Digest: 17 April 2014
In My Ideas, My Boss’s Property, Orly Lobel (for The New York Times) discusses the employee agreements common to the tech industry that result in increasing ownership of patents by corporations rather than by individuals. While non-compete agreements are common in the business world, the extent of the property ownership retained by employer corporations in the US is likely to have negative consequences. Lobel and a colleague have researched “how ownership over our skills and creative ventures affects our motivation to perform”. The results, published in the Harvard Business Review, do not bode well for US markets – relinquishment of ownership caused participants to become less focused, to spend less time on the task, and to make twice as many errors. Lobel points out that a trend likely to cause decreased creativity is a serious problem at a time when economic growth requires increasing ingenuity of innovation.
In The Growing Divide Within Developing Economies, Dani Rodrik (for Project Syndicate) discusses how in the developing world there is an increasing gap between leading and lagging sectors. The transition from agrarian to industrial economy usually produces strong growth, but recently that growth has not been materializing to the expected extent. The low-productivity segments in developing economies are growing rather than diminishing. Workers are feeding not factories but non-productive informal service industry jobs. While governments look to support small enterprises, Rodrik argues that few successful businesses start out as small informal firms, he says the challenge is to develop economic environments that can support firms engaged in modern tradable production that can absorb workers from the rest of the economy.
In Out of Ammo? The Eroding Power of Central Banks, Michael Sauga and Anne Seith (for Der Spiegel) discuss the problem that central banks, having used up their ability to affect markets by lowering interest rates, are still facing stagnant growth. In the US, the Federal Reserve has bought up sovereign bonds and mortgage-backed securities worth $18 trillion with little effect – the money has been flowing to the stock market rather than to the private sector as credit. In the UK, initial hopes in Mark Carney are running thin with a strengthening British pound and overheated real estate prices on the back of a bloated Bank of England balance sheet. In the EU, a sharp decline in the inflation rate has bankers concerned – interest has been kept low at .25% but now there is now little room for maneuver. At the Bank for International Settlements, Claudio Borio argues that the reason that underlay the financial crisis still exists, it is the failure of macroeconomic models to take proper account of fluctuations in the financial cycle, which have been increasing dramatically since deregulation in the 1980s and the globalization that has taken place since then. The financial sector has become detached from the real economy and now follows “a self-fueling logic of speculation”.
In Four Eras of Slavery, for the Benefit of Corporations, Paul Buchheit (for Nation of Change) describes the relationship between slavery and corporations through four periods: Before emancipation, Pre World War II, World War II, and the present day. He argues that while the 13th Amendment abolished slavery, it largely did so in name alone. Prior to the Civil War the cotton industry fueled by slave labor accounted for as much as 60% of US exports. After the Civil War, prisoners, vagrants, and those who could not pay court and jailhouse fees were used in convict leasing programs to feed corporations with cheap or free labor. During the Nazi years, US companies like Ford, General Motors, Kodak and IBM generated massive profits from the use of slave labor. To the present day, Buchheit argues, slave labor continues in the form of debt servitude and prison inmate labor.
In Tamiflu: Millions Wasted on Flu Drug, Claims Major Report, James Gallagher (for BBC News) discusses how the UK spent £473m on stockpiling the flu drug which now seems to be no more effective against flu than paracetamol. The report brings into question a number of claims for the value of stockpiling – reduction of symptoms, prevention of pneumonia developing, slowing the spread of flu. Tamiflu proved effective at none of these, but did provide “a number of side-effects, including nausea, headaches, psychiatric events, kidney problems and hyperglycemia.”
In America’s Homegrown Terror, Emanuel Pastreich and John Feffer (for Foreign Policy in Focus and The Nation) discuss how poor infrastructure, climate denial, unregulated tracking, and nuclear waste sites are the real risks the US faces. While risks to the nation are often framed as risks from outside the country such as foreign hackers and terrorists, really we should be looking closer to home at the risks the US has created for itself. Some of these risks genuinely have the capacity to topple the country. The authors describe risks pertaining to insecure weapons and commercial waste storage that could create a catastrophe equivalent to or worse than Chernobyl or Fukushima. They continue to consider fracking and deep water drilling. The inherent insecurity surrounding these risks is further exacerbated by diminishing investment in regulatory and safety infrastructure at a time when US infrastructure is already in a very poor state. These homegrown risks are environmental and security time-bombs that have the potential to catastrophically undermine US security.
In The West’s Financial Arsenal, Harold James (for Project Syndicate) discusses the predicament of responding to Putin’s moves in Ukraine. A military response to Russia’s annexation of Crimea is out of the question, and verbal protests are insufficient – the West is left to use financial warfare. The use of financial mechanisms to combat threats has been honed in the years since the World Trade Center attacks in 2001. Hitting the bank accounts of the wealthy in Russia is hoped to undermine their support of the Putin government and its policy. However, it is not the first time that financial market mechanisms have been used in this way. James considers how a similar pattern of military reluctance and preference for market mechanisms perversely led to the First World War, and points out that it has the potential to do so again now with Russia.
In DNA and Insurance, Fate and Risk, The New York Times presents a debate on whether DNA information should be available to insurance companies. DNA tests allow people to see whether they are at risk for inherited diseases, and their diminishing cost makes this knowledge more available. Insurers also like to have this information as it helps them to determine the actual risk of a given person as a matter of pricing health and life insurance. The NYT asks six debaters whether insurers should be barred from seeking this information.