A topless model the Tea Party should see, grandmas who dig rap music, and Ron Paul supporters everywhere: As of Saturday, MoJo's Josh Harkinson is camping out in Zuccotti Park, and we're collecting his dispatches and other #OWS must reads below, using Storify. Read on for much more.
For years, China has artificially deflated the value of its currency by some 40 percent, a huge export subsidy that cripples American manufacturers. "Chinese currency manipulation is the single biggest reason why so many Americans are still jobless," says Peter Morici, a University of Maryland business professor and former chief economist with the US International Trade Commission. Eliminating the practice, economists estimate, would boost American exports by $125 billion a year and create 900,000 US jobs. "The Chinese have figured out that this advantages them even though it's unfair," Morici says. "And they are not going to change it until we take action."
Congress seems to agree. A bipartisan majority in the Senate has agreed to vote as early as today on the Currency Exchange Rate Oversight Act of 2011, a bill that would require the Treasury Department to do more to address foreign currency manipulation. Similar legislation in the House, the Currency Reform for Fair Trade Act, has an unprecedented 225 cosponsors, including 61 Republicans. But despite bipartisan will to tackle the problem, House Speaker John Boehner has shown no sign that he'll let the bill come up for a vote. "I think it's pretty dangerous for us to move legislation in the United States Congress forcing someone to deal with the value of their currency," Boehner said on Tuesday. "This is well beyond what I think Congress ought to be doing."
In 1961, Allen Rosenstein used a $500 loan from his father to found Pioneer Magnetics, an electronics company that grew from a small NASA contractor in Southern California to a major manufacturer of computer components. By 2000, he employed 500 workers and grossed $27 million a year. But that was before competition from low-cost Asian manufacturers inspired much of the American high-tech industry to relocate overseas. "They have persuaded my biggest competitors to move over there," says Rosenstein, who's had to lay off 80 percent of his US workforce to stay competitive. "The net effect is it beggars this country, and we don't seem to be able to recognize it."
On Monday, the Obama administration sent Congress its latest version of the Korea-US Free Trade Agreement (KORUS FTA)—a bilateral pact that would be the largest of its kind since the North American Free Trade Agreement. (The package included free trade deals with Panama and Colombia, but those are small potatoes compared with Korea, the world's 15th-largest economy—and a tech and manufacturing powerhouse.) The US Chamber of Commerce, which launched a national pro-ratification campaign in January, was juiced. "America is finally getting back in the game," Thomas J. Donohue, the group's president, declared in a statement. "The chamber will pull out all of the stops to get the votes in Congress, where the agreements already enjoy bipartisan support."
A sizable number of domestic manufacturers, however, have sided against the chamber over Korea. For one, the US Business and Industry Council, an association of small and midsize firms founded in 1933, is strongly opposed to the deal. "We can't imagine that KORUS would serve current US economic interests," says Alan Tonelson, a research fellow with the council.
Corporate chieftains often claim that fixing the US economy requires signing new free trade deals, lowering government debt, and attracting lots of foreign investment. But a major new study has found that those things matter less than an economic driver that CEOs hate talking about: equality.
"Countries where income was more equally distributed tended to have longer growth spells," says economist Andrew Berg, whose study appears in the current issue of Finance & Development, the quarterly magazine of the International Monetary Fund. Comparing six major economic variables across the world's economies, Berg found that equality of incomes was the most important factor in preventing a major downturn. (See top chart.)
Andrew Berg & Jonathan Ostry
In their study, Berg and coauthor Jonathan Ostry were less interested in looking at how to spark economic growth than how to sustain it. "Getting growth going is not that difficult; it's keeping it going that is hard," Berg explains. For example, the bailouts and stimulus pulled the US economy out of recession but haven't been enough to fuel a steady recovery. Berg's research suggests that sky-high income inequality in the United States could be partly to blame.
So how important is equality? According to the study, making an economy's income distribution 10 percent more equitable prolongs its typical growth spell by 50 percent. In one case study, Berg looked at Latin America, which is historically much more economically stratified than emerging Asia and also has shorter periods of growth. He found that closing half of the inequality gap between Latin America and Asia would more than double the expected length of Latin America's growth spells. Increasing income inequality has the opposite effect: "We find that more inequality lowers growth," Berg says. (See bottom chart.)
Berg and Ostry aren't the first economists to suggest that income inequality can torpedo the economy. Marriner Eccles, the Depression-era chairman of the Federal Reserve (and an architect of the New Deal), blamed the Great Crash on the nation's wealth gap. "A giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth," Eccles recalled in his memoirs. "In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped."
Many economists believe a similar process has unfolded over the past decade. Median wages grew too little over the past 30 years to drive the kind of spending necessary to sustain the consumer economy. Instead, increasingly exotic forms of credit filled the gap, as the wealthy offered the middle class alluring credit card deals and variable-interest subprime loans. This allowed rich investors to keep making money and everyone else to feel like they were keeping up—until the whole system imploded.
Income inequality has other economic downsides. Research suggests that unequal societies have a harder time getting their citizens to support government spending because they believe that it will only benefit elites. A population where many lack access to health care, education, and bank loans can't contribute as much to the economy. And, of course, income inequality goes hand-in-hand with crippling political instability, as we've seen during the Arab Spring in Tunisia, Egypt, and Libya.
History shows that "sustainable reforms are only possible when the benefits are widely shared," Berg says. "We hope that we don't have to relearn that the hard way."
The rise of dark-money political groups has made it much harder to tell which big companies are throwing money at elections. Often, all we know is what corporations voluntarily disclose—a big reason why transparency is becoming one of the most important aspects of corporate citizenship. With that idea in mind, the Robert Zicklin Center for Corporate Integrity at Baruch College has ranked Fortune 100 companies based on how well they disclose their political activities. The results may surprise you. Highly transparent companies include hard-knuckled lobbying powerhouses such as Pfizer and Goldman Sachs. Highly opaque ones: Corporate do-gooders such as Berkshire Hathaway, Nike, and Google (though the authors hadn't seen this Google page).
If you're wondering what to make of this, the study found some fascinating trends. At the low end of corporate political engagement, companies tend to disclose more as they become more politically active. But as companies go from moderate to heavy involvement in politics, the trend reverses and politically active companies become increasingly opaque. Here's what this looks like on a graph, where the Baruch Index measures transparency (100=most transparent).
Robert Zicklin Center for Corporate Integrity
Okay, the graph isn't too transparent either. But here's what I think is going on: Companies that aren't involved in politics can seem opaque because they have nothing to disclose. Those with moderate political engagement disclose more on average because they want to let shareholders know that they're fighting for their interests. But those engaged in major political battles know that their heavy spending could tarnish their brands, so they find ways to hide what they're doing. In other words, political transparency comes with its own cost/benefit curve, which is basically what you see above.