As I have said, the behavior (driven by the poor ethical standards of the “leaders” of our financial institution) of our financial institutions means, as a a customer, you have to be on guard for their tactics to trick you out of your money. Essentially you have to expect them to behave like a pickpockets and be on guard against them at all times. This is an extremely sad state of affairs: that the ethical failings of such critically important players in our economy are so widespread, long-lasting and accepted. However, as we have seen, they profit from this behavior and their long track record of such behavior provides evidence they will continue acting in this way.
The Consumer Financial Protection Bureau and Federal Deposit Insurance Corp. found that Discover Financial Services telemarketers often talked faster when explaining fees and terms as they pitched the services, leading customers to think there was no additional fee, the regulators said Monday.
It is very good to see the Consumer Financial Protection Bureau taking action to protect the consumers from the financial institutions continued efforts to evade the law and take a little bit from millions of consumers. This type of behavior has been tolerated previously, and should never have been. The financial institutions strategy to take small amounts from millions of people was a wise way of dealing with the tendency of law enforcement to ignore such “small infractions” – they didn’t seem to bother seeing that taking small amounts from millions of people results in hundreds of millions of dollars in ill gotten gains.
Far too much of the bad practices are continuing. And when they are caught the consequences are far too small (which is why they keep behaving unethically). Discover is only being charged $14 million in civil penalties for their lapses (and has to return $200 million it took unfairly).
It is good to have police to try and catch literal pickpockets. And it is good to have the Consumer Financial Protection Bureau to catch financial institutions that take far more than pickpockets can dream of away from the wallets of consumers.
Related: Capital One Bank Agrees to Refund $150 Million to 2 Million Customers and Pay $60 Million in Fines – Very Bad Customer Service from Discover Card – Credit Card Regulation Has Reduced Abuse By Banks – Continued Credit Card Company Customer Dis-Service – I Strongly Support the Consumer Financial Protection Bureau
There is an increasing trend to move from the USA to another country to work and live. This is not surprising to me. Recently this has picked up quite a bit; I am surprised by the velocity at which this interest in moving (I figured it would be a long term mega trend but not so drastic, so quickly). Economic changes are often quite surprising in how rapidly they move forward.
An interesting survey shows USA investors have become much more interested in relocating in the last two years (the data they show though has tremendous volatility over time, so I am not really sure this means much). I wonder how much of it can be explained by investors wanting to get a deep understanding of very promising markets. I wouldn’t image the actual number that do this is huge, but maybe the number considering it is significant. Billionaire investor, Jim Rodgers moved to Asia because he sees Asia as key to the future. One of the reasons I moved to Malaysia this year was to get a in depth understanding of what South East Asia is like (it is not a deciding reason, at all but maybe the 4th or 5th reason).
I believe the globalization of the employment market is a long term trend that will continue – especially for “knowledge workers.” The USA rested on the post WW II economic domination for nearly 50 years. The policies also helped this continue: investing in science and engineering, favoring entrepreneurship… But other countries have realized the value of these things (and the USA is slipping – not investing nearly as much in science and engineering and favoring large corporations that give politicians large amounts of cash over innovation – see things like the incredibly outdated “intellectual property” system, SOPA, favoring huge financial institutions…
The combination of long term policy weakness, the inevitable decline in the USA to world ratio of economic wealth, and the financial crisis caused by the policy weaknesses have seemingly greatly accelerated the trend. The next 2 or 3 years will determine if that is a permanent acceleration or if we go back to a slower pace – but on the same path. My guess is that we will stay on this path but the pace will not follow the level surveys might indicate (showing interest in such a big change is far different from actually moving).
There don’t seem to be any decent estimates of Americans living abroad. The US State Department claims releasing their estimates would be a national security risk? And the Census bureau says it would cost too much to try. Wild guesses seem to be between 4 and 6 million.
I am frustrated that we have largely allowed those that don’t believe in capitalism to claim their beliefs are capitalist. I believe capitalism is the best system to provide economic gain to human society. When we allow non-capitalist to claim their ideas are capitalist we often lose by allowing bad policies to be adopted and failing to adopt more capitalist ideas.
Robber barons and their ilk are not capitalists. Those attacked today as capitalists are much more like European nobility that fought to let the nobility take most of the economic profit from everyone else.
Capitalism is a wonderful thing.
The foolish economic policies the politicians we have elected over and over again for decades are idiotic and not capitalist (they are somewhat capitalist but the things people are complaining about are not capitalism but the corruption of the system by those subverting capitalism). They are the result of favoring cronyism and bribery over capitalist regulated markets.
What we need to do is not throw out the capitalists. We need to actually throw out those that say their cronyistic policies are capitalist.
Capitalism is an economic system designed to achieve economic gain for a society. Adam Smith (and others) understood that if those with power to destroy the functioning of markets (for personal gain) were allowed to do so then the benefits capitalism can produce are reduced. And they definitely would try to (according to the believes fundamental to the capitalist model) so a capitalist system has to account for that.
“Free” markets are good. But in capitalism “free” markets means markets where no entity has “market” power – that is the ability to move the market. This is the idea of perfect competition. In the real world this doesn’t happen but capitalist understand the weakness of unfree markets and that has to be dealt with. Things start to get messy here. There is no perfect way to do this and I don’t know of anyone (that I don’t think is naive) that thinks this can be done in some way that avoid economic friction (loss to the society from what is possible in some ideal state).
Now those that like cronyism and letting whoever has the clout do whatever they want have tried to say capitalism means doing whatever you want to get as much capital as you want. It doesn’t. Capitalism isn’t about letting whoever has the gold get more. It is an economic system to provide gain to society by setting up rules that result in market forces brining benefit to society.
Those thinking about setting up the rules for a capitalist system understood that many people are going to try and get away with taking what isn’t theirs. So you have to enforce the rule of law. You have to prevent those that seek to destroy markets and take personal gains they should not be able to (due to being allowed to collude with other market players, collude with politicians to gain political concessions that destroy market functions…).
I happen to believe capitalism is the best economic system we have by far.
I happen to believe those that have increasingly turned out system into one where croynism is destroying markets to give gains to a few parties dominates are creating great damage. But the problem is not that these people show capitalism is bad. Instead these people show the dangers of not putting in the effort to retain capitalist ideas: your economy suffers and people suffer.
After World War II essentially the only significantly large industrial base was in the USA. The USA was emerging as a national power in the early 1900’s. The wake of World War I and World War II left a very odd situation. You had many formerly very rich countries that were devastated and one rich country that wasn’t. Devastation is not easy to overcome in even 20 years. So for a good 2 decades the USA got wealthier and wealthier even while other formerly rich countries were re-developing their countries rapidly.
This made the USA even richer as selling to all those around the world was pretty easy, just creating enough stuff was the hardest part. Almost none of the current emerging markets were doing much of anything economically. This resulted in the USA being able to live incredibly well and generate enormous wealth.
The main legacy of this is a huge benefit to the USA – enormous wealth and experience. However, it seems to have left people thinking the USA is just suppose to be enormously wealthy always no matter if we throw away hundreds of billions a year on a broken health care system, provide huge benefits to political donors (farmers or bankers or phone oligopolists or robbers of the public domain [preventing innovation through repressive, outdated “intellectual property” regimes]), spending many hundreds of billions yearly on military expenditures far beyond those of any other country… It doesn’t work that way.
You can waste huge amounts of economic benefit when you are the dominant economic power globally. And when you were as rich as the USA was in the 1950s and 1960s more and more people felt they deserved to be favored with economic gifts. So for a a few decades the USA used the excess wealth to pay off all sorts of special interests and still do very well economically. The only thing surprising is how long we have been able to keep this up.
It isn’t rational to base expectations on periods when we were granted economic wealth largely by virtue of the world industrial production, other than ours, being destroyed. This isn’t the only reason we were wealthy, we do many things very well (compared to other countries) entrepreneurship, less corruption (still way too much but less than average), from 1950 to about 1990 an equitable distribution of economic gains, until recently a good advanced education system, a brilliant system to turn science and engineering breakthroughs into economic profit (that in the last few decades other countries are starting to do, but they are still way behind)…
From 1970s until say the 2000s we could use our accumulated wealth to live off and allow huge inefficiencies to continue (lousy job of regulating banks, lousy job of subsidizing farming, lousy job of subsidizing lousy food [making it cheap to eat unhealthy food and expensive to eat healthy food], lousy job of controlling the costs of higher education, lousy job of getting people to realize they cannot expect to live far beyond most everyone else in the world just because they were born in the USA…
Many talking heads and politicians try to sell their policies of allowing large market players to take profits by prevent markets from functioning properly as capitalist. They are not. Unless liaise-fare capitalism throws out the primacy of free markets being used to aid society by allocating economic resources efficiently it isn’t either. If it does, using the word capitalism is just obfuscation, because it isn’t capitalist.
Crony capitalism is a better phrase for what we have been practicing. Though using the word capitalism is misleading. Even better would be politically supported corporate cronyism. We have elected those that pursue this anti-market approach. And we watch them in great numbers on TV based on what is supposedly popular. But I really hope we can turn away the claims of capitalism somehow being consistent with the crazy things people have done.
Pushing a political desire that anti-government and calling it capitalism doesn’t make it so. Capitalism at the core is about a system that allows markets to efficiently allocate resources to provide the greatest societal good. It is based on markets working. Capitalists know market players will try to prevent markets from working to gain themselves. To support capitalism you need to design systems that deal with this weakness otherwise you are not talking about capitalism you are talking about something else. Something that where anti-market forces which undermine the basis for why capitalism is a useful method for societies to gain economically is subverted to a desire to support those that can buy political power.
I have written about this some, as I care about it: Economic Consequences Flow from Failing to Follow Real Capitalist Model and Living Beyond Our Means – A Free Market is not One with Monopolies and Oligopolies – Mis-representing Capitalism
It is very simple. Adam Smith understood it and commented on it. If you allow businesses to have control of the market they will take benefits they don’t deserve at the expense of society. And many business will seek every opportunity to collude with other businesses to stop the free market from reducing their profits and instead instituting anti-competitive practices. Unless you stop this you don’t get the benefits of free market capitalism. Free markets (where perfect competition exists, meaning no player can control the market) distribute the gains to society by allowing those that provide services in an open market efficiently and effectively to profit.
Those that conflate freedom in every form and free markets don’t understand that free markets are a tool to and end (economic well being for a society) not a good in and of themselves. Politically many of these people just believe in everyone having freedom to do whatever they want. Promoting that political viewpoint is fine.
When we allow them to discredit free market capitalism by equating anti-market policies as being free market capitalism we risk losing a great benefit to society. People, see the policies that encourage allowing a few to collude and take “monopoly rents” and to disrupt markets, and to have politicians create strong special interest policies at the expense of society are bad (pretty much anyone, conservative liberal, anything other than those not interested in economics see this).
When people get the message that collusion, anti-competitive markets, political special interest driven policies… are what free market capitalism is we risk losing even more of the benefits free markets provide (than we are losing now). That so few seem to care about the benefit capitalism can provide that they willingly (I suppose some are so foolish they don’t understand, but that can’t be the majority) sacrifice capitalism to pay off political backers by supporting anti-market policies.
Allowing businesses to buy off politicians (and large swaths of the “news media” talking heads that spout illogical nonsense) to give them the right to tap monopoly profits based on un-free markets (where they use market power to extract monopoly rents) is extremely foolish. Yet the USA has allowed this to go on for decades (well really a lot longer – it is basically just a modification of the trust busting that Teddy Roosevelt tried). It is becoming more of an issue because we are allowing more of the gains to be driven by anti-competitive forces (than at least since the boom trust times) and we just don’t have nearly as much loot to allow so much pilfering and still have plenty left over to please most people.
I am amazed and disgusted that we have, for at least a decade or two, allowed talking head to claim capitalist and market support for their special interest anti-market policies. It is an indictment of our educational system that such foolish commentary is popular.
This is exactly the type of behavior supported by the actions of the politicians you elect (if you live in the USA).
It is ludicrous that we provide extremely anti-market policies to help huge companies extract monopoly profits on public resources such as the spectrum of the airwaves. It is an obvious natural monopoly. It obviously should be managed as one. Several bandwidth providers provide bandwidth and charge a regulated rate. And let those using it do as they wish. Don’t allowing ludicrous fees extracted by anti-free-market forces such as those supporting such companies behavior at Verizon, AT&T…
Related: Financial Transactions Tax to Pay Off Wall Street Welfare Debt – Extremely Poor Broadband for the USA (brought to us by the same bought and paid for political and commentary class) – Ignorance of Capitalism – Monopolies and Oligopolies do not a Free Market Make
This was a bad month for jobs in the USA. Not only did the U.S. Bureau of Labor Statistics report that the number of jobs remained at the same level as last month (125,000 additional jobs are needed for population growth, on average and we have huge losses from the credit crisis recession that have to be gained back) the last 2 months were revised down. The change in total nonfarm payroll employment for June was revised from
a gain of 46,000 to a gain of 20,000, and the July was revised down from gaining 117,000 job to gaining
85,000. That results in a total loss for this report of 58,000.
Still much better than the huge losses of several years ago but, along with the last few months, not a good sign for short term job growth. And the failure to address decades of favors given by politicians to too big to fail banks may actually create serious problems much sooner than most people feared. Pretty much everyone knew that the failure to address the main cause of the credit crisis was setting us up for again having the economy suffer huge blows due to the behavior of too big to fail institutions but I, and I think most people, thought it would be at least 5 years away and maybe even 10 before we had to seriously pay for the failures of our politicians to address this problem they (and their predecessors created).
It really seems like politicians don’t understand that their predecessors (decades ago) could afford to payoff large political donors and avoid dealing with problems and the enormous amount of wealth the economy was generating would let us prosper (even with lousy leadership), but that is no longer the case. The USA has used up huge economic advantages and that easy time is not coming back. Sadly the main hope for the USA is that other countries leaders create enough waste that the USA can remain competitive with all the waste our create (extremely lousy health care system, for example). It seems the American public doesn’t understand either, if anything we are electing even less intelligent and capable leaders today (over the last 10 years).
The USA has 14 million unemployed. Among the major worker groups, the unemployment rates for adult men was 8.9%, adult women 8.0% and teenagers 25.4%, whites. Of those 14 million the number of long-term unemployed (those jobless for 27 weeks and over) was about unchanged at 6 million in August.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.4 million to 8.8 million in August. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour over the month to 34.2 hours. The manufacturing workweek was 40.3 hours for the third consecutive month; factory overtime increased by 0.1 hour over the month to 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down to 33.5 hours in August, after holding at 33.6 hours for the prior 6 months.
As bad as this news is, it could be much worse. The economy is actually growing (very slowly), probably. Many companies are actually still very profitable (I am not counting companies that have fake profits with congress approved ability to report fake values for their assets – Congress granted their too big too fail donors, this, and many other favors while most others are left out in the cold). The wealth in the USA, even after we have been consuming our capital to live beyond what we earn each year (for decades) is still extremely high. This allows us to live well and invest even with many bad practices in place. We continue to have many excellent companies doing great work and providing great jobs. Even with all the problems in the USA there are few countries that are in as enviable an economic position. The biggest problem I see is we have been squandering those advantages far too easily and quickly for far too long. That leaves us much more economically venerable than we need to be.
The current frustration with economic conditions in the USA and Europe has at its core two main elements. First the anti-capitalist concentration of power in a few monopolistic and oligopolistic corporations (along with the support and encouragement of governments and the governments failure to regulate markets to encourage capitalist practices). And second the consequences of living beyond our means finally becoming much more challenging.
What we have had has been very questionably capitalist. The largest reason for this “questionable” nature is not related to labor but instead to the inordinate power given to a limited number of large corporations. The corporations are suppose to not have “market power” in real capitalism. They have huge and growing market power. To me the main problem is that power disruption to the functioning of capitalist free markets.
There is also the problem that we have been living far beyond our means. This has nothing to do with capitalism or not capitalism. It is as simple as you produce 100 units of goods and use 110 that can’t continue forever. The USA started building a surplus in the 1940’s, I imagine Europe did in the 1950’s. Since about the 1980’s both areas have been living far beyond their means. While they were consuming what they saved over the previous decades it wasn’t so bad. While they mortgaged their future to live lavishly today that was worse. We continue to live beyond our means and are beginning to see some consequences but we haven’t come close to accepting the lavish lifestyles we enjoyed (while Europe and the USA lived off past gains and off very advantageous trade with the rest of the world) is not possible any longer. We can’t just have everyone in Europe and the USA live exceeding well and the rest of the world support us. Eventually we have to realize this (or in any event we will experience it, even if we don’t realize it).
Those 2 factors need to be addressed for our economic future to be as bright as it should be.
We have had over 20 years of health care costs going up more than inflation – every year. That is an amazing (and horrifyingly bad) record. We need very strong evidence to conclude we can even just reduce the increase in damage done year after year by the broken health care system.
Getting to the point where we actually start reducing the increased damage done each year is a big leap from where we are (reducing the acceleration of damage [reducing from hugely above inflation to largely above inflation is better than not doing that but hardly a good sign – it is still worse than the year before, just the increase in badness is less than the increase in badness from the previous year).
Health care is so bad I often see people try to look at data and see that the rate of getting worse is declining and seeing that as a positive sign. Things are still getting worse. And they are already extremely bad. I really can’t see arguing for things getting worse more slowly as being something we should be happy with. Even just making tiny improvements (given how bad we have let things get over the decades is not good enough). We need to actually reduce spending on health care. Certainly, the absolutely least we can expect is increasing less than inflation (that is an extremely low expectation – though one the health care system has failed at for decades). We shouldn’t accept such horrible performance.
Once we actually can start making things better year after year (not just reducing the acceleration of badness) we likely have decades before we can reduce the enormous drain the USA health care system puts on all of us living here to a level that is just average for rich countries.
There are pockets of good things being done in health care but so so so much more is needed.
Some other positive results in 2010:
• Emergency room visits were 71 per 1000 lives, or 38% of average. Serigraph people use the ER room only in a real emergency.
• Inpatient surgeries were 51 vs. 80 average per 1000.
• Radiology scans totaled 775 vs. 1300.
• Claims related to poor lifestyle choices were only 3% of our total claims, versus 7.7% for our peers.
These strikingly positive numbers are a testimonial to the engagement of the Serigraph workforce in reforming how care is delivered in this country. They are helping to mange this complex issue.
Reforms such as a consumer-driven plan, on-site primary care, finding the best centers of value and transparency on prices and quality are making a difference, a huge difference.
We still have a lot of innovation to do. For instance, we decided recently to go after depression, the second most costly chronic disease in the work place. Few companies, if any, have an enlightened managerial effort on that front.
Great work by Serigraph.
The USA has extremely poor broadband service (compared to other rich countries). It is slow and expensive. Those that support economic policies more in line with the USA than other nations have a great deal of explaining to do about why the options are so bad. It is similar to the broken health care system.
Those that support politicians leading to this state for broadband say they support “free markets.” In actuality, they support anti-competitive practices by extremely large companies (oligopolistic behavior). Free market theory (the original form) requires that no individual company can dictate to the market. You have free competition – no barrier to entry, no restraint on entry, customers can buy where they want… But the politicians we elect instead support policies and practices that restrain free trade and prohibit good solutions in order to benefit those that pay the politicians well. And then we vote for those politicians.
Those wanting the anti-competitive markets have won in our political system. The main thing I wish was clearer was that we stop pretending these people have some capitalist leaning. They are anti-capitalist. If they want to support the policies they do I wish they would be required by the voters to at least be honest. Unfortunately the voters elect them with their dis-honest representations. If the politicians were honest they would have a more difficult time being elected (because voters want to pretend they like capitalism even while voting for politicians that just seek to give special benefits to those that pay the politicians. And then the politicians claim to support markets, and business and consumers when really they just favor making anti-market legislation and regulation to favor their contributors. As long as we vote for people that claim to support capitalism but undermine it at every step to help their friends we do deserve to suffer. I just wish we could convince enough of our fellow citizens that flashy propaganda and repeating lies over and over isn’t the same as facts and truth.
Given the anti-competitive policies in the USA, if they have much success they will probably just be bought (or maybe as others suggest fought in other anti-competitive ways, but buyouts are normally easiest for actually strong competitor) to allow anti-competitive pricing and service to continue. The only real hope is someone with actual power sees it in their interest to fight against the entrenched interests. Google is the best hope I think. It isn’t that Google has nearly as much political power as those interests but they are smart and have the advantage of just having to expose the anti-competitive behavior and apply pressure.
The narrative the politicians and voters say they support is capitalism. But the reality is just those with the gold make the rules. But when this is made obvious and continually pressed by someone with power, clout, intelligence and political savvy it makes politicians and regulators hesitant to continue business as usual. Normally they just delay for a few months and then continue the corrupt practices. Google, plus others, plus lots of individual interest can fight that off – but it takes perseverance.