—after which wages remained stagnant, people were not able to rid themselves of debt, and inequality continued to grow. What recovery there has been in recent years has mostly been captured by large corporations and wealthy individuals, while economic growth has remained slow. Meanwhile, economic elites have continued business as usual (moving production and jobs at will around the world, more interested in lowering costs, avoiding taxes, and inventing new labor-saving technologies than anything else) and political elites do everything they can to save large financial institutions and a business-friendly environment and imposing the costs—of the bailouts, the continued opening and expansion of markets, the refugees from war-torn zones, and much else—on the working and unemployed populations of their nations.

From this perspective, it’s no surprise that, in the United States, both Donald Trump and Bernie Sanders have attracted so much support—or, that, in Europe, both the Left (e.g., in Greece and Spain) and the Right (e.g., in Poland and Austria) are increasingly able to challenge mainstream parties.

To be clear, this is not to say that politics—political parties and movements, voter attitudes and behaviors, candidates and coalitions—are solely determined by the economy (or some subset of the economy, like class interests). There’s a great deal more that affects the rise and fall of political ideas and campaigns—from political practices and institutions through discourses and identities to media and communication technologies. Still, the failures of capitalism and the unwillingness of economic and political elites to solve or mitigate the effects of those failures to the benefit of the majority of the population have played a significant role in the current disenchantment with mainstream parties and the success of left-wing and right-wing alternatives in the United States and Europe.

But it is interesting that there appears to be a determined effort to absolve capitalism of any responsibility for these new political events. Both Greg Ip (writing for the Wall Street Journal) and Peter Eavis (for the New York Times) have attempted to argue that “it’s not the economy” that explains politics, but something else. And, if it’s something else, it can’t be the failures of capitalism that are to blame.

For both writers, “the economy” is economic growth, specifically growth in GDP. In Ip’s case, the difference between the 1960s (when social disarray and political dissension were accompanied by solid growth and “shared prosperity”) and now (when similar levels of voter discontent are occurring with slow growth and high levels of inequality) means we can’t make sense of electoral grievances in terms of economic discontent. For Eavis, most voters are currently “doing sort of O.K.” (with thousands of new jobs and a low unemployment rate). Therefore, he argues, this election can’t really be about the economy.

Desperate as they are to make such an argument, both Ip and Eavis miss two key issues. First, the economy is not just GDP growth. It’s also, at least for the majority of the population, about a great deal more: the tradeoff between wages and profits and the level of inequality, the ability of the government to capture portions of the surplus and to use it for social programs, the degree of security concerning jobs and the quality of the communities in which people live and work, and a great deal more. And second, capitalism doesn’t always exert its effects in the same way: in the 1960s, when both wages and profits were rising and the possibility of using part of the surplus to improve society (both for those who had prospered and those who had been excluded from that first. “Golden Age” decade of postwar growth), capitalist success created rising expectations (including the rethinking of aspects of capitalism that had previously been deemed successes); while now, in the midst of capitalism’s multiple, spectacular failures, the opposite is true (as people demand redress for their low-paying jobs, crumbling infrastructure, obscene levels of inequality, and the corruption of democratic politics by large corporations and wealthy individuals).

So, no, capitalism can’t be let off the hook. It creates and perpetuates the problems it claims to address. And even though economic and political elites want to believe otherwise, holding firm to the notion that people should be satisfied with current economic arrangements, recent developments in the United States and Europe suggest they’re not.

Not by a long shot.

BlogImageGiniCoSP052316

The folks at the Federal Reserve Bank of St. Louis find a correlation between inequality and stock prices. And, to their credit, they get half of the story: rising stock prices (and therefore increasing returns on equity wealth) have contributed to increasing inequality in the United States.

Comparing stock prices with the Gini coefficient provides further evidence of financial movement with income inequality. The steady increase in U.S. income inequality from the 1970s through the early 2000s was accompanied by strong gains in the stock market. The S&P 500 composite index grew from 92 in 1977 to over 1476 in 2007—about a 140 percent increase. These gains were huge. By comparison, the gains in the prior 30 years (1947-77) were only 50 percent. The correlation between the Gini coefficient and stock prices from 1947 to 2013 is strongly positive. As stock prices rise, the gains are disproportionately distributed to the wealthy. Lower- and middle-income families who are also wealth-poor are less likely to expose their savings to the higher risks of equity markets.

What they don’t get is the other side of the story: rising inequality has caused higher stock prices. A combination of higher profits for large, publicly traded corporations (which has served to boost the underlying returns on equity and allowed corporations to engage in stock buybacks) and a larger share of income going to the top 1 percent (as their share of the surplus has risen, which allowed them to purchase even more shares) fueled the increase in stock prices.

Once we put both sides of the story together, the conclusion is clear: rising inequality in the United States has been both a condition and consequence of rising stock prices from the late-1970s onward.

179671_600

Special mention

179758_600 Helicopter_money_05.20.2016_normal

mcfadden-22-5

Special mention

Clay Bennett editorial cartoon 981193_1_cartoon160516-01_standard

8_Questions_About_Self-Driving_Trucks-Creative_Safety_Supply-738

I was perplexed. I couldn’t figure out what all the fascination was with self-driving cars. Why all the investment in designing cars that could be operated with little or no hands-on attention by a human driver?

So, I asked a friend what that was all about, and he quickly responded: it’s really about trucks, not cars.

BT-AE739_TRUCKP_9U_20151012190008

In a country whose system of transporting commodities is insanely organized around highways and trucks (as against, e.g., railroads and trains), and where truck-drivers’ pay is once-again rising (average pay for long-haul truckers jumped 17 percent since the end of 2013, as against the 4-percent increase in average U.S. wages), it makes perfect—profitable—sense to design trucks that can operate without drivers.

Higher costs are driving shippers to reconfigure their supply chains. In August, Whirlpool Corp. opened a distribution center near a railroad spur outside Chicago so the company could load appliances directly from trains, avoiding the need to hire trucks. The amount of goods moved by train is also increasing—but trains can’t deliver to as many locations as trucks, which carry some two-thirds of cargo nationwide.

“Given the fact that the cost of transporting products over the road is rising, it has kind of forced us to rethink our distribution network strategy,” said Jim Keppler, Whirlpool’s vice president of integrated supply chain. “Driver pay is a big part of that.”

Self-driving trucks mean fewer workers (with their wages and benefits), more hours on the road (since robots don’t need to rest), and ultimately more control over driving and delivery (even when truckers are themselves wired these days to eliminate detours, stops, and other departures from more-profitable operation).

Apparently, it’s already legal to drive across Texas and Nevada with nobody at the wheel. . .

fredgraph-1fredgraph

If you look very closely, you’ll see an ever-so-slight turnaround in the capital and labor shares in the past year.

The profit share of national income has fallen (from 15.4 percent in the second quarter to 13.7 percent in the last quarter of 2015) while the wage share has risen (from 49.6 percent in 2014 to 50.4 percent in 2015).

So, Neil Irwin is correct:

In the last two or three years, as the economy has firmed up, workers have regained some of that bargaining power they lost in the recession. But they have not, not at this point at least, gained the power they lost over the last three decades.

Indeed, the profit share remains much higher than it was 30 years ago (6.8 percent in the third quarter of 1986) and the wage share much lower (it was 54.6 percent in 1986).

Remember, then, before releasing those balloons, the history of capitalist instability. It tells us that an economic downturn will—once again, with a regularity that continues to escape the notice or understanding of mainstream economists and politicians—reverse those temporary capital losses and labor gains.