Thursday Morning Links

This and that for your Thursday reading.

- Annie Lowrey points out the massive amounts of money being directed toward stock buybacks in the U.S., with the predictable effect of further enriching the people who already have the most. And Andrew Jackson's review of Mariana Mazzucato's The Value of Everything discusses the need for policy aimed toward development rather than extraction:

It is nonsense to argue that the wealth and income of hedge fund billionaires reflects their individual productive contribution, as opposed to their ability to extract profits from socially created value. Many progressive economists such as Nobel prize winner Joe Stiglitz argue that much of the modern economy consists of sectors in which rents or excess profits are extracted by dominant businesses due to limited competition and control of intellectual property rights among other factors. For example, big pharma and the tech giants like Google and Facebook earn profits well above normal rates of return due to their power to shape markets.

Mazzucato closely documents the value extraction role of the finance sector, whose share of total profits has grown rapidly since deregulation in the 1970s. While banks and other financial institutions do play a productive role in part by directing financial capital to productive uses, most real business investment is in fact financed by retained corporate earnings. Meanwhile, finance has directed resources to almost purely speculative and economically destabilizing activities such as hedge funds and creation of exotic financial instruments such as derivatives which merely transfer dollars between winners and losers, as in a casino where the dealer always wins.

As well, finance has had damaging impacts upon real economy highly productive businesses by inisting on maximizing shareholder value and demanding short term profits paid out through dividends and share re purchases as opposed to providing ‘patient’ capital for long term investment in equipment and innovation which boost real value added and productivity. Despite years of so-called financial innovation, it is hard for truly innovative new companies to attract capital since even venture capital funds are oriented to a quick turnover of capital and have very high “hurdle” rates of return In this context, very early start up capital often comes from governments which are prepared to take bigger risks for bigger long-term payoffs.
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As in her previous book, Mazzucato is very much an advocate of an expanded entrepreneurial role for government in supporting, not just research and high levels of public investment, but also in setting ambitious goals and missions, such as decarbonizing the economy. She argues that governments should take an ownership stake in the productive economy to collect a social return on public investment for citizens which could be used to fund social programs and public services as well as to create greater social equity. In the Canadian context, she would likely favour taking large equity stakes in innovative enterprises to provide long term capital for growth, while also seeking greater control of the economy and a fairer distribution of income and wealth.

The Value of Everything is a stimulating and informative overview of value creation and destruction in today’s economy. It is very much part of a wider project to develop a new progressive and social democratic economics oriented towards the creation of real value and social equity, as opposed to maximizing GDP.

- CBC reports on the Libs' decision to water down the thresholds for their already-insufficient industrial carbon price. And it's particularly worth noting the thresholds involved: while Canada has agreed to cut its emissions by 30%, the Libs' scheme will allow emitters to pollute freely as long as they are 20% or 10% below industry standards depending on the industry involved.

- The Globe and Mail rightly slams Doug Ford's decision to abruptly end Ontario's basic income pilot program for the apparent purpose of avoiding any recognition as to how it helps recipients. John Stapleton writes that the sudden reversal will only further trap people in poverty after they had reasonably expected at least some reprieve. And Hugh Segal notes that people with low incomes are apparently excluded from Ford's perceived set of constituents.

- Tavia Grant examines how the right-wing attempt to stoke fears about "illegal" refugees is based on deliberate lies as to both the number of people seeking asylum in Canada, and the international law governing their claims.

- Finally, Sarah Buhler discusses the need to expand Legal Aid services at a time when the Saskatchewan Party has nothing on offer but cuts.