Category: Economics, Business, & Work

Source: Capitalism in America has been on a suicide mission for forty years — Quartz
RE: Peter Georgescu’s new book, Capitalists Arise! End Economic Inequality, Grow the Middle Class, Heal the Nation

Young & Rubicam Chairman Emeritus Peter Georgescu on ending the era of shareholder primacy.

Georgescu is convinced he knows how to beat this cancer, and he’s pitching it to corporate leaders across the country. “The cure can be found in the post–World War II economic expansion. From 1945 until the 1970s, the US economy was booming and America’s middle class was the largest market in the world,” he says.

“In those days, American capitalism said, ‘We’ll take care of five stakeholders,’” he continues. “Then and now, the most important stakeholder is the customer. The second most important is the employee. If you don’t have happy employees, you’re not going to have happy customers. The third critical stakeholder is the company itself — it needs to be fed. Fourth come the communities in which you do business. Corporations were envisioned as good citizens—that’s why they got an enormous number of legal protections and tax breaks in the first place.”

In Georgescu’s schema, shareholders are the last of the five stakeholders, not the first. “If you serve all the other stakeholders well, the shareholders do fine,” he says. “If you take good care of your customers, pay your people well, invest in your own business, and you’re a good citizen, the shareholder does better. We need to get back to that today. Every company has got to do that.”

Source: The Definitive Crypto guide – For Beginners and Veterans Alike

This guide is meant to serve as both an easy-to-understand introduction to the world of cryptocurrencies as well as an insightful view into the different projects competing for your investments and market dominance and a look at the underlying technology, history and trends.

Source: Market power and competition explain every problem in the US economy, new research argues — Quartz

In a recent paper, De Loecker and Eeckhout analyzed the balance sheets of listed companies from 1950 to 2014. (In 2014, these firms accounted for around 40% of all sales.)

Higher markups suggest an increase in what economists refer to as “market power.” … higher markups don’t necessarily imply more market power. It is conceivable that there are larger upfront costs to starting a company today than in the past, and that higher markups are necessary to make up for this. Economist Noah Smith provides an excellent review of other criticisms of the paper.

Source: Is America Encouraging the Wrong Kind of Entrepreneurship?

In a 1990 paper, “Entrepreneurship: Productive, Unproductive, and Destructive,” Baumol argued that the level of entrepreneurial ambition in a country is essentially fixed over time, and that what determines a nation’s entrepreneurial output is the incentive structure that governs and directs entrepreneurial efforts between “productive” and “unproductive” endeavors.

we and others have documented a pervasive decline in the rate of new firm formation during the last three decades and an acceleration in that decline since 2000. In fact, we found that by 2009 the rate of business closures exceeded the rate of business births for the first time in the three-decades-plus history of our data. This decline in startup formation has occurred in each state and nearly all metropolitan areas, and in each broad industrial sector, including high tech. There has also been a slowdown in activity of high-growth firms, the relatively small number of businesses that account for the lion’s share of net job gains. All of this points to a slowdown in the growth of productive entrepreneurship.

What about the other kind of entrepreneurship? Do we also see a rise in unproductive entrepreneurship, as Baumol theorized?

We don’t have a smoking gun to confirm this hypothesis, but there surely is smoke, and it comes in two forms: rising profits, especially those earned by the largest businesses in the economy, and suggestive evidence of an increase in efforts to shape the rules of the game. This pattern is consistent with the rise of economic rents and rent-seeking behavior.