Bed Bath & Beyond and bankrupt?
https://www.vox.com/the-goods/2023/1/10/23547078/bed-bath-and-beyond-bankruptcy-closing-earnings-bbby-stock
Tag: Corporations
Prices at the supermarket keep rising. So do corporate profits.
“Food companies say their price increases merely reflect how much their costs have gone up due to “inflationary pressures,” like higher labor costs, transportation delays, and capacity issues, or the higher price of grains and animal feed. Yet inflation in 2022 outpaced the rise in wages in most industries, and the prices of many agricultural commodities have come down.
The eyebrow-raising spikes at the grocery store can only partly be blamed on manufacturers’ higher costs. The inflation narrative offers the perfect jumping-off point for companies to raise prices, and major food manufacturers are taking advantage of the moment to boost their profits.
The proof? Look at just how rich companies have gotten since the start of the pandemic.”
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““Corporate profits have hit their highest level ever, and corporate profit margins — how much they’re making on each unit that they’re selling — have hit the highest level in 70 years,” said Chris Becker, senior economist at the Groundwork Collaborative, a progressive economic advocacy organization.”
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“Why are corporate profits so high at a time when regular people feel increasingly strapped? Because a small number of players have gobbled up most of the food chain. Cargill and just three other agribusiness companies control about 70 percent of the world’s agriculture market, according to Oxfam. Brands like PepsiCo, Nestle, Mondelez, and Conagra produce and market the vast majority of the offerings found in US grocery stores.
“We look at the supermarket shelf, and we might be buying tea, cereal, whatever it might be, and we think, ‘Oh, I’ve got a real offer of choice here on the product I want to buy,’” Ahmed, of Oxfam, told Vox. “Frankly, it’s an illusion of choice, because so many of those products are actually owned by the same company.”
Grocery retailers, too, have become increasingly consolidated.”
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“Evan Wasner, a University of Massachusetts-Amherst economist who authored a recent paper on companies’ price-setting power with economist Isabella Weber, said that companies tend to raise prices when they think they won’t see a huge backlash — like when everyone else is hiking prices, too. “In a sense, economy-wide cost increases act as a kind of coordinating mechanism which allows firms competing with one another for market share to safely raise prices together,” said Wasner.”
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“Market dominance makes the supply chain more brittle, too, because it means there are just a few vulnerable points for failure. Last year’s baby formula shortage is an example of how dangerous the results can be. Just two US companies control about 80 percent of the market, which meant that when one manufacturing plant shut down, the entire nation struggled to buy baby formula.
Becker blames the vulnerable state of supply chains in part on market deregulation over the last several decades, which has enabled companies to cut corners. In the 1980s, the growing popularity of “just-in-time” inventory systems, where companies order just the amount of inventory needed right now without a buffer, allowed companies to become more efficient. That has meant lower prices for consumers, usually, and higher profits for companies — until a crisis hits, and suddenly there are shortages and supply bottlenecks.”
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“Transcripts of corporations’ recent earnings calls illuminate that they’re well aware of their power right now. Groundwork has been collecting highlights from corporate earnings calls on its website. “They’re saying a lot about cost increases and supply shocks, but they’re also saying it doesn’t matter,” said Becker. “We do have these higher costs that we’re paying, but we have so much pricing power, we’re so capable of passing all these prices on to consumers, that it doesn’t matter.””
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“Becker echoed that the current economic orthodoxy on how to fix inflation — to rein in Americans’ ability to spend money by attempting to raise unemployment levels — should be questioned.
“I would say that we have this really toxic narrative out there that the only way we can get inflation under control is to throw a bunch of people out of work,” said Becker. “Larry Summers recently claimed that we would need 10 percent unemployment [for one year], which is about 11 million jobs lost, to get inflation under control.”
“We’re going to try to solve a cost-of-living crisis by making people poor or losing their jobs? I think that’s crazy,” he continued.
What will break the cycle of not just inflation, but of consumers having to pay ever-higher prices for essential goods while the world’s food producers become richer? Experts offered several potential solutions. One is stronger antitrust laws and improved enforcement of preventing and breaking up monopolies. Anti-price gouging laws are another tool in the arsenal. Oxfam, for one, has been a vocal advocate of a windfall profits tax on food corporations. “It’s a tax on those corporations which are raising prices substantially in excess of costs,” Ahmed explained. The fact that it would raise tax revenue is great. But “fundamentally, it reins in companies’ monopoly power and disincentives corporate greed.” Other countries already have similar measures in place. Spain expects to raise about $6.39 billion from its windfall tax on energy companies and banks.
“Corporations are really making profits on the backs of consumers and households,” said Becker. “Let’s tax those windfall profits — and let’s do something with that money.
“There’s nothing that really stops corporations right now from just doing whatever they want.””
The weird Republican turn against corporate social responsibility
“ESG is not a regulation or a set of rules, and it does not require any real action from a corporation. It’s mostly used as a catch-all term for any investment that considers social and environmental responsibility. In fact, what counts as ESG is so ill-defined and malleable it has been criticized as a way to “greenwash” corporate actions.
One of the defining ideas of ESG is that a company is better off accounting and reporting environmental and social risks to investors and clients, rather than being willfully blind to the world around it. This can include a broad swath of issues, such as a company’s reliance on oil, gas, and coal, or exposure to sea-level rise in coastal operations, human rights violations of the countries it operates in, and lack of board diversity and CEO transparency. A big part of the ESG movement, at least right now, is largely about disclosure of these potential bottom-line risks in the future, not necessarily doing anything differently in the present.
But Republican officials in West Virginia, Texas, Louisiana, Missouri, and now Florida have withdrawn billions of dollars from BlackRock’s management. Proponents are planning to introduce a slew of bills in at least 15 states next year to divest pensions and boycott companies for considering sustainability as an aim. At the federal level, House GOP lawmakers are preparing antitrust investigations.
To get to the bottom of what is driving this, I spoke to one of the state officials leading the attack on ESG, Riley Moore, state treasurer of West Virginia. The way he sees it, “banks are coercing capital away” from coal, gas, and oil industries. He explains he doesn’t want the coal- and gas-reliant state to contract its financial services with a company that is “trying to diminish those dollars. They want less coal mining, they want less fracking.”
This is getting much bigger than BlackRock, State Street, and Vanguard, companies that used to be solidly at the right of corporate America. There are real stakes for pensioners, red-state taxpayers, and the wider economy if the GOP succeeds in scaring off financial institutions from pursuing climate targets.”
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“On the left, ESG has for years come under criticism as a form of greenwashing, and ESG disclosure isn’t the same thing as corporate behavior. As Harvard Business Review noted, the funding in ESG is “dedicated to assuring returns for shareholders, not delivering positive planetary impact.” Many environmentalists think ESG is a distraction from the main issue they’d like to see traction on: companies disclosing the impact their products and investments have on the world around them, and accounting for that in decisions.
ESG doesn’t go this far. In no way will disclosure be enough to save the planet from climate change. There are no binding requirements, either. But what Republican critics of ESG really fear is that the financial world will realign with climate science and no longer see new coal plants and offshore drilling as viable projects to finance.”
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“Many of the Republican attacks on ESG stem from a misrepresentation of what it actually means. It’s not always motivated by an altruistic climate or social agenda. ESG also helps banks and public companies meet their one goal by screening investments for various risks. “They’ve got a fiduciary duty to generate returns. So they’re not going to impose some agenda, whether it’s climate or social agenda, that’s going to get in the way of returns,” said University of Oxford business expert Robert Eccles.
As baseless as the attacks have been, the pressure could still work. Vanguard on Wednesday announced it is withdrawing from the Net Zero Asset Managers coalition, in which companies voluntarily committed to reaching net-zero emissions in their portfolios by 2050.”
How Corporations’ Good Social and Environmental Intentions Undermine the Common Good
“these trends will undermine the most important way businesses really do contribute to the common good. By pursuing shareholder value and maximizing profit, publicly traded companies facilitate choice in goods and services for consumers, provide wages and benefits to their employees, repay their loans to banks, and pay their taxes. They increase the total material wealth in society, allowing people who have never owned a share in their lives to realize goods ranging from health care to education.
Just as protectionism and industrial policy significantly compromise the workings of market exchange by using state power to privilege connected groups of businesses and political leaders, so too would a capacious, government-enforced vision of stakeholder capitalism. By blending politics and business, it would further shift the economy’s focus away from meeting the needs and wants of 330 million American consumers and toward promoting the interests of politically connected businesses.”
Humanity was stagnant for millennia — then something big changed 150 years ago
“It really looks that we had as much technological change and progress between 1870 and today as we had between 6000 BC and 1870 AD. We packed what had previously been nearly eight millennia of changes in the underlying technological hardware of society, which required changes in the running sociological code on top of that hardware. To try to pack what had been eight millennia worth of changes before in 150 years is going to produce an awful lot of history.
Before 1870, most of history is how elites run their force-and-fraud, domination-and-extraction mechanism against a poor peasantry so that they, at least, can have enough, and so that their children are only two inches shorter than we are, rather than five or six as the peasants are. It’s about how the elites elbow each other out of the way as they eat from the trough. And it’s about the use they make of their wealth for purposes good and ill, of civilization and destruction.
But if you’re enough of a Marxist, like me, to say that the real motor of history is the forces of production, their changes, and how society reacts for good or ill to changing forces of production, then yes, [1870 to 2010] has to be as consequential because there’s as much technological change-driven history as there is in entire millennia before.”
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“you look worldwide and you take my index of technological progress, and it [grows by] less than half a percent per year from 1770 to 1870. That’s based on exploitation of really cheap coal and also on the productivity benefits of falling transport costs that gather all of the manufacturing in the world into the place [the United Kingdom] where it’s most productive and most efficient, because it’s the place where coal is cheapest.
I was struck by a line I came across from the 1871 version of John Stuart Mill’s Principles of Political Economy: “Hitherto it is questionable if all the mechanical inventions yet made have lightened the day’s toll of any human being.”
Say you have some slowdown in global technological progress after 1870 because the cheapest coal has already been mined and the deeper coal is hard to find, and say that you have some other slowdown because you don’t get the boost from gathering manufacturing in places where it’s productive. We might well have wound up right with a steampunk world after 1870: a world with about the population of today, but the living standards of 1870 on average.
That’s what the pace of progress was, except that we got the industrial research lab, the modern corporation, and then full globalization around 1870. The industrial research lab rationalized and routinized the discovery and development of technologies; the corporation rationalized and routinized the development and deployment of technologies; and globalization diffused them everywhere.”
Both Democrats and Republicans Want To Break Up Big Tech. Consumers Would Pay the Price.
“You don’t have to believe that the market produces perfect outcomes to understand that government can rarely outperform private enterprise. Political decisions aren’t driven by any market signals, profit motive, or consumer preferences. These decisions are inherently political, suffer from a serious knowledge problem and are mostly untied to any accountability regimes when they fail. Government often proves to be biased against large, successful companies that provide new technology that legislators often don’t understand well but consumers love. This is why government so often fails, and this policy is no exception.”
https://reason.com/2022/07/21/both-democrats-and-republicans-want-to-break-up-big-tech-consumers-would-pay-the-price/
The CHIPS Act Is Corporate Welfare Disguised as Industrial Policy
“Industrial policy is making a comeback. For those of you under the age of 50, this is just another term for corporate welfare—a lovely name for the unlovely practice of a government granting subsidies, protective tariffs, and other privileges to politically influential industries or companies. It’s often done in the name of some lofty goal such as strengthening national security or ensuring that America is a leader in the “industries of the future.” But the outcome is always the same: wasteful, unfair, unsuccessful, and unjustified. Oh, and it invariably grows the budget deficit.
The latest form of industrial policy is Congress’s CHIPS Act of 2022, a bill meant to subsidize the semiconductor industry by channeling taxpayer money to build up domestic production capacity and combat feared Chinese computer-chip supremacy.
This chapter began with the disruption caused by lockdowns to global supply chains. Unsurprisingly, that led to a series of semiconductor shortages aggravated by a surge in demand for automobiles. Automakers wrongly assumed that the original drop in demand would persist, canceled orders for semiconductors, and then could not keep up with the buying public.
Now, Congress is responding to this temporary chip shortage with $52 billion in subsidies and $24 billion in tax credits mostly directed at semiconductor industry beggars.
Never mind that chip firms have already expanded production without subsidies. In fact, two years into negotiating this bill, it’s obvious that it has little to do with any alleged structural deficiencies in the semiconductor market. For instance, the initial chip subsidy proposal had a $16 billion price tag. Since then, the industry has announced its own investments totaling over $800 billion, with $80 billion committed for near-term investment in U.S.-based fabrication facilities. Yet somehow, the bill more than tripled in price to target a problem that’s already being solved.
What about the argument that China is subsidizing its chip producers and thus threatening our technological leadership? Yes, China subsidizes its chip industry, but this doesn’t guarantee their subsidies will work. If U.S. politicians could for a moment stop treating every Chinese action as a threat, they would see that the Chinese semiconductor industry is both quantitatively and qualitatively weak. In fact, many of the companies subsidized would go under without the government’s help. That’s hardly the sign of a vibrant industry. These subsidies are more like life support than super-vitamins.”
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“” Any resulting new operations would still face deep-rooted issues hindering American manufacturing. Large-scale environmental assessments will be required, but over the years, the costs and delays have become excessive. Recent trends promoting or requiring unionized workers for federal contracts, combined with the current labor shortage, will hinder chipmakers’ ability to find talent and could exacerbate the cost of domestic production. ”
In other words, if you believe that moving most of our chip production onshore is important for national security reasons, you should labor for regulatory reforms rather than subsidies.”
David Cay Johnston on How “The Fine Print” Rips You Off
The Export-Import Bank’s New ‘Made in America’ Corporate Welfare Scheme
“Dating back to its founding in 1934, the Export-Import Bank of the United States has had a pretty specific mission: subsidize the export of American-made products by extending cheap credit to foreign companies looking to buy our stuff.
Whether the bank serves any legitimate purpose is another matter entirely. These days, the Export-Import Bank mostly acts as a slush fund for politically connected American corporations like Boeing and General Electric that would have no trouble doing business abroad but are more than happy to benefit from its largesse, doled out in the form of low-interest loans to potential buyers. Sometimes it also blows American taxpayer money on propping up government-run monopolies in foreign countries.
Still, the mission has always been clear. It’s right there in Executive Order 6581, which President Franklin Delano Roosevelt signed in 1934 to authorize “a banking corporation…with power to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States and other Nations.” The bank’s current mission statement, too, clearly spells out a goal of “supporting American jobs by facilitating the export of U.S. goods and services.”
Now, quietly, the Ex-Im Bank is taking on a new—and entirely domestic—project.
At a meeting last week, the Ex-Im Bank’s board of directors voted unanimously to approve a so-called “Make More in America” initiative. The press release announcing the new program is a gobbledygook of crony capitalist doublespeak virtually devoid of specifics about how the program will operate or what it will cost. The new program “will create new financing opportunities that spur manufacturing in the United States, support American jobs and boost America’s ability to compete with countries like China,” Reta Jo Reyes, the bank’s president and board chair, says in the statement.
This latest development at the Ex-Im Bank is another aspect of the sprawling federal effort that began under President Donald Trump and continues under President Joe Biden to subsidize American manufacturing. The creation of a “domestic financing program” at the Ex-Im Bank was part of a series of supply chain recommendations made by the White House in June. A few days before Christmas, the Ex-Im Bank filed a vague notice in the Federal Register outlining plans to implement the program.
But there has been little clarity about what the program will aim to do, which businesses might stand to benefit from it, or how its results will be judged. In the announcement last week, the Ex-Im Bank only said that the new program will “immediately make available the agency’s existing medium- and long-term loans and loan guarantees for export-oriented domestic manufacturing projects.””
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“the government will throw taxpayer dollars at investments that private capital markets have deemed too risky.
But how will the government decide which projects to fund? Toomey also asked the bank to explain what steps will be taken to “ensure that domestic transactions will not be influenced by political pressures.”
The Ex-Im Bank’s response to that query is even more worrying. There don’t appear to be any safeguards in place. “Financing is available to all qualifying applicants based on criteria established by law and agency practice,” Lewis wrote in reply.
Translation: Any company with the resources to hire the attorneys, accountants, and lawyers necessary to decipher the bank’s policies and sufficiently schmooze decision-makers can get paid.
“There is no reason that taxpayers should have to back domestic financing when we live in a highly developed market economy in which promising businesses have access to capital on competitive terms,” says Toomey.”
Elizabeth Warren’s plan to break up Big Everything
“mergers don’t just affect consumers: “The world has changed for those workers,” Warren said.”
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“Studies have shown that as markets become more concentrated, wages stagnate.”
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“Under Warren’s new bill, mergers over a certain size or that consolidate the market too much are forbidden. And consummated mergers that have harmed competition, workers, consumers, or competitors can be broken up.”