the board does not have to cater to the wishes of a subset of the shareholders, or even a majority of the shareholders. Instead, directors are supposed to use their own independent judgment to determine what is best for the corporation.
.. But when have you seen a corporate board really stick up for the little guy? By contrast, I tend to think of corporate directors as cronies chosen by the CEO to maximize his already excessive compensation package; to overlook questionable and illegal practices that lead to, say, a global financial crisis; and, increasingly, to acquiesce in his contributions of the corporation’s money to pet charities and political causes.
Inflation Fears: The weird obsession that’s ruining the GOP
Why this GOP inflation obsession? Maybe it’s a legacy of how rapidly rising prices in the 1970s swept conservatives into power in both America and Great Britain. Maybe it’s how many conservative talk radio shows are sponsored by gold companies who stand to benefit from inflation hysteria. Maybe it’s a belief that every single economic metric must be a nightmare under President Obama.
Chart: World Income Growth 1988-2008
What you see is the surge by the global elite (the top 0.1, 0.01, etc. would be doing even better than his top 1), plus the dramatic rise of many but not all people in emerging markets. In between is what Branko suggests corresponds to the US lower-middle class, but what I’d say corresponds to advanced-country working classes in general, at least if you add post-2008 data with the effects of austerity. I’d call it the valley of despond, and I think it’s going to be a crucial factor in developments over the next few years. More eventually.
The Real Story of How America Became an Economic Superpower
Periodically, attempts have been made to rehabilitate the American leaders of the 1920s. The most recent version, James Grant’s The Forgotten Depression, 1921: The Crash That Cured Itself, was released just two days before The Deluge: Grant, an influential financial journalist and historian, holds views so old-fashioned that they have become almost retro-hip again. He believes in thrift, balanced budgets, and the gold standard; he abhors government debt and Keynesian economics. The Forgotten Depression is a polemic embedded within a narrative, an argument against the Obama stimulus joined to an account of the depression of 1920-21.
As Grant correctly observes, that depression was one of the sharpest and most painful in American history. Total industrial production may have dropped by 30 percent. Unemployment spiked at perhaps close to 12 percent (accurate joblessness statistics don’t exist for this period). Overall, prices plummeted at the steepest rate ever recorded—steeper than in 1929-33. Then, after 18 months of extremely hard times, the economy lurched into recovery. By 1923, the U.S. had returned to full employment.
.. Grant’s argument is not new. The libertarian economist Murray Rothbard argued a similar case in his 1963 book, America’s Great Depression. The Rothbardian story of the “good” depression of 1920 has resurfaced from time to time in the years since, most spectacularly when Fox News star Glenn Beckseized upon it as proof that the Obama stimulus was wrong and dangerous.
..
Take the case of France, which suffered more in material terms than any World War I belligerent except Belgium. Northeastern France, the country’s most industrialized region in 1914, had been ravaged by war and German occupation. Millions of men in their prime were dead or crippled. On top of everything, the country was deeply in debt, owing billions to the United States and billions more to Britain. France had been a lender during the conflict too, but most of its credits had been extended to Russia, which repudiated all its foreign debts after the Revolution of 1917. The French solution was to exact reparations from Germany.
Take the case of France, which suffered more in material terms than any World War I belligerent except Belgium. Northeastern France, the country’s most industrialized region in 1914, had been ravaged by war and German occupation. Millions of men in their prime were dead or crippled. On top of everything, the country was deeply in debt, owing billions to the United States and billions more to Britain. France had been a lender during the conflict too, but most of its credits had been extended to Russia, which repudiated all its foreign debts after the Revolution of 1917. The French solution was to exact reparations from Germany.
Britain was willing to relax its demands on France. But it owed the United States even more than France did. Unless it collected from France—and from Italy and all the other smaller combatants as well—it could not hope to pay its American debts.
Americans, meanwhile, were preoccupied with the problem of German recovery. How could Germany achieve political stability if it had to pay so much to France and Belgium? The Americans pressed the French to relent when it came to Germany, but insisted that their own claims be paid in full by both France and Britain.
.. As the economy revived, workers scrambled for wage increases to offset the price inflation they’d experienced during the war. Monetary authorities, worried that inflation would revive and accelerate, made the fateful decision to slam the credit brakes, hard. Unlike the 1918 recession, that of 1920 was deliberately engineered. There was nothing invisible about it. Nor did the depression “cure itself.” U.S. officials cut interest rates and relaxed credit, and the economy predictably recovered—just as it did after the similarly inflation-crushing recessions of 1974-75 and 1981-82.
In 1913, a dollar bought a little less than one-twentieth of an ounce of gold; by 1922, it comfortably did so again.
James Grant hails this accomplishment. Adam Tooze forces us to reckon with its consequences for the rest of the planet.
.. America’s determination to restore a dollar “as good as gold” not only imposed terrible hardship on war-ravaged Europe, it also threatened to flood American markets with low-cost European imports. The flip side of the Lost Generation enjoying cheap European travel with their strong dollars was German steelmakers and shipyards underpricing their American competitors with weak marks.
.. The world owed the United States billions of dollars, but the world was going to have to find another way of earning that money than selling goods to the United States.
.. Between 1924 and 1930, world financial flows could be simplified into a daisy chain of debt. Germans borrowed from Americans, and used the proceeds to pay reparations to the Belgians and French. The French and Belgians, in turn, repaid war debts to the British and Americans. The British then used their French and Italian debt payments to repay the United States, who set the whole crazy contraption in motion again. Everybody could see the system was crazy. Only the United States could fix it. It never did.
.. He dreamed of conquering Poland, Ukraine, and Russia as a means of gaining the resources to match those of the United States. The vast landscape in between Berlin and Moscow would become Germany’s equivalent of the American west, filled with German homesteaders living comfortably on land and labor appropriated from conquered peoples—a nightmare parody of the American experience with which to challenge American power.
.. Hitler’s empire could not feed itself, so his invasion plan for the Soviet Union contemplated the death by starvation of 20 to 30 million Soviet urban dwellers after the invaders stole all foodstuffs for their own use.