Hi, Welcome to BIG, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here. Or just read on… Today I’m going to write about how the Coronavirus crisis is changing politics, with a focus on the $8.5 billion spending bill that Congress just passed. And I’m going to need your help, because the House Small Business Committee is holding a hearing next week and they are trying to understand the impact of the Coronavirus on business. I want to submit a statement with feedback from you.
My friends who run small businesses in business areas have seen their business dry up as employers tell everyone to work from home. Many cannot survive a month with their revenue smashed. The rent has to get paid, employees need to be paid, insurance needs to be paid, ...
I am not a business owner, so I am not qualified to fill out your form. However, in the domestic premium steel/metal producer where I work, the fear is worse than the actual COVID-19 effect.
1) Most of my colleagues are under 70 with good access to healthcare.
2) We sell internationally, and have plants in several locations
3) Despite this, we are trimming our travel except for "business critical" trips.
4) So far, our raw material supply is OK, and we are able to ship product. How long this condition lasts is anyone's guess, as many strategic minerals come from affected countries.
5) Reduction of air travel has a direct knock-on effect because our metals are critical to air travel. The less air travel, the less demand for our products. This might not have been a problem, since our business has learned from past aviation cycles how to handle these normal variations. However, we are also facing 737 MAX demand headwinds.
6) For high-information/high-skilled white collar jobs, there is a certain amount of working from home that is possible (and I would argue critical, despite someone else's claim that being able to work from home is tantamount to having a meaningless job). This puts a strain on local merchants, as we aren't going out for lunch, taking clients out to dinner, and similar activities. Other retail merchants will come under more strain as the fear ratchets up, as people will stop shopping at brick-and-mortar establishments.
Summary - so far, our business has a decent chance of minimal impact from COVID-19 in isolation. However, it may be the final straw, as the saying goes, and in combination with other challenges may have a disproportionate impact.
As for Republican legislative efforts to help with this crisis, it makes sense that any good publicity is worth a few billion dollars. The margins in 2016 were razor-thin, and it doesn't appear to me a significant number of people in the 91 million "didn't bother to vote" group are going to vote this time, either. So if 2 million people either see help or believe that others are being helped by Republicans, it is worthwhile to them to pass the legislation. As for Democrats, when you have a pile of legislation being pocket-vetoed by the Senate Majority Leader, it makes sense to wait and see what the Republicans will offer before bothering to do anything. After all, from their perspective, much of what they offered in the past 10 years has been immediately opposed simply because a Democrat proposed it. In terms of realpolitik, why would Democrats suddenly help Republicans look helpful and effective in an election year, given the sorts of unprecedented obstructionism Republicans have imposed since 2010?
I'm in lodging, specifically hostelling, where a disproportionate share of the market is international. Two things are killing that market: 1.) Trump, as in people hate him and "his" America, and don't want to visit here; and 2.) COVID-19 fears and travel restrictions. It's brutal and getting worse. Recessionary spiral would be the optimistic outcome here...
Why can't we build a supply chain here in the U.S.? Are you kidding? Is more evidence needed of the effect of 45 years of lying globalist neoliberal propaganda than that politicians are mystified on this topic? How could one be so wholly indoctrinated as to not see the core premise of the entire neoliberal exercise, to decimate the power of labor, at work here? The inability to support a supply chain here in the U.S. isn't a failure of policy, it is the frigging apotheosis of policy. Why can't we sustain a supply chain here in the U.S. indeed?
Matt, a contra-factual as it were: Maybe the Rs are taking the lead on this because it’s a scam like the urban renewal tax break. Sounds progressive but is just another effort to enrich the GOP and DNC’s true base, the wealthy. Which also explains what the House may be doing. They’re either pushing assuredly bipartisan initiatives — that $8.5b — for example, or things the GOP would be sure to reject so the Dems have some basis to run as opposition party.
So it follows from that tax break that maybe empowering the SBA to do what they’re not set up to do — loan money which they can’t be trusted to do, instead enriching people who don’t need the money at the expense of those who do, is not something the ads want to be involved with.
In other words, I think maybe you’re falling for a line of BS. No good faith comes from Rubio ever and there’s no reason to trust him, or any a Republican, now.
I own a small business (wholesale specialty foods) with three other people. We just had the huge Natural Products Expo in Anaheim cancel at the last minute. Lost a lot of money- I'm sure everyone did. The big players can absorb this but all of us small businesses get hurt.
Hard to say if orders are drying up yet. Seemed very quiet this week though.
And we have a business where you can't really 'work from home'. It's producing, manufacturing, shipping, receiving. (and as a side note- if you can 'work from home' it's probably not really work. See Graeber's Bullsh*t Jobs.) I emailed my Senators (Murray and Cantwell) to tell them they need to get way out in front of this. If this continues like this with closings, social distancing, hoarding, we may be heading toward a Depression. Small businesses will be closing en masse. What will our 'leaders' do? Bail out the usual players? What about people who no fault of there own are furloughed, laid off etc? Banks, landlords, etc don't care about that and whether you are now short of money. It's like Goodfellas: "F**k you, pay me". Seems like we are at a precipitous moment. Please let us know how your work goes. Thanks
a response to the comments on skiing and concerts. in the areas where I live around the world I observe a massive growth in leisure time activities and spending. Part of that is due to the reduced consumer maintenance for property and vehicles, and reduced community engagement. Discretionary income is at a high, so there is unprecedented packaging and marketing of everything, but less of home and community. That results in huge traffic increasingly for limited places and famous activities. We all know about Chinese tourists overwhelming Europe, but it is the same for Kenya national safari parks. But it is not only Chinese, rather the entire world middle class of 100s of millions. The US would do well to encourage localization in every aspect of policy rather than high carbon-footprint travel.
Wow, lot's there to digest! The short time frame needed to address the coronavirus and impending war with Red China will not allow for simple SBA and industry incentives to be effective soon enough. A national industrial policy is needed and great, but a national industrial/investment/infrastructure policy and program to roll it out just as in WWII and the Cold War. PPP is fine, but government must take the lead. That means unity in government is required - no exceptions. In addition, key sectors - or any sector for that matter - should not be dominated or controlled by immigrants or other aggrieved groups, starting with Silicon Valley.
ZIRP loans for small businesses, emergency refi of student loans, affected healthcare workers etc. Use this event to force the discussion why the powerful get ZIRP while screwing the masses is good for society.
"They want to know .. why is it so hard to have a supply chain based in America? Is it financing, distribution, market power, etc?"
Our problem–which could have been ignored for a few more years had China not shown us up–lies in financing, distribution, market power and, probably, in etc., too. So I'll drag China into my reply too because it demonstrates what a united society can accomplish and puts the lie to the myth of rugged individualism.
Financing. Our banks are privately owned and pursue their own, private agenda–which includes retirement packages for executives and dividends for shareholders, the future be damned. Chinese banks, the biggest and most profitable on earth, are publicly owned and pursue a public agenda. To ensure that they do their CROs are their highest paid executives and there are executives in charge of overseeing the banks' agenda (the Party Secretary, with a hotline to the Finance Minister) and its honesty (an anti-corruption inspector with a badge and the authority to compel every bank employee to answer every question he asks fully and honestly or be immediately detained). Draconian, perhaps, but necessary.
Distribution. Ten years ago, as part of its annual benchmarking, the PRC noticed that Chinese logistics costs were 400% higher than America's. The government began a dialog with business, pointing out the discrepancy, and asked provincial governments to experiment and publicize their results. Today their logistics costs are 4% lower than ours. China is embracing 5G because it's a logistics magic wand, not because kids can download videos faster.
Market power. We are China's #3 trading partner, after ASEAN and EU. GM makes 40% of its cars there. Half the world's economic growth occurs there. 70 years of chest-thumping and anti-China propaganda has blinded us to the reality of the world we live in.
Etc. We don't have the workforce. In response to my request that he review a chapter (in my ever-forthcoming book) on Chinese labor, here's a letter from friend who hires factory workers in both the US and China, :
"At our US facility our only requirement for assemblers was a high school degree, US citizenship, passing a drug and criminal background check and a simple assembly test: looking at an assembly engineering drawing and then putting the components together.
"While the vast majority of Americans were unable to complete the assembly test, in China they completed it in half the time and 100% of applicants passed.
"Hiring for an assembler position in the US would require 30 interviews a day and produce 29 rejections, not to mention all the HR hassles of assemblers walking off shift, excessive lateness, stealing from work, slow work speed and poor attitudes. The position starts at $12 an hour in flyover country which is pretty reasonable compared to other jobs that only require a GED and no prior work experience. It offers medical, dental and annual raises with plenty of opportunity to move up in the company and earn the average salary for a Production Assembler, $33,029 in US, if they stay for 5+ years.
"Identical positions in China pays the same wages as other positions there with only a high school degree and no work experience. Yet the applicant quality is much higher and this also applies to the white collar support professionals: schedulers, quality inspectors, equipment testers and calibrators, engineers, supply chain managers, account managers, sales. Their labor quality is simply higher.
"At the end of the day, high-end and middling manufacturing is not moving to either the US or Mexico because average people in flyover country are as dumb as rocks."
You ask, "why is it so hard to make things in America?" I believe that the problem is rather simple: the Capitalist model dictates that corporate profit be maximized for the shareholders. Saving a penny here, a dollar there, by sending work offshore meets that dictate, as does obtaining supplies from other than American suppliers.
The model also, parenthetically, requires some businesses to fail, go out of business or file bankruptcy, then have its assets sold off to another business that maybe can compete in that industry. That did not work so well after the 2008 subprime fiasco, as the "too big to fail" entities did not fail but were bailed out by the government.
Another flaw in the model is what it does to the average wage earner viz the top corporate brass and who earns the money versus who gets the money.
These are frailties of capitalism, perhaps three examples of a flawed model, and know that I do not eschew capitalism or endorse scuttling it. I just see where it does not always work.
Large (and thus global typically) organizations are not our strength. They are exposed to a variety of black swan events, whether it is covid19, the financial meltdown, or other 'systemic' problems.
Concentration of power/money/resources is a petri dish for Lord Acton-esque bad outcomes. Power corrupts. Absolute power corrupts absolutely. Think Google/FB/Amazon. All under pressure to break up. Think Apple in their dominance...and supply chain concentration in an effort to maximize profits. Remember the financial crash? Or think of our utility grid, or, or...
Information Theory confirms that concentration of power/energy/money/resources/information/people is bad.
Entropic distribution is good. It is healthier.
More resources/information/capital needs to flow to more startups in more regions around the country, to more broadly distribute our economic base, job creation, innovation, etc., outside Silicon Valley, NYC, LA and Boston, where over 80% of venture activity takes place.
This broader distribution of entrepreneurial capital would also support more domestic manufacturing. With 3D printing, CAD/CAM, small batch manufacturing can be done here more cost effectively and without the dependency of China (not to mention the logistics benefits).
Bubbles form (and vulnerability to black swan events as well) when you have such concentration. Resiliency comes from distributed resources, into smaller and more hands.
Do you believe republicans like hawley etc would continue to try to use the government to help small businesses/working class in the kind of populist economic ways like this that you've been noticing if a democrat wins in 2020? I believe they will revert back to blocking these types of things at all costs again right after that happens. What do you think?
My friends who run small businesses in business areas have seen their business dry up as employers tell everyone to work from home. Many cannot survive a month with their revenue smashed. The rent has to get paid, employees need to be paid, insurance needs to be paid, ...
I am not a business owner, so I am not qualified to fill out your form. However, in the domestic premium steel/metal producer where I work, the fear is worse than the actual COVID-19 effect.
1) Most of my colleagues are under 70 with good access to healthcare.
2) We sell internationally, and have plants in several locations
3) Despite this, we are trimming our travel except for "business critical" trips.
4) So far, our raw material supply is OK, and we are able to ship product. How long this condition lasts is anyone's guess, as many strategic minerals come from affected countries.
5) Reduction of air travel has a direct knock-on effect because our metals are critical to air travel. The less air travel, the less demand for our products. This might not have been a problem, since our business has learned from past aviation cycles how to handle these normal variations. However, we are also facing 737 MAX demand headwinds.
6) For high-information/high-skilled white collar jobs, there is a certain amount of working from home that is possible (and I would argue critical, despite someone else's claim that being able to work from home is tantamount to having a meaningless job). This puts a strain on local merchants, as we aren't going out for lunch, taking clients out to dinner, and similar activities. Other retail merchants will come under more strain as the fear ratchets up, as people will stop shopping at brick-and-mortar establishments.
Summary - so far, our business has a decent chance of minimal impact from COVID-19 in isolation. However, it may be the final straw, as the saying goes, and in combination with other challenges may have a disproportionate impact.
As for Republican legislative efforts to help with this crisis, it makes sense that any good publicity is worth a few billion dollars. The margins in 2016 were razor-thin, and it doesn't appear to me a significant number of people in the 91 million "didn't bother to vote" group are going to vote this time, either. So if 2 million people either see help or believe that others are being helped by Republicans, it is worthwhile to them to pass the legislation. As for Democrats, when you have a pile of legislation being pocket-vetoed by the Senate Majority Leader, it makes sense to wait and see what the Republicans will offer before bothering to do anything. After all, from their perspective, much of what they offered in the past 10 years has been immediately opposed simply because a Democrat proposed it. In terms of realpolitik, why would Democrats suddenly help Republicans look helpful and effective in an election year, given the sorts of unprecedented obstructionism Republicans have imposed since 2010?
So, it's not just the democrats that have a monopoly on their party's base ... nytimes piece today
I'm in lodging, specifically hostelling, where a disproportionate share of the market is international. Two things are killing that market: 1.) Trump, as in people hate him and "his" America, and don't want to visit here; and 2.) COVID-19 fears and travel restrictions. It's brutal and getting worse. Recessionary spiral would be the optimistic outcome here...
Why can't we build a supply chain here in the U.S.? Are you kidding? Is more evidence needed of the effect of 45 years of lying globalist neoliberal propaganda than that politicians are mystified on this topic? How could one be so wholly indoctrinated as to not see the core premise of the entire neoliberal exercise, to decimate the power of labor, at work here? The inability to support a supply chain here in the U.S. isn't a failure of policy, it is the frigging apotheosis of policy. Why can't we sustain a supply chain here in the U.S. indeed?
Matt, a contra-factual as it were: Maybe the Rs are taking the lead on this because it’s a scam like the urban renewal tax break. Sounds progressive but is just another effort to enrich the GOP and DNC’s true base, the wealthy. Which also explains what the House may be doing. They’re either pushing assuredly bipartisan initiatives — that $8.5b — for example, or things the GOP would be sure to reject so the Dems have some basis to run as opposition party.
So it follows from that tax break that maybe empowering the SBA to do what they’re not set up to do — loan money which they can’t be trusted to do, instead enriching people who don’t need the money at the expense of those who do, is not something the ads want to be involved with.
In other words, I think maybe you’re falling for a line of BS. No good faith comes from Rubio ever and there’s no reason to trust him, or any a Republican, now.
I own a small business (wholesale specialty foods) with three other people. We just had the huge Natural Products Expo in Anaheim cancel at the last minute. Lost a lot of money- I'm sure everyone did. The big players can absorb this but all of us small businesses get hurt.
Hard to say if orders are drying up yet. Seemed very quiet this week though.
And we have a business where you can't really 'work from home'. It's producing, manufacturing, shipping, receiving. (and as a side note- if you can 'work from home' it's probably not really work. See Graeber's Bullsh*t Jobs.) I emailed my Senators (Murray and Cantwell) to tell them they need to get way out in front of this. If this continues like this with closings, social distancing, hoarding, we may be heading toward a Depression. Small businesses will be closing en masse. What will our 'leaders' do? Bail out the usual players? What about people who no fault of there own are furloughed, laid off etc? Banks, landlords, etc don't care about that and whether you are now short of money. It's like Goodfellas: "F**k you, pay me". Seems like we are at a precipitous moment. Please let us know how your work goes. Thanks
a response to the comments on skiing and concerts. in the areas where I live around the world I observe a massive growth in leisure time activities and spending. Part of that is due to the reduced consumer maintenance for property and vehicles, and reduced community engagement. Discretionary income is at a high, so there is unprecedented packaging and marketing of everything, but less of home and community. That results in huge traffic increasingly for limited places and famous activities. We all know about Chinese tourists overwhelming Europe, but it is the same for Kenya national safari parks. But it is not only Chinese, rather the entire world middle class of 100s of millions. The US would do well to encourage localization in every aspect of policy rather than high carbon-footprint travel.
Wow, lot's there to digest! The short time frame needed to address the coronavirus and impending war with Red China will not allow for simple SBA and industry incentives to be effective soon enough. A national industrial policy is needed and great, but a national industrial/investment/infrastructure policy and program to roll it out just as in WWII and the Cold War. PPP is fine, but government must take the lead. That means unity in government is required - no exceptions. In addition, key sectors - or any sector for that matter - should not be dominated or controlled by immigrants or other aggrieved groups, starting with Silicon Valley.
ZIRP loans for small businesses, emergency refi of student loans, affected healthcare workers etc. Use this event to force the discussion why the powerful get ZIRP while screwing the masses is good for society.
"They want to know .. why is it so hard to have a supply chain based in America? Is it financing, distribution, market power, etc?"
Our problem–which could have been ignored for a few more years had China not shown us up–lies in financing, distribution, market power and, probably, in etc., too. So I'll drag China into my reply too because it demonstrates what a united society can accomplish and puts the lie to the myth of rugged individualism.
Financing. Our banks are privately owned and pursue their own, private agenda–which includes retirement packages for executives and dividends for shareholders, the future be damned. Chinese banks, the biggest and most profitable on earth, are publicly owned and pursue a public agenda. To ensure that they do their CROs are their highest paid executives and there are executives in charge of overseeing the banks' agenda (the Party Secretary, with a hotline to the Finance Minister) and its honesty (an anti-corruption inspector with a badge and the authority to compel every bank employee to answer every question he asks fully and honestly or be immediately detained). Draconian, perhaps, but necessary.
Distribution. Ten years ago, as part of its annual benchmarking, the PRC noticed that Chinese logistics costs were 400% higher than America's. The government began a dialog with business, pointing out the discrepancy, and asked provincial governments to experiment and publicize their results. Today their logistics costs are 4% lower than ours. China is embracing 5G because it's a logistics magic wand, not because kids can download videos faster.
Market power. We are China's #3 trading partner, after ASEAN and EU. GM makes 40% of its cars there. Half the world's economic growth occurs there. 70 years of chest-thumping and anti-China propaganda has blinded us to the reality of the world we live in.
Etc. We don't have the workforce. In response to my request that he review a chapter (in my ever-forthcoming book) on Chinese labor, here's a letter from friend who hires factory workers in both the US and China, :
"At our US facility our only requirement for assemblers was a high school degree, US citizenship, passing a drug and criminal background check and a simple assembly test: looking at an assembly engineering drawing and then putting the components together.
"While the vast majority of Americans were unable to complete the assembly test, in China they completed it in half the time and 100% of applicants passed.
"Hiring for an assembler position in the US would require 30 interviews a day and produce 29 rejections, not to mention all the HR hassles of assemblers walking off shift, excessive lateness, stealing from work, slow work speed and poor attitudes. The position starts at $12 an hour in flyover country which is pretty reasonable compared to other jobs that only require a GED and no prior work experience. It offers medical, dental and annual raises with plenty of opportunity to move up in the company and earn the average salary for a Production Assembler, $33,029 in US, if they stay for 5+ years.
"Identical positions in China pays the same wages as other positions there with only a high school degree and no work experience. Yet the applicant quality is much higher and this also applies to the white collar support professionals: schedulers, quality inspectors, equipment testers and calibrators, engineers, supply chain managers, account managers, sales. Their labor quality is simply higher.
"At the end of the day, high-end and middling manufacturing is not moving to either the US or Mexico because average people in flyover country are as dumb as rocks."
You ask, "why is it so hard to make things in America?" I believe that the problem is rather simple: the Capitalist model dictates that corporate profit be maximized for the shareholders. Saving a penny here, a dollar there, by sending work offshore meets that dictate, as does obtaining supplies from other than American suppliers.
The model also, parenthetically, requires some businesses to fail, go out of business or file bankruptcy, then have its assets sold off to another business that maybe can compete in that industry. That did not work so well after the 2008 subprime fiasco, as the "too big to fail" entities did not fail but were bailed out by the government.
Another flaw in the model is what it does to the average wage earner viz the top corporate brass and who earns the money versus who gets the money.
These are frailties of capitalism, perhaps three examples of a flawed model, and know that I do not eschew capitalism or endorse scuttling it. I just see where it does not always work.
Large (and thus global typically) organizations are not our strength. They are exposed to a variety of black swan events, whether it is covid19, the financial meltdown, or other 'systemic' problems.
Concentration of power/money/resources is a petri dish for Lord Acton-esque bad outcomes. Power corrupts. Absolute power corrupts absolutely. Think Google/FB/Amazon. All under pressure to break up. Think Apple in their dominance...and supply chain concentration in an effort to maximize profits. Remember the financial crash? Or think of our utility grid, or, or...
Information Theory confirms that concentration of power/energy/money/resources/information/people is bad.
Entropic distribution is good. It is healthier.
More resources/information/capital needs to flow to more startups in more regions around the country, to more broadly distribute our economic base, job creation, innovation, etc., outside Silicon Valley, NYC, LA and Boston, where over 80% of venture activity takes place.
This broader distribution of entrepreneurial capital would also support more domestic manufacturing. With 3D printing, CAD/CAM, small batch manufacturing can be done here more cost effectively and without the dependency of China (not to mention the logistics benefits).
Bubbles form (and vulnerability to black swan events as well) when you have such concentration. Resiliency comes from distributed resources, into smaller and more hands.
Do you believe republicans like hawley etc would continue to try to use the government to help small businesses/working class in the kind of populist economic ways like this that you've been noticing if a democrat wins in 2020? I believe they will revert back to blocking these types of things at all costs again right after that happens. What do you think?