« Sandbox - 6apr18 | Main | Ruminations – 9apr18 (updated 14apr18) »

08 April 2018

Comments

Scott Obermuller

It would be much easier to side with Tesla on this issue but that we must remember that Tesla enjoys a huge wind behind their sails in the form of tax payer money taken at gun point from those who can not afford a Tesla so that the wealthier citizens can have the cost of buying their Tesla reduced. I'm against the idea of govt favoritism by all means but as for Tesla in this little ado, I'm telling Musk to go pound sand. Live by the sword - die by the sword.

George Rebane

ScottO 527pm - can't disagree with your perspective Scott, and I would have preferred a better pedigreed victim here to illustrate corporatism in operation - had to take the best currently egregious case that I could find that was so well documented. I hope that readers can focus on the point made.

BTW, as taxpayers we should side a bit more with Tesla, since we had no say in their being subsidized. In any case, I would like to see them get profitable sooner than later and start paying taxes that had a chance of making up some of their received largess.

Mary Wanna

GeorgeR, Why not just change the name of your blog to “It’s all the fault of the Left”? The majority of your rants lead with this premise - even though, as is the case in this most recent rant, the Left has little to do with the subject of corporatism as we know it today.

When governments act in a protectionist manner to favor an insustry, in this case, the legacy auto manufacturers in Michigan - it is not the Left’s doing.

RINO Trump is a corporatist since he enacts tariffs, and other protectionist barriers like the border wall to keep out the supply of labor.

The Bush bailout of the ‘too big to fail’ banks and TARP and the American Recovery and Reinvestment Act of 2009 and no-bid government contracts are also corporatist mechanisms as was the New Deal and TVA electrification program.

And lurking somewhere in there are both Leftys and Righty greedy ‘corporate’ fat cats.

George Rebane

MaryW 707pm - Are you in favor of fewer regulations, more open markets, lower taxes, smaller government, a larger choice of products and services along with their concomitant risk, more freedoms to dispose of your property as you will?

Russ

LA Times: Elon Musk's growing empire is fueled by $4.9 billion in government subsidies - 2015.

Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.

And he's built those companies with the help of billions in government subsidies.

Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups.

"He definitely goes where there is government money," said Dan Dolev, an analyst at Jefferies Equity Research. "That's a great strategy, but the government will cut you off one day."

The figure compiled by The Times comprises a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars.

A looming question is whether the companies are moving toward self-sufficiency — as Dolev believes — and whether they can slash development costs before the public largesse ends.

Tesla and SolarCity continue to report net losses after a decade in business, but the stocks of both companies have soared on their potential; Musk's stake in the firms alone is worth about $10 billion. (SpaceX, a private company, does not publicly report financial performance.)

Musk and his companies' investors enjoy most of the financial upside of the government support, while taxpayers shoulder the cost.

The payoff for the public would come in the form of major pollution reductions, but only if solar panels and electric cars break through as viable mass-market products. For now, both remain niche products for mostly well-heeled customers.

Musk declined repeated requests for an interview through Tesla spokespeople, and officials at all three companies declined to comment.

The subsidies have generally been disclosed in public records and company filings. But the full scope of the public assistance hasn't been tallied because it has been granted over time from different levels of government.

New York state is spending $750 million to build a solar panel factory in Buffalo for SolarCity. The San Mateo, Calif.-based company will lease the plant for $1 a year. It will not pay property taxes for a decade, which would otherwise total an estimated $260 million.

The federal government also provides grants or tax credits to cover 30% of the cost of solar installations. SolarCity reported receiving $497.5 million in direct grants from the Treasury Department.

That figure, however, doesn't capture the full value of the government's support.

Since 2006, SolarCity has installed systems for 217,595 customers, according to a corporate filing. If each paid the current average price for a residential system — about $23,000, according to the Union of Concerned Scientists — the cost to the government would total about $1.5 billion, which would include the Treasury grants paid to SolarCity.

Nevada has agreed to provide Tesla with $1.3 billion in incentives to help build a massive battery factory near Reno.

The Palo Alto company has also collected more than $517 million from competing automakers by selling environmental credits. In a regulatory system pioneered by California and adopted by nine other states, automakers must buy the credits if they fail to sell enough zero-emissions cars to meet mandates. The tally also includes some federal environmental credits.

On a smaller scale, SpaceX, Musk's rocket company, cut a deal for about $20 million in economic development subsidies from Texas to construct a launch facility there. (Separate from incentives, SpaceX has won more than $5.5 billion in government contracts from NASA and the U.S. Air Force.)

Subsidies are handed out in all kinds of industries, with U.S. corporations collecting tens of billions of dollars each year, according to Good Jobs First, a nonprofit that tracks government subsidies. And the incentives for solar panels and electric cars are available to all companies that sell them.

Read the rest HERE.

Scott Obermuller

"... the Left has little to do with the subject of corporatism as we know it today."
Total liar or totally ignorant.
Take your pick and yes, I can back it up a dozen ways to Sunday. The American left loves corporatism. Lots of Republicans as well.
But to say the American left has little or nothing to do with the 'subject' of corporatism - apparently the 'American left' must mean a handful of commies in some isolated cell in Ann Arbor.
Mary Wanna been smoking way too much MJ.

Scenes

My own over-simplistic view is that corporatism is merely a broken free market. There are quite a few natural and/or government encouraged monopolies out there, but little interest in tamping them down (a reasonable application of the .gov I think). If they are on your side, like Google, then the political Left stays out of it.

If they donate to campaigns, everyone stays out of it.

IP law appears to favor those with money, as it is largely applied to maximize the value of an idea, not "To promote the Progress of Science and useful Arts".

My impression of the old school Right and Left, is that the former appears to be more laissez-faire when economic resources are concentrated, but is fine with protection of large companies. The latter is the same, but is more interested in pulling the money back out for good deeds. Neither one, at least it's elite, appears particularly interested in
encouraging truly free markets.

At the small scale, it's like arguments about individual taxes. The Right wants people to keep their money, the Left is fine with them getting rich but wants most of it back for redirection to their own causes. I don't hear much curiosity about why some people are so well paid. In a lot of cases, what I see is a broken labor market.

George Rebane

Scenes 743am - Good points Mr Scenes. Re your last paragraph, would you please expand your thoughts on "a broken labor market."

scenes

"a broken labor market."

Not a fully fleshed out concept, but I'll think of a few examples.

One case is people who are paid partly due to an artificial scarcity in a profession (there are obvious examples). Another one might be corporate execs who run a company more for their own benefit than that of the stockholders, usually by stacking a board. A tendency towards gigantism (and/or monopoly) in entertainment markets causing a very few performers (athletes, musicians, and the like) to make more then they would otherwise.

In any case, there seems to little interest from the Left in freeing up the constraints that might lower wages at the top due to competition, but a lot of interest in skimming off a chunk of the returns from those people.

Basically, the professional Left likes the concentration of wealth because the money can be redirected to the areas they find desirable, and there's always an infinite number of good works to invest in. As a practical matter, there's little interest in finding out why those folks became rich to begin with...and a truly free labor market would likely result in a bit less inequality.

George Rebane

scenes 612pm - OK, then let's build on your thoughts. To go from here to a "truly free labor market", what needs to be done, and who would do it? I assume that you will not appeal to altruistic behavior from the participants.

scenes

'altruistic behavior'. Good God no.

Wages will always be calculated in peculiar ways, but I'm game to think of some changes.

.Get rid of collective bargaining in .gov jobs. Government employees basically supply a labor monopoly and, especially in mission-critical cases, can push prices to a level much higher than market levels. Public safety employees in CA are a prime example. 'Prices' includes the total pay package including retirement, healthcare, etc. of course.

In truth, any collective bargaining likely results in a single source of workers and would result in price distortions.

.Grow schools to meet market need rather than restrict graduates. They may need to shrink of course. I have a funny feeling that some forms of medical professionals, lawyers (in states that require a degree to pass the bar...California is not one of those), etc. keep the outflow of graduates down.

.How to encourage executive in publicly traded companies to maximize their fiduciary relationship with investors rather than somewhat abusing their ability to extract cash? I have no idea. Stockholders appear (to me) to have a fairly weak hand on the tiller. I'd have to go through old SEC filings to see how times have changed, but suspect that they have. I have never observed a strong relationship between a new CEO's performance and their pay package.

A side note. I'm not an expert in this (but hey, why not express an opinion?), but have a feeling that we would be better off if dividends were encouraged over stock price. Dividends are not tax deductible to the payer, no? That seems counter intuitive and, if that's true, a simple tax change might alter everyone's thinking about stocks away from speculation and towards income.

.I think the music business (in terms of winner-take-all) is somewhat solving itself as the money is somewhat evaporating from distribution and moving to performances. IP law strikes me as a lawyer/gov caused swamp. Paul may have a different take. Sports, obviously, is filled with non-competitive angles from .gov subsidies to the MLB monopoly. To be fair, it's one of the few cases where the very best person is worth every penny. F1 probably being the premier example.

Is the banking sector really worth all the money that is poured into it? Beaucoup government interference and .gov caused opportunities for chicanery. More than I know.

Gotta go to bed. Let me think some more.

scenes

...and just to be clear. I have nothing wrong with money being made, although you can argue that the government scrapes back some of it at the very highest end via estate taxes and progressive tax systems...it's not dissimilar to occasional antitrust action as money accretes money. OTOH, government has it's hands dirty in a thousand ways in terms of aiding or harming income.

At the bottom end, in some decades floods of un- and low-skilled labor is actively encouraged to enter the country, causing drops in wages for the working classes. At the higher end, there are scads of distortions. From automobile dealership or liquor distribution laws to labor monopolies (ie. unions) to an artificially large and highly paid bureaucracy to abused IP law to the awarding of contracts for fairly sketchy reasons, not to mention the Fed. The Right appears to be more hands-off but doesn't do a whole lot to free up markets that I can see, while the Left appears to be fine with .gov caused movements of money but simply wants a piece of the action.

Flawed reasoning, no doubt, but there you have it.

George Rebane

scenes 658am - Thank you Mr scenes, to a large extent you and I are fellow travelers on the same ideological highways and byways. My own ideas about a free labor market start with maximizing an individual's opportunity to hang up any shingle s/he wants as long as the prospective customer/client/employer is not restricted in vetting the advertised skills. Yes, a gardener can decide to go into brain surgery, and practice it as long as his patients can determine his skills in that endeavor, and then agree to go forward (with, of course, the appropriate releases being signed by both parties). If the patient (customer) requires board certification in brain surgery, so be it; but it is the customer who decides, not a third party with no skin in the game. And the worker can also be summarily fired, as per their contract or absence thereof. In short, the worker and employer determine their own relationship, and not have an obscure and restrictive form of it imposed against the parties' will by someone else with a gun.

I did have concern about your question - "Is the banking sector really worth all the money that is poured into it?" Worth it to whom? Seems that there might be that third party with gun involved who decides how much worth is bestowed on other people. Did I misunderstand?

Gregory

Here's Python(Monty) on the subject of gardeners doing brain surgery...
https://www.youtube.com/watch?v=M68GeL8PafE

Thinking of a Mr. Gumby piloting an airplane in the USA, well, the reality is that with financial responsibility laws in place, an insurer will pretty much require more demonstrated experience than the FAA does every time. The same would be true for Dr. Gumby.

George Rebane

Gregory 1033am - And that's the point, all of those "in place" laws contribute to the distortion of a "truly free labor market". In the final analysis, to what extent must we be protected from ourselves, and by whom?

scenes

"Is the banking sector really worth all the money that is poured into it?"

I suppose I'm referring to that in two ways. The first is the amount of .gov money that flows through it, especially during that last financial crisis. Quite a lot stuck to their fingers of course.

The second refers merely to the percentage of the economy that is taken up by the FIRE 'industries'. Finance and it's brethren are basically a form of overhead to an economy, not primary wealth generators (although you do need trust networks and liquidity). I believe they've basically doubled in size as a percentage of GDP, 10% -> 20% over the last 60 years or so.

I'd like to better understand what is driving that.

George Rebane

scenes 1157am - And you did hit upon the crucial role of banks and the financial industry in wealth generation. It is that industry, when run by people with skin in the game, that enables the functional wealth generators of an economy by constructing and operating the pipelines of money going to where it bestows greatest value and is consequently rewarded for that service. We do know that financial institutions can also be corporatists, but the way to accurately assess the banking sector's worth is to first minimize the 'ties that bind' it to the government tit. That's my two cents, or more hubristically 'Rebane Doctrine'.

Bill Tozer

If I were Zuckingberg, I would be begging to be regulated. It’s in their overwhelming best interests. When a company becomes a monopoly, the best thing that can happen is to be regulated. That keeps all potential and yet to be foreseen competitors at a disadvantage. The monopoly remains because only the monopoly can benefit from struck regulation..

An example of sorts might be Jamie Diamond. He has a full time staff of 6,000 just to keep up with and comply with regulations. The big boys can do that and absorb the costs, Citizens Bank cannot. Advantage goes to monopoly with regulation if you owned FB.

In an unrelated matter, we all know (I hope) there never would be Congressional hearings about FB if Hillary had won. The crime FB has committed is allowing a few million FB user files to be skimmed off the top to potentially help Trump. An unforgivable sin. Everything FB had was given to Obama’s campaign Obama for America in 2012. Now, the government has everything FB has. A partnership. Regulate FB to keep the good thing for both government and the “private company” going. Mutually beneficial.

Scott Obermuller

Something being left out here in the discussion of labor markets is the fact of folks not involving themselves in the labor market due to the govt giving them a living. Farmers complain about needing workers due to the govt chasing away illegals, but actually it's the legal citizens being 'chased' away from working because the easier path is sitting on your butt collecting bennies. Oh - excuse me - 'entitlements'.
Once half of Mexico has been declared to be due full SS and all the other benefits of American citizenship, the farmers will have a hard time finding anyone to work at any wage.

scenes

" but actually it's the legal citizens being 'chased' away from working because the easier path is sitting on your butt collecting bennies."

There's really not much in the way of benefits for working-age males, most of the money (I believe) is attached to children. What it does force the ag industry to do is to increase wages to the point that a US citizen will do it rather than an illegal indentured servant.

Personally, I'm fine if the price of lettuce went up slightly, there's not a lot of labor content in the cost of retail fruit and vegetables. I'd certainly rather do that than have generation after generation of newly imported people do the work, it isn't like their kids have any intention of replacing their parents in the fields.

In any case, most illegals aren't farm workers. They've replaced citizens in construction trades, restaurants, places that prepare meat, yard care, body repair shops. Basically taking jobs from first-time workers, teenagers, skilled manual trades. The net effect was to drive down wages and drive up unemployment and the need for benefits.

It wouldn't surprise me to see a big push for automation in farming, but that assumes that yet another open-borders administration doesn't take power.

The comments to this entry are closed.