Archive for February, 2017

Shareholder democracy is ailing | The Economist – The Economist

DEMOCRACY is in decline around the world, according to Freedom House, a think-tank. Only 45% of countries are considered free today, and their number is slipping. Liberty is in retreat in the world of business, too. The idea that firms should be controlled by diverse shareholders who exercise one vote per share is increasingly viewed as redundant or even dangerous.

Consider the initial public offering (IPO) of Silicon Valleys latest social-media star, Snap. It plans to raise $3-4bn and secure a valuation of $20bn-25bn. The securities being sold have no voting rights, so all the power will stay with Evan Spiegel and Bobby Murphy, its co-founders. Snaps IPO has echoes of that of Alibaba, a Chinese internet giant. It listed itself in New York in 2014, in the worlds largest-ever IPO, raising $25bn. It is worth $252bn today and is controlled by an opaque partnership using legal vehicles in the Cayman Islands. Its ordinary shareholders are supine.

Optimists may dismiss the two IPOs as isolated events, but there is a deeper trend towards autocracy. Eight of the worlds 20 most valuable firms are not controlled by outside shareholders. They include Samsung, Berkshire Hathaway, ICBC (a Chinese bank) and Google. Available figures show that about 30% of the aggregate value of the worlds stockmarkets is governed undemocratically, because voting rights are curtailed, because core shareholders have de facto control, or because the shares belong to passively managed funds that have little incentive to vote.

Cheerleaders for corporate governance, particularly in America, often paint a rosy picture. They point out that fewer bosses are keeping control through legal skulduggery, such as poison pills that prevent takeovers. Unfortunately, these gains have been overwhelmed by three bigger trends. The first is that technology firms can dictate terms to infatuated investors. Young and with a limited need for outside capital, many have come of age when growth is scarce. Google floated in 2004 with a dual voting structure expressly designed to ensure that outside investors would have little ability to influence its strategic decisions. Facebook listed in 2012 with a similar structure and in 2016 said that it would issue new non-voting shares. Alibaba listed in New York after Hong Kongs stock exchange refused to countenance its peculiar arrangements. Undaunted, American investors piled in.

At the same time there has been a drift away from the model of dispersed ownership in emerging economies, with 60% of the typical bourse being closely held by families or governments, up from 50% before the global financial crisis, according to the IMF. One reason has been lots of IPOs of state-backed firms in which the relevant government retains a controlling stake. Hank Paulson, a former boss of Goldman Sachs, helped design many of Chinas privatisations in the early 2000s. The Chinese could not surrender control, his memoirs recall. Mr Paulson hoped that the government would eventually take a back seat, but that has not happened. Other emerging economies, including Brazil and Russia, copied the Chinese strategy of partial privatisation. And across the emerging world, tightly held family firms, such as Tata in India and Samsung in South Korea, are bigger than ever.

Voter apathy is the third trend, owing to the rise of low-cost index funds that track the market. Passive funds offer a good deal for savers, but their lean overheads mean that they dont have the skills or resources to involve themselves in lots of firms affairs. Such funds now own 13% of Americas stockmarket, up from 9% in 2013, and are growing fast. A slug of the shareholder register of most listed firms is now comprised of professional snoozers.

For many in business the decay of shareholder democracy is irrelevant. After all, they argue, investors own lots of other securitiesbonds, options, swaps and warrantsthat dont have any voting rights and it doesnt seem to matter. At well-run firms such as Berkshire, shares with different voting rights trade at similar prices, suggesting those rights are not worth much. Some managers go further and argue that less shareholder democracy is good, because voters are myopic. Last year Mark Zuckerberg, Facebooks boss, pointed out that with a normal structure the firm would have been forced to sell out to Yahoo in 2006.

It doesnt take a billionaire to poke holes in this logic. For economies, toothless shareholders are damaging. In China and Japan firms allocate capital badly because they are not answerable to outside owners, and earn returns on equity of 8-9%. A study in 2016 by Sanford C. Bernstein, a research firm, got Wall Streets attention by calling passive investing the silent road to serfdom. Without active ownership, it said, capitalism would break down.

Democratic deficit

At the firm level, voting rights are critical during takeovers, or if performance slips. At Viacom, a media firm with dual-class shares, which ran MTV in its heyday but which has stagnated for the past decade, outside investors are helpless. Control sits with the patriarch, Sumner Redstone, aged 93, who has 80% of its votes but only 10% of its shares. Yahoo (once as sexy as Snap) has lost its way, too. But because it has only one class of shares, outsider investors have been able to step in and, using their voting power, force the firm to break itself up and return cash to its owners.

The system may be partially self-correcting. Some passive managers, such as BlackRock, are stepping up their engagement with companies. If index funds get too big, shares will be mispriced, creating opportunities for active managers. If shares without votes are sold for inflated prices, their owners will eventually be burned, and wont buy them again. And if fashionable young firms miss targets, they will need more cash and will get it on worse terms. But in the end shareholder democracy depends on investors asserting their right to vote in return for providing capital to risky firms. If they dont bother, shareholder democracy will continue to decline. That is something to think about as fund managers queue up for Snaps IPO.

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Shareholder democracy is ailing | The Economist - The Economist

A gray cloud hangs over American democracy – The Philadelphia Tribune

The first few days Donald Trumps presidency have seen what may be the beginning of the end of the Affordable Care Act, an average annual hike of $500 for middle-class homeowners mortgage insurance premiums, a hint at a re-invasion of Iraq and a shift in the Department of Justices effort to protect voting rights.

Yet, the overwhelming cloud that hangs over the Trump administration is the suggestion of Russian interference in the election. Investigators from six different U.S. intelligence and law enforcement agencies have been examining possible links between Russian officials and Trumps presidential campaign.

This cloud hangs not only over Trumps presidency, but over American democracy itself. Preservation of the integrity of our democratic process depends upon the aggressive pursuit of the truth and the full cooperation of Trump and his advisers in that pursuit.

Media reports indicate that investigations into Trumps Russian ties began as far back as last spring before the FBI received the notorious dossier alleging that Russian operatives held compromising information about Trump, and that there was a continuing exchange of information between the Russian government and Trump associates.

Any concrete evidence in support of these allegations would be damaging to Trumps presidency. And failure to investigate them would be even more damaging to the nation itself.

Democracy, while a founding principle of the United States, has been a work in progress from the days when only white, male and in some states, Protestant Christian property owners were permitted to vote. Gradually, over two centuries, the franchise was extended to non-landowners, Native Americans, women, and people of color.

We still are engaged in the business of expanding and protecting our democracy, fighting back racially-motivated voter suppression laws and contending with the anti-democratic effects of the Electoral College. Our goal must be a full and true democracy, where every citizen has an equal opportunity to be heard, without the corrupting influence of foreign agents working against American interests.

If a foreign government interfered to boost one candidate chances, its not merely an affront to the losing candidate; its an affront to every single honest, voting citizen. Its an affront to American democracy.

Because Trump was elevated to office by the anachronistic Electoral College counter to the choice of a majority of voters he owes the American people an exceptional level of deference. He should go to every length to demonstrate that his own conduct, at least, was above-board and beyond reproach. Any attempt to stonewall an investigation should be viewed with the utmost skepticism.

His public statements on Russia and its president, Vladimir Putin, have been contradictory at the very least. In 2013, 2014 and 2015, he said he had a relationship with Putin, had spoken with him and had gotten to know him. In the third presidential debate, he said he had never met him. In the second debate, he said he had no dealings with Russia and no businesses there.

But his son, Donald Trump Jr., said in 2008 that Russians make up a pretty disproportionate cross-section of a lot of our assets. This confusion should raise serious questions.

President Trump appears to be engaged in a campaign of disinformation about his election claiming without evidence that he was denied a popular victory by millions of illegal votes. His apparent obsession extends to making repeated false statements about attendance at his inauguration. His preoccupation could complicate our intelligence agencies attempts to ferret out the truth. Its our hope that he will see that any failure to cooperate or to encourage a full investigation would be crippling to the nation.

During the Inauguration Ceremony on Jan. 20, much was made about the peaceful transfer of power that is and should be an example for the world. But that peaceful transition depends upon the strict balance of powers as outlined in the Constitution. Its up to our legislative and judicial branches to serve as a check on the executive, beginning with the investigation into foreign influence.

Marc H. Morial is the CEO of the National Urban League.

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A gray cloud hangs over American democracy - The Philadelphia Tribune

Congratulations To Bolivarian Socialism – Venezuela Sees The Old Child Killing Diseases Back – Forbes


Forbes
Congratulations To Bolivarian Socialism - Venezuela Sees The Old Child Killing Diseases Back
Forbes
Some years back the mess that the Bolivarian socialists were making of Venezuela's economy could be treated as a joke, a dark one to be sure but a joke all the same. It was amusing to see this righteous sticking it to neoliberalism and the Yanquis ...

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Congratulations To Bolivarian Socialism - Venezuela Sees The Old Child Killing Diseases Back - Forbes

Failure of socialism is old news – Press & Sun-Bulletin

John Stossel Published 4:39 p.m. ET Feb. 10, 2017 | Updated 17 minutes ago

20/20 - JOHN STOSSEL(Photo: STEVE FENN, ABC)

Oh, no! I did it again.

It was a foolish mistake. But I slipped.

I read The New York Times.

This is bad for my health, because I get so mad at the smug socialist spin, but how can I not read it? Its my hometown paper. My wife wakes me up with indignant questions like, How can you say government is too big? The Times says

Aargh! Nearly every day brings a new Times outrage.

Saturday, a front-page story smeared Labor Secretary nominee Andy Puzder.

The story begins, Decades before President Trump nominated him Puzder went to battle with federal labor regulators

Wait a second. Decades (END ITAL) before? They went back decades to criticize him? Actually, (SET ITAL) three (END ITAL) decades -- to 1983, when as a young lawyer, Puzder represented a client whom the Labor Department accused of squandering union money.

The Times went on to say: He has repeatedly argued that economic regulations stifle economic growth.

Puzder argued that? Regulations (SET ITAL) obviously (END ITAL) stifle growth. Thats their purpose -- to protect workers by putting limits on businesses pursuit of profit. Regulation is a big reason this post-recession recovery has been so weak.

In just the last 10 years, the Department added regulations that require another 70 million hours of paperwork.

Monday: Trumps F.D.A. Pick Could Undo Decades of Drug Safeguards.

Oh, no! Trump will poison America with unsafe drugs!

President Trump hasnt actually made his FDA pick yet, but the Times worries his push for deregulation might put consumers at risk.

The reporter cites thalidomide, which, 60 years ago, caused severe birth defects in babies whose mothers had taken the drug in pregnancy. Since then, the F.D.A. has come to be viewed as the worlds leading watchdog for protecting the safety of food and drugs, a gold standard

Fools gold. The FDA protected American babies from thalidomide not by being smart, but by being so slow. By the time thalidomide neared approval, its bad effects were visible in Europe.

The Times eagerly reports damage done by drugs: Drug safety watchdogs point to examples like the painkiller Vioxx, which was withdrawn from the market

But invoking Vioxx as the icon for such looseness is itself ignorant looseness, says my medical researcher brother, Tom. FDA approvals are tradeoffs between benefits and risks. The FDA knew about Vioxxs risks. It was the company, not the FDA, that withdrew the painkiller. Many doctors now say it was an ill-advised move that deprives patients of a good alternative. Vioxxs risks are no greater than painkillers like Motrin sold over the counter.

The Times avoids detailing just how onerous todays regulation is. The reporter says, The agency sets a 10-month goal for approving standard drugs.

Gee, goals are nice, but does the agency honor them? The Times doesnt say. It also doesnt mention that the 10-month goal only applies to the final step of regulation after all trials are done. The entire process takes an average 16 years and $2.6 billion.

Americans want protection from bad drugs, but how many of us suffer needless pain, or die, while waiting those 16 years? How many die because a drugs developers cannot raise $2.6 billion?

One more smear:

President Trumps pick to lead the Federal Communications Commission, Ajit Pai, has aggressively moved to roll back consumer protection regulations.

Consumer protection? No. Socialist idiocy.

The Times says Pai stopped nine companies from providing discounted high-speed internet service to low-income individuals.

No, he stopped a $9.25/month government subsidy for high-speed internet.

He withdrew an effort to keep prison phone rates down, says the Times.

No, he stopped FCC lawyers from fighting about in-state phone calls because the FCC has no constitutional authority there.

Utterly reasonable. But the Times quotes an advocacy group saying, Chairman Pai is showing his true stripes (doing) favors for the powerful corporations.

Please. Someone. Tell The New York Times that socialism was tried. It doesnt work.

You can contact John Stossel at info@creators.com.

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Failure of socialism is old news - Press & Sun-Bulletin

Socialism and defence of the free movement of labour: Part two – World Socialist Web Site

By Julie Hyland 10 February 2017

This is the conclusion of a two-part series on the British pseudo-lefts support for immigration controls. Part one was published on February 9.

Britains pseudo-left distort Karl Marxs analysis of the industrial reserve army or relative surplus population in order to smuggle in a racial and nativist criterion that, in fact, belongs to the far right.

This is underscored by the fact that, in support of their position, they frequently cite Marx on the issue of Irish migration to England in the 19th century, quoting from a letter in which he wrote, Ireland constantly sends her own surplus to the English labour market, and thus forces down wages and lowers the material and moral position of the English working class. [Marx letter to Sigfrid Meyer and August Vogt, April 9, 1870]

The divisions cultivated between Irish and English workers were notorious and by no means confined to the 1800s. Many people today remember only too well the No Irish, No Blacks, No dogs signs that frequented rented accommodation in the UK right up to the 1960s.

Once again, the pseudo-left omit the remainder of Marxs letter, which excoriates the backwardness of the English worker, who regards himself as a member of the ruling nation and consequently he becomes a tool of the English aristocrats and capitalists against Ireland, thus strengthening their domination over himself.

Marx continues: He cherishes religious, social, and national prejudices against the Irish worker. His attitude towards him is much the same as that of the poor whites to the Negroes in the former slave states of the USA The Irishman pays him back with interest in his own money. He sees in the English worker both the accomplice and the stupid tool of the English rulers in Ireland.

This antagonism is artificially kept alive and intensified by the press, the pulpit, the comic papers, in short, by all the means at the disposal of the ruling classes. This antagonism is the secret of the impotence of the English working class, despite its organisation. It is the secret by which the capitalist class maintains its power. And the latter is quite aware of this... It is the special task of the Central Council [of the First International] in London to make the English workers realise that for them the national emancipation of Ireland is not a question of abstract justice or humanitarian sentiment, but the first condition of their own social emancipation.

For Marx, prejudice amongst English workers against their Irish brothers and sisters was the occasion for a ruthless political struggle to establish their common class interests against the British bourgeoisienot, as with the pseudo-left today, an excuse for justifying nationalist reaction.

Far from opposition to border controls not being a socialist principle, the controversy over this issue was to take on life and death dimensions within the Second International.

The issue of immigration restrictions arose in the run-up to the 1907 Socialist Congress in Stuttgart, the Seventh Congress of the Second International. The US state was targeting Chinese and Japanese workers. Congress had passed the Chinese Exclusion Act in 1882, halting the entry of Chinese immigrants into the country. In 1908, Japanese immigration into the US was also banned.

On behalf of the US Socialist Party leadership, Morris Hillquit and Victor Berger proposed a resolution calling for a campaign against the willful importation of cheap foreign labor calculated to destroy labor organizations, to lower the standard of living of the working class, and to retard the ultimate realization of socialism.

This stance was opposed by the left wing within the Socialist Party, with Eugene Debs attacking it as utterly unsocialistic, reactionary, and, in truth, outrageous.

The Stuttgart Congress rejected the resolution. Lenin, who attended the congress as one of the Bolshevik party delegates, welcomed the defeat. Support for immigration restrictions represented an attempt to defend narrow, craft interests and was the outcome of the spirit of aristocratism that one finds among workers in some of the civilised countries, who derive certain advantages from their privileged position, and are, therefore, inclined to forget the need for international class solidarity. [Lenin Proletary, No. 17, October 20, 1907, The International Socialist Congress in Stuttgart]

Lenin returned to the issue of Capitalism and Workers Immigration in his article of that title in Za Pravdu, October 29, 1913. Capitalism has given rise to a special form of migration of nations, he wrote, forcing hundreds of thousands of workers to wander hundreds and thousands of versts for employment.

There can be no doubt that dire poverty alone compels people to abandon their native land, and that the capitalists exploit the immigrant workers in the most shameless manner. But only reactionaries can shut their eyes to the progressive significance of this modern migration of nations. Emancipation from the yoke of capital is impossible without the further development of capitalism, and without the class struggle that is based on it. And it is into this struggle that capitalism is drawing the masses of the working people of the whole world, breaking down the musty, fusty habits of local life, breaking down national barriers and prejudices, uniting workers from all countries in huge factories and mines in America, Germany, and so forth

Noting that the most backward countries of the world were thrust into the ranks of the advanced, international army of the proletariat, he wrote, The bourgeoisie incites the workers of one nation against those of another in the endeavour to keep them disunited. Class-conscious workers, realising that the break-down of all the national barriers by capitalism is inevitable and progressive, are trying to help to enlighten and organise their fellow-workers from the backward countries.

The anti-migrant proposal was indicative of the growth of opportunism within the Second International, in which the trade unions were to play a particularly significant role.

Opportunist elements also argued in favour of colonialism, on the grounds of its civilising role. Most notably, several delegates raised the demand to support working class national defence in times of war.

Though defeated at the 1907 Congress, these tendencies were to plunge the working class into a fratricidal slaughter in 1914. This betrayal of socialism by most of the leaders of the Second International, Lenin wrote, has been mainly caused by the actual prevalence in it of petty-bourgeois opportunism, the bourgeois nature and danger of which have long been indicated by the finest representatives of the revolutionary proletariat of all countries.

Lenin continued: The opportunists had long been preparing to wreck the Second International by denying the socialist revolution and substituting bourgeois reformism in its stead, by rejecting the class struggle with its inevitable conversion at certain moments into civil war, and by preaching class collaboration; by preaching bourgeois chauvinism under the guise of patriotism and the defence of the fatherland, and ignoring or rejecting the fundamental truth of socialism, long ago set forth in the Communist Manifesto, that the workingmen have no country; by confining themselves, in the struggle against militarism, to a sentimental philistine point of view, instead of recognizing the need for a revolutionary war by the proletarians of all countries, against the bourgeoisie of all countries; by making a fetish of the necessary utilization of parliamentarianism and bourgeois legality, and forgetting that illegal forms of organization and agitation are imperative at times of crises. [Lenin, The tasks of revolutionary Social-Democracy in the European War, 1914]

In opposition to the capitulation of the Second International, the Bolshevik Party, under the leadership of Lenin, came out against the war and launched the fight for a new Third International. This was to be built on the basis of an uncompromising struggle against the opportunist national chauvinist tendencies that had revealed themselves as the agencies of imperialism within the workers movement.

This was the critical preparation for the revolutionary eruptions that were signified by the outbreak of imperialist war and the breakdown of the nation state system. It was on this basis that Lenin, alongside Leon Trotsky, was able to prepare the Bolshevik Party and the most advanced sections of workers and youth for the seizure of power in October 1917 and the establishment of the first workers state in the world.

Lenin returned to the issue of border controls at the height of the war in a November 1915 letter to the Socialist Propaganda League (SPL), a left-wing formation within the US Socialist Party that broke with the Socialist Party after the October Revolution to form the US Communist Party.

Lenin wrote, In our struggle for true internationalism and against jingo-socialism, we always quote in our press the example of the opportunist leaders of the SP in America, who are in favour of restrictions of the immigration of Chinese and Japanese workers (especially after the Congress of Stuttgart, 1907, and against the decisions of Stuttgart).

We think that one cannot be internationalist and be at the same time in favour of such restrictions.

The global integration of capitalism has reached an unprecedented level since Marx and Lenins time. In combination with the spectacular developments in science and technique over the last 30 years, it has made possible a rationalisation of production and facilitated the ability of the bourgeoisie to drive down wages and conditions to an ever-diminishing global benchmark.

However, the cause of this process is not the globalisation of production, as the national opportunists would claim, but capitalism itself. The tremendous achievements to be derived from the progressive unification of the globe and its resources are perverted by private ownership of the means of production and the division of the world into antagonistic nation states.

In Europe, the bourgeoisie seized upon the 2008 financial crash as the pretext to turn the clock back centuries through the imposition of austerity. From Greece to Spain to Britain, social democracy, the trade unions and their pseudo-left apologists have played a key political role in this process.

As a result, thousands of workers, especially young workers, are forced to move around looking for work. But once again, this migration is not the cause of low wages in the UK, or anywhere else. The cause is the subordination of the world economy to the profit interests of the corporate and financial elite.

Even in the surveys routinely cited by the right wing, supposedly revealing the impact of EU migration on wages in semi-unskilled employment, the impact is minimalcalculated at between 0.5 percent and 1.0 percent. Yet wages fell by 10.4 percent in the UK between 2007 and 2015, a drop equalled only by Greece within the countries of the Organisation for Economic Cooperation and Development.

This fall is the result of a deliberate political strategy on the part of the bourgeoisie to pauperise the working class, one in which the Labour Party and the trade unions play the key role.

These organisations are completely incorporated into the bourgeois and corporate state apparatus, enforcing austerity, wage freezes and wage cuts. Their justifications for this are the same as those they employ in favour of border controls: Nothing can be done to alter the scarcities created by the monopolisation of global wealth by a tiny financial elite. Instead, the working class must make sacrifices, especially the migrant workers who are to be told there is no place for them.

This accounts for the grotesque spectacle of Labour and the trade unions spouting forth on the need for immigration controls so as to protect labour standards, even as they collaborate with the government and corporations to destroy these standards in order to make British capital more competitive.

The pseudo-left are an integral part of this labour bureaucracy and constitute the bulk of its leadership. From Labour leader Jeremy Corbyn to the heads of numerous unions to the Syriza government in Greece, the pseudo-left function as a special anti-working class detachment of the bourgeoisie.

While Trump declares for America First, Corbyn demands import controls against China and similar protectionist measures, while the pseudo-left repeat the specious claim that strong national borders, economic protectionism and tighter immigration laws will benefit the working class. Their support for the strengthening of the nation state is wholly reactionary. As history has proven, it leads to the intensification of the attacks on the working class at home and support for imperialist war abroad.

Against the national chauvinism of the pseudo-left, the absolute principle of socialist-minded workers and youth must be to oppose the efforts to divide native-born and migrant workers. The right of all workers to live and work in the country they choose, with full and equal rights, is not for sale.

Only in solidarity with its class brothers and sistersirrespective of colour, language, religion and nationalitycan the working class successfully struggle against globally mobile capitalist corporations and advance its own independent solution to the world economic crisis: the reorganization of the global economy to meet social needs, not the drive for private profit.

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Socialism and defence of the free movement of labour: Part two - World Socialist Web Site