Category: business ethics

Extreme Inequality Helped Cause Both The Great Depression And The Current Economic Crisis (via Washington’s Blog)

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure1 Comment

From Washington’s Blog –

Most mainstream economists dismiss the idea that wealth inequality causes economic crises.

Of course, some ideologues will argue that even discussing inequality is waging class warfare, and smacks of an attack on capitalism.

However, the father of modern economics – Adam Smith – disagreed.

And as Warren Buffet, one of America’s most successful capitalists and defenders of capitalism, points out:

There’s class warfare, all right, but it’s my class, the rich class, that’s making war ….

(And as I have previously noted, radical concentration of wealth actually destroys capitalism.)

More to the point, most mainstream economists do not believe there is a causal connection between inequality and severe downturns.

But recent studies by Emmanuel Saez and Thomas Piketty are waking up more and more economists to the possibility that there may be a connection.

Washington’s Blog is an interesting web site full of writing you will not see else where. Here’s the link.

I lean toward the argument that inequality is a factor in economic downturns.

Read their post. I can’t do it justice in a few paragraphs. It’s full of graphs, multiple references and good writing. I’ve got this on my favorites.

James Pilant

Will Tax Cuts Spur the Economy? (via The Ethics Sage)

On By southwerkIn business ethics, ethics, Government Failure2 Comments

Steven Mintz takes out a sharpened pen and ridicules the notion of a cut in social security taxes as a stimulant for the economy. (I ridicule it, too and I’m less polite.) He suggests a better alternative but you are going to have to click on the link to see it. Visit the web site and while you’re there, look around and enjoy the writing.

From the Ethics Sage –

By now you’ve heard about the plan to cut the payroll tax on employees that funds Social Security and Medicare by 2%. Once again the fiscal irresponsibility of those in Congress and President Obama shines through any effort to get control of federal spending and reduce the national debt. The plan is put forward at a time when many have warned about the potential bankruptcy of social security in the not too distant future. How can our “leaders” possibly defend the proposal?

The explanation seems to be that the 2% extra in workers’ paycheck each pay period will stimulate the economy. We’ve been down this road before with little positive effect on spending. In past economic stimulus plans the workers largely saved the money or paid off bills. What makes the government think the result will be any different this time around?

The Ethics Sage, the whole web site, is found here.

James Pilant

Who will regret giving insider minnows free lunch?

On By southwerkIn business ethics1 Comment

This is a column from Reuters’ Richard Beales. I’ve put it up for two reasons. The first is that it’s a fine piece of writing. The second is the author has the same suspicions I have that the hoopla over the insider trading arrests is just hoopla. Only small, very small, fish will get caught and the big ones will walk away. There are a lot of very big fish that deserve de-scaling.

From Reuters –

The widening U.S. insider trading probe brought more arrests on Thursday. Three were technology firm employees who, together with another, earned over $400,000 moonlighting as expert consultants. That kind of gig sounds a bit too good to be true. And they are now alleged to have shared inside information with hedge funds and others. But the key question is still which bigger fish the enforcers are after.

Preet Bharara, the U.S. attorney for Manhattan, alleges that staffers at Dell, AMD, Flextronics and TSMC distributed inside information. They got their consulting work through Primary Global Research, a California firm that boasts a network of such experts.

As the scale of the investigation into insider trading becomes clearer, it would be an anti-climax if mid-level executives at tech firms were the ultimate targets. But it’s not clear who is. An absence of evidence isn’t stopping the popular vote going to Steven Cohen of SAC Capital, a big enough fish to own Damien Hirst’s pickled shark as part of a probably unmatched collection of cutting-edge contemporary art. But the reality is that nothing so far goes directly to SAC’s Jeff Koons-adorned lobby.

Exactly. Four hundred thousand bucks is a lot of money to me but to Wall Street, it’s a fraction of a  bonus. I want some criminals to go down, criminals whose thefts range in the hundreds of million, maybe billions. The only way to curb Wall Street Greed is by prosecution and regulations with teeth. Moral exhortation is wasted on the criminal. The financial elite of this country not only do not respond to moral persuasion, they have their own philosophy in which they play the role of heroes beset by their inferiors.

And here, the government cooperates by putting up a smoke screen of small malefactors scooped up. This demonstrates that the government is on the job and implies that there is no greater wrong doing. Once again the big fish swim away content.

Oh, by the way, use the link and read the whole thing. This is good stuff. The Brits are less concerned with the sell, sell, sell attitude of their American counterparts and more concerned with decent journalism. That’s why you see me draw from those sources instead of running to CBS Moneywatch’s Five Reasons Not to Get an MBA. That’s not journalism. It’s just idle speculation about a future that is hardly predictable.

James Pilant

Privacy is the Person of Last Year

On By southwerkIn business ethics, ethics

From Reuters –

Whether either Facebook or WikiLeaks will live up their leaders’ divergent, but comparably idealistic, hopes is questionable. Extra status updates can bring friends closer or just irritate, and personal data shared online can reveal more than is healthy. Likewise, making ambassadorial dispatches public can shine a disinfecting light on a government’s role in unsavory deals — or hurt efforts to forestall damaging conflicts and put undercover agents in harm’s way.

Both organizations are gaining status and so are their leaders, as the Time selections attest. This may, however, be their golden hour. Technology has made it much harder to keep things hidden or to hush them up once exposed. But the costs of bringing formerly private things to light are likely to become increasingly evident. Even the relatively benign-seeming Mr. Zuckerberg, now in command of vast amounts of personal information, is likely to face calls for far greater accountability from Facebook’s mass of users – if not regulators one day.

In a Reuters’ opinion column, Robert Cyran writes about privacy and the role of Facebook and Wikileaks. It’s a tale of the ongoing saga of privacy or lack therof. The two paragraphs I culled from the larger do not really do the article justice. I recommend you follow the link and read it in its entirety.

James Pilant

Bob Cesca – Are Progressives Losing Touch With Reality?

On By southwerkIn business ethics, ethics, President Obama

(I want you to know that I recognize that this essay is going to offend readers. I am sorry about that. I wanted very much over the last two years to write about how home owners were saved from foreclosure, how the banks were stopped from paying bonuses with public money, how thorough investigations were conducted into the banking practices which resulted in the financial meltdown, how the financial regulation of the 1930’s was reinstated to prevent future disasters, how white collar criminals were frog marched from their fancy offices and incarcerated, and how the President called on Americans particularly in the business world to act ethically, morally and responsibly. I didn’t get to write those essays.)

This is a response to Bob Cesca’s essay in the Huffington Post

Bob finds the President’s ability to sacrifice core beliefs that he asserted a few days before to be admirable displays of negotiating ability.

The President agrees to extend the Bush tax cuts after unequivocally saying he would not.

Losing touch with reality? Those funny people can read newspapers, observe blogs and understant ideology and facts.

The facts are clear. The President has no principle he is willing to stand for. None. Nada. Zero.

You expect a President to occasionally give up an ideogical point for negotiation. With Obama, whoops, excuse me, Mr. Cesca, I mean President Obama, everything is on the table.

Watching him eaten alive by Republican piranha is hardly the political vision held by Americans when he was elected.

Let me make it absolutely clear to you, Mr. Cesca. Lyndon Johnson said he knew the difference between chicken s**t and chicken salad. We’ve been fed a steady diet of chicken s**t by this White House.

It’s time for something different. It’s time for a primary challenge.

It would be better to have some exercise in actual belief than continual surrender.

It would be better to have a human being with some sincerity, some vestige of belief, some commitment to his own words, than this.

You want political reality, Bob? You want some straight talk, Cesca?

Try this. A good section of the Progressive movement are fed up and disgusted. They are not coming up with money, knocking on doors and doing all that other stuff that paid off with exactly, precisely zero. Progressives worked for this President. Oh, did I get that right, Bob, saying President? Does that make you feel more comfortable? Progressives are the cutting edge of the blade. They are the people that organize and fight for a candidate. No, they are not a majority of the Democratic party, just the part that gets out and fights. What are you hoping for? That Palin is the nominee, and all the Progressives will say they are sorry and come flocking back to fight?

What if it’s not Palin? What are you going to do then? Will you write how Progressives are out of touch while they sit at home?

This is rage, Bob. This is what you get when you get betrayed over and over again.

This is what you get when you watch banks bailed out to the last dime and watch the HAMP program (run by a twenty year veteran of Citibank) go down in flames having helped less than a million Americans of whom more than twenty percent are going back into foreclosure.

Oh, I guess that doesn’t bother you, Bob. See those are real, breathing, walking around Americans having the largest investments in their lives seized and turned into quick cash by those same bailed out banking institutions.

I teach business law and business ethics. Did you ever walk into a class and try to explain how a privileged class can crush the economy by gambling on derivatives and playing with home mortgages like monopoly money and walk away with their millions (billions) intact. No criminal investigations, no action taken to recover the money, the President constrained from even light criticism. All I have to do is explain that virtue is its own reward. Hard sell, Bob?

But morals, ethics, campaign promises, they can all be dispensed with for pragmatism. After all, cutting a deal, however bad, is what it is all about. Right?

Losing touch with reality? Lord God, I wish. This is a nightmare.

If anyone had told me two years ago, this would be the result of the election, I would have thought they were mental.

There was a lack of contact with reality. But it was then, not now. We know what we have now and it’s not much.

James Pilant

Workplace bullying 2010: “Bullycides,” Breakthroughs, and Backlash (via Minding the Workplace)

On By southwerkIn business ethics, ethics, Government Failure2 Comments

Bullycide
“Bullycide” deserves admission to the Oxford English Dictionary. Let David Yamada explain this from a post on his web site, Minding The Workplace.

James Pilant

The year 2010 was a significant one for the emerging American movement to stop workplace bullying. Here is my attempt to characterize major developments of the past year. "Bullycides" An unfortunate but apt term entered our lexicon this year, "bullycide," referring to suicides linked to bullying at work and schools. In the workplace context, two such deaths became especially prominent. One involved the July suicide of Kevin Morrissey, an editor a … Read More

via Minding the Workplace

Irish And Greek Bailouts Won’t Work!

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

James Saft
James Saft writing on his blog discusses the strange bailouts of Ireland and Greece. “What’s strange?” They are unsustainable. They are disastrous. They are a bandaid that won’t hold. This essay uses the word, bizarre. That is correct.

James Pilant

From Reuters –

So let’s recap, because this is truly bizarre: Lenders to Ireland or the other troubled states won’t take a hit now but if they stick around until 2013 then they will take losses along with the taxpayers. Oh yeah, and the current round of bailouts are aimed at seeing Ireland and Greece through the next couple of years, at which point it will become extremely dangerous to lend to them, as their economies will have shrunk, their debt burdens bloomed and private lenders will be on the hook.

To add to this, the European Stability Mechanism, the name of the new fund, will be senior to all creditors except the International Monetary Fund, meaning that in the event of a bankruptcy it would be paid first. Ratings agency Fitch looked at this provision and quite rightly said that it might lead to lower ratings on shaky euro zone sovereigns.

The only way you could make this policy mix work was if you could find a very rich lender with no ability to conceptualize the future. Hmm, let’s see a rich entity with limited ability to fully imagine a future state – it must be the European Union!

Few private lenders will stick around, they will sell their bonds and the only buyers will be the EU or ECB, which itself as it understands this predicament is hugely unwilling to play along.

Germany and France are both so unwilling to both have principles and pay for them that they are refusing to act on proposals for common European bonds and are expected to resist moves to increase the size of the European Financial Stability Fund, the vehicle now being used for bailouts.

Okay, do you get it? These aren’t solutions. They are designed to tide things over until someone new is in office to take responsibility. And especially, they are designed to appear as decisive action when they are nothing of the kind.

It is important that both Greece and Ireland elect new governments charged with challenging these horrendous plans that smack only of disaster. Those countries deserve better, and their citizens should demand better terms. These are sovereign nations not American homeowners subject to the whims of banks.

Let democracies exert the power of the people, the one and only thing that banks fear.

James Pilant

Spencer Bachus, The New Sheriff? In Town?

On By southwerkIn business ethics, Capitalism

Spencer Bachus
From Salon –

Rarely do you see a politician quite this honest: Last Wednesday, just hours after securing the position of chairman of the House Financial Services Committee, Spencer Bachus, R-Ala., told the Birmingham News that “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”

Well, let’s all lick some boots. Millions of Americans in foreclosure, the middle class stuck dead center in a disastrous financial calamity caused by the banks, massive wrongdoing apparently endemic in the financial sector, but don’t worry at least one of our dear Representatives has the right idea.

Let’s serve the banks. Wow, that worked so well in the past.

It’s just another version of Rod Serling’s “To Serve Man.” Want to buy a cookbook, anybody? We’re going to fry up consumers and, in fact, we’re going to rotisserie whole communities, barbecue States and lightly sautee small nations. All so that the banks can feel served. It makes you glow with pride doesn’t it?

James Pilant

Why Aren’t American Financial Criminals Going To Prison?

On By southwerkIn business ethics, ethics

Take a look at this and ask the same questions they are.

James Pilant

Nation On Wrong Track? – COMMENT by Jayaraman Rajah Iyer

On By southwerkIn business ethics, Capitalism, ethics, Government Failure3 Comments

Jayaraman Rajah Iyer comments on one of my recent posts. Being down with a sinus infection (it’s still hanging on), I wasn’t able to do it justice in my comments, so now I remedy that by letting you all see it as a direct post.

James Pilant

Yes all nations are in the wrong track. Quote from my book:”When the priority is already set, the hungry man accepts
the inevitability of the human race which is non-reacting,
non-acting, non-responding, inert-like entity. The change that
is needed from a Government to shift the gear from
advanced technology and space exploration to a mundane
agricultural economy is a process very tough to implement in
a short notice, even if one realizes that more than a billion
people are below poverty line. Nuclear submarines,
armaments, security initiatives of trillion dollar valued
business enterprise have precedence over morality and
therefore prudence is what the government feels they should
adopt. Not because it is not the priority but effecting change
in increasing the arable lands, increasing the yield per
hectare, linking satellites facilities for better farming,
conclusion on Genetically Modified seeds, advanced
agricultural machinery, increasing the total agricultural
production etc. involve a clear long-term strategy of many
years to implement.

“The new pledge to commit $20 billion to global
agricultural development.. has the potential to dramatically
improve the livelihoods of more than 700 million of the
world’s poor living in rural areas, so says Catherine Bertini,
former executive director, UN World Food Program; and Dan
Glickman, former secretary, U.S. Department of Agriculture.”
$20 billion is a minuscule amount, given the defense
expenditure and the estimated sum tax evaders who have
effectively squirreled away between 7 and 11 trillion dollars
in safety deposit boxes and offshore bank accounts, as
Lesley Curwen reports in BBC, it gives the state of
affairs of the economy driven by forces beyond the control of
the world governments. Agricultural production gets stagnated for years but world, if ever takes cognizance of
increased production in agriculture, then the society as a
whole has to be brought into action. The canvas is much
larger, expansive, broad and comprehensive in its strategy
to execute. Without involving many in the society it is
conceptually difficult to materialize major results.”

Recent visit by Obama to India has again pushed defense equipment for sale that would at the most protect a few jobs. India is stagnated at 300 million tonnes agricultural produce for too long and there seems to be no strategy to scale up to 500 million tonnes. Leadership is very much needed lest those who remain hungry takes the leadership in their hands – at the street level.