Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. The Doha Round: A Bad Deal All RoundAn opinion piece in today's Guardian by Tim Wise (former D&S editor, now of the Global Development and the Environment Institute at Tufts) and Kevin Gallagher:
Labels: Doha round, GDAE, Tim Wise, WTO Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). More on the "Fire Industrial Comlex"Another report on the high cost of private contractors fighting fires, often saving rich people's homes, with public money. This article from the LA Times was probably the source of the Marketplace story we posted on earlier this week.Labels: forest fires, privatization Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Forest Fires, Privatization, Prison LaborThe business program Marketplace, from American Public Radio, whose economic coverage usually leans pro-business (or cheerily "neutral," which is to say, ideological), had an interesting segment today about the business of fighting forest fires. The report discusses the privatization of forest-firefighting, and the huge bills private contractors submit, including $1,000 per day for a fancy "briefing room" for a two-month-long forest fire.Click here to hear the segment. Also, as the Christian Science Monitor reported recently, and USA Today reported a while back, prisoners are often key to fighting forest fires these days, for piss-poor wages: "We save million-dollar homes for a dollar an hour," said Ricky Frank, 33, doing a 10-year stretch for theft. "You get to help people. It's better doing this than being locked up." As usual, prisoners are better at getting at what's going wrong. The objection should not be to prison labor per se (on the contrary, enforced idleness is inhumane), but to the piss-poor wages, and to prisons per se. (Hat-tip to Dennis Claxton on lbo-talk for pointing out these articles.) Labels: forest fires, prisons, privatization Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). How hospitals are killing E.R. patients.This is from Joel A. Harrison, author of our recent feature, Paying More, Getting Less, which provides a novel argument in favor of a single-payer health care system.The issue of long waits at emergency rooms has been in the news, and even the Institute of Medicine has looked at the problem of "divert status," where ambulances are told by the nearest emergency room they are filled up and they need to go to another more distant emergency room. One story told of an ambulance spending 45 minutes before finding an emergency room willing to accept a patient. Keep in mind that divert status has nothing to do with being insured! Some of the reasons are: 1. Because emergency rooms can't refuse treatment, they lose money on the uninsured, and many hospitals are closing their emergency departments; 2. Patients who are uninsured or underinsured use emergency rooms for primary care and/or wait until their conditions get serious, thus ending in emergency. Now a new article in the online magazine Slate adds one more nail in the coffin of the profit-motive in health care, which puts us all at risk. Notice that in "socialized-medicine" England, the government requires and enforces that 98% of patients be seen within 4 hours. Of course, since everyone has health insurance and a family practitioner, one of the reasons for crowding is eliminated. Notice also that American hospitals are fighting tooth and nail against even keeping waiting statistics. A recent report by the Commonwealth Fund put United States dead last in ability to get medical attention at night and on weekends among advanced industrialized nations, and poor placement in getting to see primary-care physician within 48 hours.
Labels: health care, single-payer, Slate Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). What free markets?Our July/August issue is (finally) going to press; here is the Editors' Note for the issue:The government's response to the ongoing banking and credit crises is beginning to look like a massive redistribution of wealth from taxpayers and ordinary borrowers to the financial companies that got us into these crises in the first place—and to their executives, who profited handsomely along the way. It seems that policymakers and regulators are happy to take a hands-off approach to markets as long as stocks and other financial assets are appreciating—even if that appreciation walks, talks, and quacks like a bubble—but not when the stock market starts to go sour. The bailout of Fannie Mae and Freddie Mac is a case in point. On the one hand, the government has to back the mortgage giants' bonds, given the enormous number of mortgages they hold or guarantee (over $5 trillion), and given that investors in those bonds—including foreign central banks—have assumed that the government would guarantee them. Failure to honor the bonds would throw the U.S. housing finance system into chaos, hurting millions of families. But as Dean Baker of the Center for Economic and Policy Research has pointed out, the Treasury Department has also effectively promised a potentially huge bailout of holders of Fannie and Freddie's stock. That would be a bailout on an even larger scale than Bear-Stearns's earlier this year. Unlike the guarantee of the companies' bonds, this piece of the bailout is nothing more than a redistribution of wealth from taxpayers to shareholders who made risky investments. While the government—the public—is bailing these companies out, how about some conditions? Maybe the public should get to own Fannie and Freddie, following the lead of the British government, which nationalized failing bank Northern Rock earlier this year. At the very least, caps on executive pay would be nice. David Mudd and Richard Syron, CEOs of Fannie and Freddie, made a combined $30 million in salary and other compensation last year. The bailout of is part of the larger housing bill that also includes steps to address the foreclosure crisis. As Fred Moseley discusses in this issue, the bill's foreclosure provisions in fact amount to a partial taxpayer bailout of mortgage lenders, since refinancing is initiated by lenders rather than borrowers, and the federal government will guarantee the new mortgages. This, when lending companies were the ones who lured people into risky mortgages in the first place. Moseley reviews policies to cope with foreclosures and sorts out which ones will truly help homeowners at risk. Other issues in the headlines—food, oil—also expose the myth of the "free market." The "fundamentals" of supply and demand have clearly played a central role in the precipitous rise in global food prices, but so has the rush of so-called index investors into new, unregulated "over-the-counter" markets for commodity futures. In the case of the oil industry, supply and demand have never been a free-market affair. In this issue we also examine two of the biggest winners in an economy rigged to redistribute wealth upwards: the managers of private equity firms and hedge funds. The regulatory and tax advantages lavished on our wealthiest citizens make clear that the government is active in the rigging. Meanwhile, to read the editorial page of the Wall Street Journal, you'd think the big flow of money is from corporations into the public purse, as John Miller reveals in his critique of the Journal editors' stance on auctioning, rather than giving away, carbon credits. Our question is: what planet are they on? Labels: Dean Baker, Fannie Mae, food crisis, Freddie Mac, hedge funds, Northern Rock, oil, private equity Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Federal government trails 23 states on minimum wageThe latest Economic Snapshot from the Economic Policy Institute:The second part of a multi-stage hike in the federal minimum wage takes effect July 24, raising the wage from $5.85 to $6.55 per hour. But many states and the District of Columbia are a step ahead of the federal government when it comes to guaranteeing a fair wage. This week's Economic Snapshot illustrates which states have a higher-than-federal minimum wage. Read the rest of the Snapshot. Labels: Economic Policy Institute, minimum wage Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). We're not keeping upThis is from our pal J-P Ferguson:There's a good story by Louis Uchitelle, one of the Times's labor reporters, today on how the economic downturn has contributed to a decline in women's labor-force participation. (I know that household work should be included in any definition of the labor force. I agree that most modern service industries can only be understood as the commodification of previously unpaid domestic work. I'm working with the narrow definitions of the Labor Department for the moment.) Executive summary: Every recovery since the 1958 recession has ended with more women in the labor force (as a share of all women) than it started with. The 2001-2007 recovery saw a slight drop in participation, though, and that's expected to accelerate as the economy tanks. It's an interesting empirical phenomenon. You can see how the perceptions of previous decades shaped the interpretation of this data for several years. Academics and policymakers long perceived a large voluntary component in the growth of women's labor-force participation. The quest for social equality, status or something similar was seen as at least as important in drawing women out of the home and into the paid workforce as economic pressures were. Withdrawal from the labor force was also perceived to have a voluntary component: motherhood, spending time with the kids, etc. Yet of course there was always a counter-narrative based entirely on classic labor-market factors, such as declining real (and sometimes nominal) wages for male workers. I've mentioned before (and I'm hardly alone) that almost all the increase in Americans' real standard of living since the early 1970s has come from increased female labor-force participation. Even that, we think, may be chimeric, because an income scale doesn't correct for exactly the commodification of previously unpaid domestic work necessary to allow many women to operate in the paid labor force. But the bigger point still holds: to stay in place, many households had to add another wage-earner. Now we're finally noticing the other half of that story. If economic conditions are a better explanation for women entering the workforce than sociological aspirations are, then those economic conditions should also better explain women's withdrawal from the labor force. It's this shift in thinking that Uchitelle's article describes. I give the dude credit: he explains both the misconception and the realization. So do many of the researchers he quotes: “When we saw women starting to drop out in the early part of this decade, we thought it was the motherhood movement, women staying home to raise their kids,” Heather Boushey, a senior economist at the Joint Economic Committee of Congress...said in an interview. “We did not think it was the economy, but when we looked into it, we realized that it was.” I suspect several people are reading this and thinking, "How could they have ever thought that it wasn't the economy, Stupid?" But it's more complicated than that. The US labor force has been dominated by wage earners for about a century. For most of that time, women were disproportionately concentrated in a few industries and occupations. Remedying this, of course, was a major goal of the women's movement. One unintended impact of that odd distribution, though, was that women's employment was less sensitive to general swings in the business cycle than men's employment was. Thus the business cycle (however defined) was never as good a predictor of women's participation and pay as it has of men's.* Go back and look at my earlier post, for example, and you'll see that women's wages rose in the 1970s and early 1980s, against a declining economy, while men's wages declined. Thus the general business cycle's coming to dominate changes in female participation is an empirical change, not just the scales falling from researchers' eyes. The upshot is that though gender segregation is still widespread in the US, especially by occupation, it has decreased enough over the last generation that women as a group now resemble men in their vulnerability to business cycles. Talk about a bittersweet finding! This doesn't imply that women are paid or treated the same as men in all jobs, of course, As the article continues: The women, in sum, are for the first time withdrawing from work with the same uniformity as men in their prime working years. Ninety-six percent of the men held jobs in 1953, their peak year. That is down to 86.4 percent today. But while men are rarely thought of as dropping out to run the household, that is often the assumption when women pull out. “A woman gets laid off and she stays home for six months with her kids,” Ms. Boushey said. “She doesn’t admit that she is staying home because she could not get another acceptable job.” * If you remember Gary Becker's dictum that discrimination acts like a constraint on free-market activity then this makes complete sense. (I agree with Becker's metaphor, though I disagree with the ways he tried to push it.) Labels: Louis Uchitelle, recession, women's labor-force participation Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). IMF = DeathA new study in the journal PLoS of Medicine by Cambridge researcher David Stuckler reports that the rise in rates of tuberculosis in Eastern Europe is strongly associated with a country's receipt of loans from the IMF.The authors speculate that this a result of country's reducing their expenditures on health care to qualify for the loans. According to the NYT "The researchers studied health records in 21 countries and found that obtaining an I.M.F. loan was associated with a 13.9 percent increase in new cases of tuberculosis each year, a 13.3 percent increase in the number of people living with the disease and a 16.6 percent increase in the number of tuberculosis deaths. The study, being published online Tuesday in the journal PLoS Medicine, statistically controlled for numerous other factors that affect tuberculosis rates, including the prevalence of AIDS, inflation rates, urbanization, unemployment rates, the age of the population and improved surveillance." The report notes that every .9% increase in mortality from TB was correlated with a 1% increase in credit from the Fund . Labels: health care, IMF, New York Times, Tuberculosis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Companies Get $100 Million In SBA Contracts They Don't DeserveAccording to the Washington Post, a new GAO report identifies over $100 million in Small Business Administration contracts that have improperly been given to businesses falsely claiming to be located in economically distressed zones.Usually the businesses just set up a fake storefront in the zone, even if their real operations are thousands of miles away. However, the GAO submitted several test applications with completely bogus information, some listing a Starbucks shop for the main company address. Several of these contracts were approved. According to the article: SBA officials said they would work on their internal systems to improve the verification process. Last year, administration officials quashed legislation that would have required on-site visits of applicants and other measures to ensure businesses' eligibility, calling them "burdensome or undesirable."Incompetence and fraud at the SBA is nothing new under the Bush Administration. For a catalog of similar shenanigans from 2002-2005, see Christopher Moraff's The Incredibly Shrinking Company from our Jan/Feb 2006 issue. Labels: Christopher Moraff, Corporate Fraud, GAO, SBA Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). A Stronger Social Safety Net Would Free the FedThis is from the Wall Street Journal's Real Time Economics column:It's a widely held view that Chairman Ben Bernanke and his fellow policy makers are facing a worrisome mix of tepid growth, troubled financial conditions and rising price pressures, with few attractive options for fixing this toxic environment. The weak economy and market tumult call for rate cuts. But the energy-driven price gains and deteriorating expectations for future prices call for rate increases. Read the whole article. Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Statement on the Bailout of Fannie Mae and Freddie MacA statement from Dean Baker of the Center for Economics and Policy Research:The collapse of the housing bubble has put the survival of Fannie Mae and Freddie Mac in jeopardy, as those of us who warned of the bubble have long predicted. While there can be no question of supporting these mortgage giants at such a critical moment for the housing market, the public should place serious conditions on this support. These companies face bankruptcy because of the incompetence of their management. They should not be given unlimited access to taxpayer dollars without any strings attached. Read the full statement. Labels: affordable housing, Center for Economic and Policy Research, Dean Baker, Fannie Mae, Fredddie Mac, housing bubble Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Fannie Mae/Freddie Mac, RevisitedThe bailout of Fannie Mae and Freddie Mac that was announced yesterday was predictable. In fact, D&S collective member and frequent blog contributor Larry Peterson was on this story back in early May:The New York Times reported today that the two mega government-sponsored mortgage lenders, who have single-handedly kept the US mortgage market from sinking through the quicksand altogether since private mortgage finance dried up in the wake of the subprime crisis (they account for no less than 80% of mortgages bought by investors in the first quarter of 2008), may themselves require enormous taxpayer-financed bailouts if properties they hold continue to decline in value. Fannie and Freddie, who use their unspoken government guarantee to clinch cheap financing (which they do, to a degree, pass on to consumers), buy mortgages from banks and keep some of them on their books, while securitizing and selling the rest off (retaining the liability for repayment if consumers default). For example, Fannie Mae sits on an enormous pile of debt and outstanding loans (nearly $3 trillion), while investments, retained earnings and equity (or "core capital") chalks up at only about %800 billion, while Freddie has about $2 trillion in liabilities and $750 billion in assets. If these some of these loans follow the prevailing trend and continue dropping in value, it is clear that Fannie and Freddie could find themselves facing a serious shortage of capital, especially since they've been doing all in their power to avoid ramping up capital, in order to concentrate on paying off shareholders. Shareholders, remember, were put off by a series of scandals at the agencies, and Fannie and Freddie have been using Congress' desperation to keep the mortgage markets open to extract better terms from Congress (for one thing, Congress increased the cap on mortgages they can buy to $730,000 from $417,000); and now, Fannie and Freddie want Congress to repeal the very laws Congress made in the wake of the scandals. Labels: Fannie Mae, Fredddie Mac, housing bubble Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). G-8 Crisis: Failing to Fight Food PricesThis weeks meeting of the G-8 Industrial nation’s leaders concluded with a statement pledging action on, in part, the issue of rising global food prices; "We agreed on the need to address in particular, issues of elevated oil and food prices and global inflationary pressure, stability of the financial markets and fight against protectionism.”It is obvious that the food crisis needs to be addressed, and millions of people saved from the brink of starvation, but it seems as though the G-8 leaders are committed more to maintaining the status quo or further cementing the structural problems that lead to the crisis in the first place. The leaders called for more aid to countries particularly stricken from higher food prices but as Robert Weissman points out, this aid is usually administered by the IMF which requires certain neoliberal pro-market measures to be implemented in order for that aid to be delivered. These measures have had a pathetic history of failing in poverty stricken countries around the world and have been blamed for causing all sorts of crises, including the current one with food prices. While the attention is, and should be, placed primarily on impoverished countries—whose residents literally survive off stable food prices—even here in the United States food prices are having a noticeable effect on everyday life. Aside from simply higher prices in grocery stores, such signs as people flooding food banks and overbudget and undersubsidized school lunch programs indicate the wide reaching negative influence of high food prices. Be sure to check out the upcoming issue of Dollars & Sense for several insightful articles on the world food crisis and its causes. Labels: food crisis, G8 summit, neoliberalism, poverty Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Unemployment and Production StagnationAccording to recent reports on unemployment, the U.S. economy shed an additional 62,000 jobs in June bring the yearly total to a frightening level. The total amount of jobs that have disappeared from the economy for this year is now close to half a million, at 438,000, with almost all those missing jobs showing up in an increase in applications for jobless benefits, which was last at 404,000.The construction industry shed 43,000 jobs and manufacturing 33,000 despite the latter being almost double the size of the construction industry. The significance of this shows in the fact that workers in these industries have a labor intensive skill set and are faced with difficulties when trying to find jobs in other sectors without retraining, which costs money, or taking a significant pay cut. With the country’s job growth coming mainly from information technology, health care, government jobs and service sectors (government jobs accounted for the most job growth in June at an increase of 29,000), construction and manufacturing workers will be hard pressed to diversify into those sectors without sacrificing their standards of living and accepting a new way of life. The trend of growth in jobs in the service based sectors (health care, government, food service) as opposed to the decrease in production based sectors (construction and manufacturing) underlies an increasing trend of economic stagnation in production. As investments are more often made in volatile financial markets that offer quick profits instead of long term pay off, our economic base will continue to be degraded at the cost of real production output and trained, well paying jobs. This is exemplified in the previously mentioned report of construction job losses that are based primarily in the lack of need for buildings and factories that, if built or being built, would represent growth in real production capacity and output. But, as the housing market crash showed, real economic growth cannot be based upon extended credit lines that are treated with insignificance by lenders. Production growth must be centered around sustainable and practical long term needs, not just luxury consumption on credit. The solutions to unemployment will need to involve radically different ways of creating jobs and ensuring a healthy economy. Plans to address the unemployment problem might include something along the lines of what Ryan Dodd’s article suggests in our March/April Issue, entitled; A New WPA? An Introduction to the Employer of Last Resort Proposal, in which unemployment is ended “...via a government promise to provide a job to anyone ready, willing, and able to work.” Additionally, according to the American Society of Civil Engineers, the country’s nationwide basic infrastructure (roads, water supply, waste disposal, energy) is in shambles and need of massive overhaul, repair and restructuring that could (or rather, needs to) provide numerous economic benefits and stimulation. Investing in new energy alternatives and updating our roads and sewer systems could constitute a new wave of job creation, increased efficiency, health and safety, and consumer spending that could lift the country to new heights of prosperity. All that is stopping such a need from being met is a large price tag that could, in theory, be easily met through decreased military spending or a reneging on the Bush tax cuts that favor the superrich. Unless something is done soon we may see the increased and unnecessary suffering of thousands of workers continue to be a symptom of an eroding economic base. Labels: construction, Employer of Last Resort, infrastructure, stagnation, unemployment Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Victory on unemployment insurance!This just in from our friends at the Economic Policy Institute:After months of campaigning by EPI and allied groups, Congress finally enacted a 13-week extension of unemployment benefits in all 50 states and the District of Columbia. The veto-proof June 27 vote is expected to help more than 3 million unemployed workers who otherwise would have exhausted their benefits over the next nine months, and to provide a needed boost to hard-hit local economies. The vote also signals an understanding by members of Congress that the current economic downturn is serious and requires ground-level intervention. EPI started agitating for the extension in December, when talk of a recession was just emerging. Since then, the Institute has been at the forefront of the campaign, with staff members providing testimony, giving media interviews, writing op-eds and blogs, and conducting research showing that rates of long-term unemployment were already high enough to warrant action. Benefits run out after 26 weeks in most states. In early June, two weeks before the final vote, EPI urged its email subscribers to contact members of Congress. As EPI Vice President Ross Eisenbrey wrote in the alert, it was time to stop blaming the jobless for their plight. "There are now only 3.7 million job vacancies but 8.5 million unemployed looking for work," Eisenbrey noted. "The fault is not with the jobless; the problem is a failing economy and the government's failure to turn it around." Labels: Economic Policy Institute, unemployment, unemployment benefits, unemployment insurance Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Doctors' RevoltIda Hellander, executive director of Physicians for a National Health Program, emailed us recently with praise for Paying More, Getting Less, from our May/June issue. She called the article "very clear and compelling. It will be very, very useful to all of us in the single payer movement... Thanks again for publishing this article. I've wanted something like this for many years!"In fact, a solid majority of U.S. doctors now support a single-payer system, as reported in a web-only piece posted to the American Prospect website on Tuesday: The Doctors' Revolt Visit the new health care links page on our site for more articles from D&S on health care, and for links to national and state-level organizations working for single-payer. Labels: American Prospect, health care, Physicians for a National Health Program, single-payer Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
