Political Economy category archive

I mentioned developer magic last week in conjunction with the scheme of some in Virginia Beach for the city to fund a developer’s construction of a new hotel.

A refresher on how it works: the city gives money to a developer to pull a rabbit out of a hat, magically making tourists favor Virginia Beach over, for example, Ocean City or Myrtle Beach.

The developer disappears the money and the rabbit stays in the hat.

Meanwhile, the hotel sits half-empty, surviving on the city’s guarantees, until comes another developer to promote another “public-private partnership” (see below) to convert the site to condominiums or retail space or something, promising that, like a weekend in the Bahamas, it will restore the magic. &c.

Here’s the latest in the story.

The resident curmudgeon at the local rag tore into this issue yesterday, and she had facts and figures. Unlike City Council’s numbers, they are based on facts, not on developer’s projections. A snippet:

Sanders is the author of academic articles with titles like “Convention Center Follies,” “Convention Mythology” and “Flawed Forecasts.” But what does Sanders know? He’s just a graduate of Johns Hopkins with a doctorate from Harvard, a member of Phi Beta Kappa and a guest scholar for the Brookings Institution.

“This is not an ideological issue for me,” Sanders told me Tuesday. “I don’t oppose public spending on the stuff that makes sense…. But it’s the same script and the same scenario everywhere.”

From coast to coast, in cities large and small, politicians salivate over inflated visions of convention business. They build magnificent facilities and then chase conventions by slashing their fees and pouring public money into ancillary projects designed to give their centers a competitive edge.

After years of studying the convention industry, Sanders says he’s not surprised to find municipalities that are struggling to balance budgets and pay teachers that can miraculously find money to throw at their convention centers. These exhibit halls inevitably come with overblown promises of stampeding visitors, millions in tax receipts, and hotels packed with conventioneers.

Travelers don’t go to cities to visit hotels.

Travelers go to hotels to visit cities.

All the rage right now.

Here’s how they work:

A legitimate governmental function needs doing, such as, say, an expressway needs to be built. Instead of the building the expressway directly with tax money, the government gives the tax money to a private company, which uses it to pay for executive bonuses and country club memberships.

Years later, a new sidewalk is christened.

With toll booths.

Jay Bookman, while discussing some proposals in Georgia, sums up the underlying methodology.

They (the state–ed.) want to take money out of your pocket and give it to other people who don’t need it as much as you do.

Robert Reich recalls Henry Ford’s decision to pay his employees enough to buy his cars, then remuninates on refusing to learn from the past. A snippet:

In the years leading up to the Great Crash (1929–ed.), most employers forgot Henry Ford’s example. The wages of most American workers remained stagnant. The gains of economic growth went mainly into corporate profits and into the pockets of the very rich. American families maintained their standard of living by going deeper into debt. In 1929, the debt bubble popped.

Sound familiar? It should. The same thing happened in the years leading up to the crash of 2008.

The latest data on corporate profits and wages show we haven’t learned the essential lesson of the two big economic crashes of the last 75 years: When the economy becomes too lopsided – disproportionately benefiting corporate owners and top executives rather than average workers – it tips over.

In other words, we’re in trouble because the basic bargain has been broken.

Mixed, but, for all practical purposes, status quo ante.

Jobless claims climbed by 6,000 to 402,000 in the week ended Nov. 26 that included the Thanksgiving holiday, Labor Department figures showed today in Washington. The median forecast of 43 economists in a Bloomberg News survey called for a drop to 390,000. The number of people on unemployment benefit rolls and those getting extended payments increased.

(snip)

Today’s data showed the four-week moving average, a less volatile measure than the weekly figures, rose to 395,750 last week from 395,250, which was a seven-month low.

The number of people continuing to receive jobless benefits climbed by 35,000 in the week ended Nov. 19 to 3.74 million.

Via BartCop.

Brave New Films contrasts the defense war industry’s claims about their role in providing employment with economic facts.

Surprising result: It ain’t necessarily so.

For all practical purposes, no change. Reuters tries to present that as something positive:

New claims for unemployment benefits rose slightly last week but held below 400,000 for the third straight week, suggesting the labor market was gaining traction.

Initial claims for state unemployment benefits climbed to a seasonally adjusted 393,000 from an upwardly revised 391,000 in the prior week, the Labor Department said on Wednesday.

(snip)

Initial claims below the 400,000 mark are normally seen as pointing to some healing in the jobs market.

The four-week moving average of claims, considered a better measure of labor market trends, fell 3,250 to 394,250, the lowest since April.

As usual in these stories, there is no mention of how many persons no longer eligible for benefits are still out of work.

But the Dow is over 11,000.

And I do mean rundown.

Once more, no mention of how many persons are no longer eligible for benefits, yet remain unemployed and living in their cars in Walmart parking lots.

Applications for jobless benefits decreased 5,000 in the week ended Nov. 12 to 388,000, the lowest level since April, Labor Department figures showed today in Washington. Economists forecast 395,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls fell to a three-year low.

(snip)

The four-week moving average, a less-volatile measure, dropped to 396,750 from 400,750.

The number of people continuing to collect jobless benefits decreased by 57,000 in the week ended Nov. 5 to 3.61 million, the fewest since September 2008. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments dropped by about 70,400 to 3.46 million in the week ended Oct. 29.

Emphasis added.

The Barnes residence is part of a growing line of new homes marketed to multigenerational families, a category that increased by 30 percent from 2000 to 2010, according to the U.S. Census Bureau. KB Home, Lennar Corp. (LEN) and PulteGroup Inc. are among the builders that offer models with second master bedrooms, kitchenettes and separate entrances.

Those features may help lure buyers at a time when new homes are selling at a record slow pace and more Americans are living with extended families, said Megan McGrath, a homebuilding-industry analyst with MKM Partners LP in Stamford, Connecticut.

One of the things that broke people do is move in with each other.

Detail here.

At Asia Times, Juan Cole looks at the “Arab spring” in the light of economics, arguing forcefully that the economic causes of rebellions in North Africa and the Mediterranean rim have been under reported.

Here’s a bit:

In the “glorious 30 years” after World War II, North America and Western Europe achieved remarkable rates of economic growth and relatively low levels of inequality for capitalist societies, while instituting a broad range of benefits for workers, students, and retirees. From roughly 1980 on, however, the neo-liberal movement, rooted in the laissez-faire economic theories of Milton Friedman, launched what became a full-scale assault on workers’ power and an attempt, often remarkably successful, to eviscerate the social welfare state.

(snip)

In the global South, countries that gained their independence from European colonialism after World War II tended to create large public sectors as part of the process of industrialization. Often, living standards improved as a result, but by the 1970s, such developing economies were generally experiencing a leveling-off of growth. This happened just as neo-liberalism became ascendant in Washington, Paris, and London . . . .

Egypt and Tunisia, to take two countries in the spotlight for sparking the Arab Spring, were successfully pressured in the 1990s to privatize their relatively large public sectors. Moving public resources into the private sector created an almost endless range of opportunities for staggering levels of corruption on the part of the ruling families of autocrats Zine El Abidine Ben Ali in Tunis and Hosni Mubarak in Cairo. International banks, central banks, and emerging local private banks aided and abetted their agenda.

Not that we’ve seen any such corruption and opportunism on our own shores in the last 30 years.

Crashing credit default swaps, Batman, good heavens no.

More like this, please.

Officials in Santa Cruz county, California, have cut all ties with Bank of America and JP Morgan Chase after an examination of both organizations’ histories of cash settlements over fraud allegations.

Santa Cruz Treasurer-Tax Collector Fred Keeley said Thursday evening that the banks, which were handling some of the county’s bond investments, had engaged in unacceptable practices that should alarm any official charged with handling public dollars.

“There seems to be no limit to the greed of some of our nation’s largest banks,” Keeley said . . . .

One of the things that keeps the banksters going is that persons keep going to them. Since all they care about is money, the only consequences that will get their attention must involve money (or perhaps jails).

So far, we have reinforced their recklessness and duplicity: we keep giving them more money for doing the same things all over again once more.

Still holding its own (emphasis added):

The Real Estate Information Network reported that 866 existing homes were sold last month, down 8.2 percent from September but up 12.6 percent from October 2010. It was the fourth consecutive month of year-over-year sales volume increases.

Distressed sales in all of Hampton Roads still played a major factor in the market last month, accounting for 33 percent of October’s sales. Those sales include foreclosures and sales by homeowners whose homes are worth less than the balance of their mortgage.

Under 400k. It’s not clear how from the story how many persons are still out of work but no longer eligible for unemployment compensation, but it’s likely a lot.

Jobless claims fell by 10,000 to 390,000 in the week ended Nov. 5, Labor Department figures showed today in Washington. The median forecast of economists in a Bloomberg News survey called for 400,000 new claims. The number of people on unemployment benefit rolls decreased, while those getting extended payments rose.

(snip)

Today’s data showed the four-week moving average, a less volatile measure than the weekly figures, fell to 400,000 last week, the lowest since April, from 405,250 the previous week.

The number of people continuing to receive jobless benefits fell by 92,000 in the week ended Oct. 29 to 3.62 million. They were forecast at 3.68 million.

The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.