[PEN-L:3752] Re: economists and failure
Anders writes: Doug said that mainstream economists would explain the failure of IBM, etc. by saying that in the new international economy, they didn't make it because they'd gotten "fat and lazy." I guess what I'm trying to ask is, how do smart neoclassicals explain how + when large corps get "fat + lazy" + stop acting as rational, calculating entities? It's easy to ignore if it happens to only one corporation--chalk it up to randomness--but when most of the large U.S. corporations who were dominant in their fields all make amazing foolish decisions, presumably you need a more systematic explaination. I'll take a shot at this. The generic mainstream explanation, I think, would feature a)market power and b)the so-called principal- agent or incentive problem with respect to the relevant firms' management. Market power, while it lasts, gives a firm the leeway not to act in a strict profit-maximizing fashion. The question then becomes why a firm would not do so. This is where the principal-agent problem comes in. A firm's management has no _necessary_ personal interest in strict profit maximization. As Anders' wording suggests, ensuring the latter is hard work, and as long as the managers get paid well, they might be willing to slough off to some degree. Profit-sharing compensation schemes and stock options alter the degree but demonstrably do not eliminate the basic problem. This is the central point of principal-agent analysis, a descendant of the "separation of ownership and control" discussion in the older institutionalist literature. Stockholders presumably prefer profit maximization (but even that concensus depends on the operation of certain market mechanisms--the point of my recent paper with Greg Dow), but lack perfect means to induce the same motives in management. Note on this score that to be "fat and lazy" does not imply that management is no longer a "rational, calculating entit[y]"; it may be rationally calculating its own, rather than shareholders', interests. As earlier posts have suggested, increased competition is a partial substitute for internal incentive schemes, but an imperfect one, since competitors may face their own agency problems as well. Gil Skillman
[PEN-L:3753] piece from the Progressive
NEW PARTY TIME BY DANIEL CANTOR ([EMAIL PROTECTED]) Over the last three years, I've had thousands of conversations with people about the idea of building a new political party in the United States. Many of these conversations have been with the leadership of existing organizations: labor unions, environmental groups, low-income community organizations, pro-choice networks, school-reform coalitions, and more. And I've spoken and corresponded with countless individual activists, writers, farmers, donors, teachers, programmers, cab drivers, Perotistas, doctors, artists, social Christians, Quakers, the unemployed, the underemployed, workaholics, alcoholics, young feminists, old leftists, and nearly every member of both sides of my family. Not one has disputed the premise of the conversation. Not one has said, "No, you're wrong. America doesn't need a new party." What they have usually said is, "You're right, but it just can't be done. " The reasons why "it can't be done" are varied, but certain themes emerge: It's too time-consuming; it's too expensive; it's utopian; the racial divide is too immense; Americans are too stupid; it's too late. But November 8 shook up conventional thinking in lots of ways, including the views toward third-party efforts. Since Black Tuesday, the phones at various New Party offices have rung more frequently, and the general comment we're now hearing is: "If this is what we get with a center-right Democratic strategy, maybe it's time to take the idea of a third party more seriously. " Of course, there's nothing new about the idea of a new party. The question to ask is not whether it's needed, but can a class-based, multiracial party really be built? Is the crisis in our society so profound that a stable new political party could emerge? And does the New Party (or anyone else, since we're not the only ones trying) have a strategy to get past the usual obstacles to third parties? A massive Times-Mirror poll just before the election found 53 percent of the people in favor of a new, major third party. Some of that is right-wing, some of it is left, and most of it is probably just confused. Regardless, on the numbers alone, a new independent political formation has a potentially huge base. This is quite different from the past, and should not be underestimated. Both major parties have lost credibility, and nowhere is it preordained that populist anger must go in a sour, right-wing direction. It could just as easily bend toward Jim Hightower as Rush Limbaugh, if Hightower's message were heard. I say this knowing full well that the Right has a big head start in terms of grass-roots organization and financial resources. But giving up is not acceptable, so we are forced to ask ourselves if the Democratic Party can recapture the voters or the credibility it has lost. This is where the rubber meets the road. The Democrats have become a party that moves to the left in the campaign season but to the right once in office. They get their votes from one set of people but their money and ideas from a second. This causes a deep and unresolvable tension. The Democrats fool no one but themselves when they rhetorically claim an allegiance to manual laborers but then move heaven and earth for NAFTA and GATT. The claim of "investing in people" pales when the budget puts deficit reduction before jobs. And a health-care proposal that guarantees the position of the insurance industry over the real health needs of most Americans clouds more than it clarifies, and thus dies a long, slow death. Democrats are preferable to Republicans, but let's not kid ourselves: They lost their way a long time ago. And perhaps this should not surprise. The median income of delegates to the Democratic Convention in 1992 was $92,000 (which was higher than at the Republican love-fest in Houston). No matter how culturally hip the Democrats are, or how much the cabinet "looks like America," they have slowly but surely lost any ability to speak to people of ordinary means. Were they to do so, the money that funds the party would be withdrawn. But even if the moment is right, and people are open as never before, and the two major parties are wings of one corporate establishment, aren't the obstacles to a third party still insurmountable? Surely we can't ask citizens to waste their votes on candidates who are doomed to lose, can we? The answer here is to begin at the beginning. In the two-plus years that we've been running candidates, New Party chapters have backed ninety-three people in nine states and won sixty-two elections in six. It's all modest-level stuffQcity council, county commission, school board, zoning board, and an occasional state representativeQbut it's the right place to start. Roughly half of the candidates have been white, and roughly half have been
[PEN-L:3754] Re: piece from the Progressive
Many thanks to Matt Z. for posting the Progressive piece on the New Party by Daniel Cantor. My main concern with going the third-party route (as opposed to revitalizing the progressive "wing" of the Democratic party) was the divide-and-conquer problem the article spoke to quite effectively. Any further feedback from PEN'rs on Cantor's blueprint for a progressive political strategy? Gil Skillman
[PEN-L:3755] Re: Krugman and Mundell
Everybody has their own preference for what they want Pen-l to be. I vacillate between wanting to learn how we can use our training to be activists (going beyond the mere repitition of left rhetoric) and gaining deeper insight into economics. Lynn's long postings represent the best of the second option. I, for one, want to express my appreciation. Although Doug's postings are less long (and more frequent), a good number of them (just like the LBO) are filled with invaluable nuggets of information. Sometimes I get impatient with pen-l, but when it works, its great. Thanks. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 916-898-5321 E-Mail [EMAIL PROTECTED]
[PEN-L:3756] Who are Corporate Criminals?
Hi, The subject header is a serious question. I am working on creating some propaganda for street organizing (and net organizing) that addresses right-wing scapegoating versus the true abuses in favor of the wealthy. THe form of the sheet will probably start with: WHO IS THE CORPORATE ELITE TRYING TO CRIMINALIZE? Answer, the homeless, welfare mothers, immigrants, urban black males, etc. Now, where PEN-L help would be useful (and here's the challenge) is your best examples of true corporate abuse. In a line or so, can you describe an example of a big corporation breaking the law, receiving welfare from the government, or using the international economy in an abusive way. The challenge is to write your answer as succintly and quickly as possible. One sentence is the ideal. If you want to add some detail, it might be added to follow-up information sheets. But please concentrate on a good example that can be explained quickly or is obvious. Here are the questions to answer: WHO ARE THE REAL CORPORATE CRIMINALS? Polluters, big-time SL folks, defense fraud examples, etc. WHO ARE THE CORPORATE WELFARE RECIPIENTS? WHO ARE THE TRUE CORPORATE ILLEGAL ALIENS? Examples of corporations destroying jobs here and commiting illegal acts around the globe--child slavery, union-busting etc. WHO HAVE RECEIVED CORPORATE AFFRIMATIVE ACTION? Special regulatory breaks for big business--the special concessions that lock in power of the wealthy. Cable franchises etc. WHO ARE THE CORPORATE TAX EVADERS? Tax loophole list I will repost the list of best examples. Thanks all, *Nathan Newman: [EMAIL PROTECTED] ***
[PEN-L:3757] China to Establish Direct Commercial Links to Internet
2. China to Establish Direct Commercial Links to Internet ... 56 Source: The Boston Globe, 1/2/95 Written by: Ted Plaflser Abridged by: Jim Yu BEIJING - China is about to establish its first direct commercial links to the Internet, creating another paradox for a regime that is trying despe- rately to modernize its booming economy while maintaining a tight grip on the flow of information. Two dedicated lines, one from Beijing and the other from Shanghai, are due to begin operation in early January. Jointly operated by China's Ministry of Post and Telecommunications and US telecommunication company Sprint, these new links will allow any Chinese with a computer and a modem to tap directly into the full range of Internet's resources, and to commu- nicate instantaneously with its estimated 20 to 30 million users worldwide. Sprint, which has not disclosed the value of the deal, will provide speci- ally configured equipment for the Beijing and Shanghai hubs. The company will also be responsible for the download portion of the satellite link to an Internet gateway in California. Transmission from the Chinese hubs up to the satellite will be handled by the Ministry of Post. Subscribers will have to apply through the ministry, which plans to run the service as a profit-making venture but has yet to announce its price structure. Judging from its experience in countries where it has provided Internet access, Sprint is expecting the number of Chinese users to rise quickly. Professor Hu Daoyuan, director of the Institute of Integrated Information Network Technology at Qinghua University in Beijing, agrees. He believes that China, with its 1,100 universities and millions of computer-literate students and academics, will soon come to dominate the Internet and help shape what he calls "the world's new electronic civilization." A handful of Chinese computer users, primarily scientists and academics, have managed to engineer indirect access to the Internet. In most cases, those links either require the costly expedient of dialing into a foreign gateway, or they provide e-mail service and nothing else. One exception, however, has been an academic network in Beijing called the National Computing and Networking Facility of China. Anchored by the Chin- ese Academy of Sciences and connected to the campus networks of Beijing and Qinghua Universities, the facility last year established its own direct link to the Internet in May of last year. Because the Academy of Sciences opened China's first direct link to Internet, it has been granted the country- level domain name. That has rankled officials at the Ministry of Post, who consider themselves China's rightful telecommunications authority and are balking at the pros- pect of having to apply to the Academy of Science for a subordinate-level domain indicator. The Ministry of Post, the sources say, is trying to get the country level, or .CN, name for itself. "We are not concerned with control or anything else, so if they are cheap enough, we will gladly go through" the ministry, said Professor Qian Hualin, deputy director of the academy's Department of Computer Networks. "But," he added, "we cannot give them the .CN domain name. They will have to take a secondary level domain name instead."
[PEN-L:3758] Unemployment as measure of gains over bysiness cycle
In this whole discussion about folks rising with the tides and particularly about minorities gaining more during upturns, I wonder how much unemployment stats tell us. What kind of jobs are these people getting? It might well be better to be employed at minimum wage than unemployed. Yet, if minorities are getting a larger portion of lower paying jobs, I would be careful of saying they are gaining relatively if they continue to get a smaller portion of the total gains due to taking lower paying jobs. I think we need to look at much more than share of employment and other employment stats to speak about whether a particular group gains more or less than a different group. Does anyone have info regarding the types of jobs and whether those jobs have good wages, fringes, etc which the minorities are getting when the tide rises? Mary Engelmeyer University of Notre Dame [EMAIL PROTECTED]
[PEN-L:3759] RE: China to Establish Direct Commercial Links to Internet
What will this do to the use of internet? Will this very large increase in the number of users overwelm the hardware currently in existence? Recently I spoke with a rep. from Digital who predicted that the use of the internet on a large scale basis as it is now moving towards will destroy the internet within two years. I certainly hope he was wrong but do those of you out there believe that this is possible? Just a second way to look at what appears to be good news. Loren Rice The University of Science and Arts of Oklahoma
[PEN-L:3760] Re: piece from the Progressive
Coincidentally, the Labor Party Advocates held a public hearing in the San Francisco area yesterday on the need for a labor party. Four hundred people showed up to participate at the meeting in Hayward. More public hearings are planned across the US. I was not at the meeting but can get a report from a friend who was, if there is interest in knowing about this. The press attended as well, so there may yet be some news coverage. Ellen J. Dannin California Western School of Law 225 Cedar Street San Diego, CA 92101 Phone: 619-525-1449 Fax:619-696-
[PEN-L:3762] Re: Who are Corporate Criminals?
Have a look at Paul Hawken's book The Ecology of Commerce for some excellent examples. Sally Lerner Hi, The subject header is a serious question. I am working on creating some propaganda for street organizing (and net organizing) that addresses right-wing scapegoating versus the true abuses in favor of the wealthy. THe form of the sheet will probably start with: WHO IS THE CORPORATE ELITE TRYING TO CRIMINALIZE? Answer, the homeless, welfare mothers, immigrants, urban black males, etc. Now, where PEN-L help would be useful (and here's the challenge) is your best examples of true corporate abuse. In a line or so, can you describe an example of a big corporation breaking the law, receiving welfare from the government, or using the international economy in an abusive way. The challenge is to write your answer as succintly and quickly as possible. One sentence is the ideal. If you want to add some detail, it might be added to follow-up information sheets. But please concentrate on a good example that can be explained quickly or is obvious. Here are the questions to answer: WHO ARE THE REAL CORPORATE CRIMINALS? Polluters, big-time SL folks, defense fraud examples, etc. WHO ARE THE CORPORATE WELFARE RECIPIENTS? WHO ARE THE TRUE CORPORATE ILLEGAL ALIENS? Examples of corporations destroying jobs here and commiting illegal acts around the globe--child slavery, union-busting etc. WHO HAVE RECEIVED CORPORATE AFFRIMATIVE ACTION? Special regulatory breaks for big business--the special concessions that lock in power of the wealthy. Cable franchises etc. WHO ARE THE CORPORATE TAX EVADERS? Tax loophole list I will repost the list of best examples. Thanks all, *Nathan Newman: [EMAIL PROTECTED] ***
[PEN-L:3766] Re: New Party piece
Dear Doug: Did I miss it since 1/5/95, or did your proof that claims of the New Party in Milwaukee were "bullshit"appear elsewhere? I would appreciate reading your remarks. How can I find them? While I find the articles of Nation writers generally interesting and certainly entertaining--including your own -- I think the tone of smug superiority that often infects the editorializing unhelpful toward the fostering of good works or the correction of errors. Perhaps your review of the "bullshit" claims of the NEw Party will be refreshing. J Case [EMAIL PROTECTED]
[PEN-L:3768] *Who are Corporate Criminals?
Nathan Newman wrote on January 15, 1994: Who are the real corporate criminals? Consider the recent case of GM in which U.S. Transportation Secretary Federico Pena concluded that certain Chevy and GMC pickup trucks are prone to catch fire in side collisions. Rather than force a recall, Pena forged an agreement under which GM will spend 51 million dollars on such things as safety seats for poor families, a fire safety research lab with the Transportation Department, education programs to promote seat belt use and deal with drunken driving, and, last but not least, burn and trauma treatment research. The federal government agreed to do its part by kicking in 27 million to the cause. Ralph Nader called the agreement "the most unprecedented buyout of law enforcement officials by a culpable corporation in regulatory history." Nader stated that "General Motors can keep these trucks on the road. They can keep burning people. And all we are going to get out of it is paying the government for research and the purchase of some child-restraint seats." I read about this in an AP story on 12/3/94 (Press and Sun Bulletin, Binghamton NY). Sorry I couldn't be more brief. For a good book that is full of this kind of stuff, check out 'The Rich Get Richer and the Poor Get Prison' by Jeffrey Reiman. -Chuck
