Author: ken

Divided and “Split”

“The overall share of Americans who express consistently conservative or consistently liberal opinions has doubled over the past two decades from 10 percent to 21 percent. And ideological thinking is now much more closely aligned with partisanship than in the past.”

This is how the Pew Research Center summed up its recent findings about the electorate. They used the familiar language of politics: “opinion,” “partisanship,” “ideology.” But for psychologists this finding looks like a more dangerous form of pathology. It’s not just that the electorate has different ideas. They live in two distinct emotional worlds. For “consistent” read “rigid.” They don’t communicate or understand each other – or even try to understand each other. Reality is “split” into two incompatible halves. (See, “Dangerous Divisiveness.“)

We know this from other sources: the gridlock in Washington, the fragmenting of the parties, the huge sums being spent in elections, campaigns to defeat issues and candidates at all costs. What Pew did was provide evidence and numbers for what we already know.

It’s a recipe for hatred. The “other” side – which ever side that is, liberal or conservative — is no longer seen as reasonable adults with whom we differ or can be reconciled. They are less than human.

And Who Feels Loved?

It certainly goes against conventional wisdom, but according to a new study, reported in The Wall Street Journal, we experience more stress at home than we do at work, measured by cortisol levels in the blood.

There are several reasons for this, suggests the lead researcher on the study: “Paid work is more valued in society,” while on the other hand, “Household work is monotonous and not particularly rewarding.”

Then there is the fact that “We get better at our job with time (hopefully), and the increased competence means less stress and more rewards,” while “none of us . . . ever truly feels like an expert at parenting or even at marriage.

“We are more likely to feel appreciated at work,” she adds. “At home many of our efforts go unnoticed.”

Finally, “There is behavioral etiquette at work. No yelling, storming off or crying—at least, not if we want to keep our job and our colleagues’ respect.”

All these factors provide defenses against stress and anxiety.

But then there is the question of happiness. The Journal went on to say: “Both men and women showed less stress at work. But women were more likely to report feeling happier there. Men were more likely to feel happier at home.”

“The researchers say this may be because women still do more housework and child care and may feel they have less free time.” Yes, there is more work for women at home and, in many families, no time off. But I think the important reason for the difference is that men, by and large, are the major beneficiaries of that work. They are the ones whose laundry is done, whose beds are made, who are cooked and cared for. (See, Work Creates Less Stress Than Home, Penn State Researchers Find.”)

This is not to affirm the stereotypes of the sixties, the adoring wife of the sitcoms who greets her husband at the end of the day with a kiss and a martini, but just to observe that men can more easily experience the work women do to maintain the family as forms of attention and care. They can feel it as affection and love, even when that work is dutiful and routine. It may not be love in the full sense of the term, but it is calming and soothing. Built into the maternal role, often taken for granted it is powerful, even when unrecognized.

This dynamic is somewhat analogous to what I imagine animals feel who stick close to the caregivers who feed them, confident that their hunger is understood and will be responded to, grateful and secure, even if they cannot put those feeling into words.

Just Plain Tax Evasion?

A French economist “has put creditable numbers on tax evasion, showing that it’s rampant — and a major driver of wealth inequality,” according to a story in The New York Times. What some have long suspected has proved to be true.

The economist, Gabriel Zucman, “estimates — conservatively, in his view — that $7.6 trillion — 8 percent of the world’s personal financial wealth — is stashed in tax havens. If all of this illegally hidden money were properly recorded and taxed, global tax revenues would grow by more than $200 billion a year, he believes.”

The Times added: “these numbers do not include much larger corporate tax avoidance, which usually follows the letter but hardly the spirit of the law. According to Mr. Zucman’s calculations, 20 percent of all corporate profits in the United States are shifted offshore, and tax avoidance deprives the government of a third of corporate tax revenues.”

Mr. Zucman, a protegy of Thomas Picketty, is only 27. His book, ”The Missing Wealth of Nations” was a best seller in France last year.

So where are all the American economists? Can it be that these topics, along with such dramatic findings, would not be popular here? Would American economists risk their careers by taking up such subjects?

“A sort of noble purpose”

A professor of management practice at Harvard Business School recently asked a provocative question about the drug industry: “Is the role of leading large pharmaceutical companies to discover lifesaving drugs or to make money for shareholders through financial engineering?”

His question was aimed at a company that was, obviously, more interested in the money, but adept at disguising that fact. In researching the issue, Andrew Ross Sorkin, at The New York Times, focused on Mike Pearson, the chief executive of Valeant Pharmaceuticals, who spoke about his company’s “sort of noble purpose” in pursuing the development of life-saving drugs.

Finding such drugs is difficult of course, as it is impossible to know in advance if the expensive research will pan out. But Sorkin looked into Valeant’s record and found some disturbing facts. “Valeant [spends a mere] 3 percent [of its revenue on R&D], and has said it plans to cut around 20 percent of the combined companies’ 28,000 jobs.”

By comparison, another drug company, Allergan, spends 17 percent on R&D. Valeant is trying to take over Allergan, and Sorkin quotes a report of an investment firm: “The Allergan executive team is one of the best and most shareholder-focused in the pharmaceutical industry.” He comments: “And so what we’re left with isn’t a tale about a brilliantly innovative drug company trying to buy a mismanaged fixer-upper; it’s quite the opposite. Valeant, desperate for ways to increase its revenue, needs a cash cow to milk until it can find the next one.” (See, “Do Drug Companies Make Drugs, or Money?”)

Sorkin continues: “In case there is any question about Valeant’s slash-and-burn strategy, here is Mr. Pearson in his own words from last week on the value of research and development: ‘There has been lots and lots of reports, independent reports, talking about how R.&D. on average is no longer productive. I think most people accept that. So it is begging for a new model, and that is hopefully what we have come up with.’”

If the goal is sheer profit for investors, Mr. Pearson’s “new model” hardly resembles the “sort of noble purpose” he claims. Yes, R&D is expensive. But what is the alternative? If new drugs are just too costly to be developed, does that mean they will they not be developed? Who else could step in to do that? And how will we find the new medications we need?

This seems to be another example of how the short-term focus on investment returns is strangling long-term economic growth and development. Our economic system has been highly successful in stimulating and rewarding new enterprises. But now the drive for ever-greater returns by the financial industry is pushing us into a place where we can no longer rely upon private enterprise to produce the new drugs, services, and the other costly innovations we need – not to mention jobs.

Driven by the dominant role now occupied by finance in our society, which seems split off from the rest of the economy, have we become so fragmented and specialized that no one can see the consequences? And are CEOs now required to engage in double talk to conceal the frightening truth?

What Is Happening to Competition?

Increasingly, our financial world is an oligarchy of big established firms: big banks, big cable companies, big hospital systems, big advertising agencies, big airlines – you name it. It has frequently been argued that economies of scale will result in lower prices. Bigger, in other words, is better. But it isn’t always turning out that way.

Recently Eduardo Porter, the business reporter for The New York Times, has been exploring the implications of this development, and he has been finding that conventional wisdom here is not always correct.

Consider health care, a sector that accounts for nearly one-fifth of the American economy. “Hospital systems have been growing at breakneck speed, gobbling up independents and taking over physician practices . . . In 1992, the average metropolitan area was served by the equivalent of four rival hospital systems of equal size, according to estimates by [the] chief economist at the Federal Trade Commission. By 2006, the number was down to three.” But the cost of health care is not declining, nor is service improving.

“Four airlines — United, Delta, American and Southwest — serve 71 percent of domestic air traffic in the United States. From 1980 to 2009 the share of the top four fluctuated around 55 percent.” As their market share rose, so did their fares.

Cable companies are combining and thriving, and “yet, the United States has some of the highest broadband prices among industrial nations, according to data compiled by the Organization for Economic Cooperation and Development in the fall of 2012, and comparatively slow speeds.” (See, “Concentrated Markets Take Big Toll on Economy.”)

A parallel development is that “The rate of new businesses entering the economy declined sharply from the late 1970s through 2011, [according to research] reported by Robert E. Litan of the Brookings Institution and Ian Hathaway of Ennsyte Economics.”

“I wasn’t expecting this result,” Mr. Litan said. “I’m still struggling with this puzzling fact.” He thought it might be due to “tougher regulation and increasing economies of scale” created by existing businesses, weighing against small new entrants. But the pattern also fits a picture of entrenched incumbents erecting walls against new competitors, buying them up, for example, before they can become established.

Joseph Stiglitz has argued that the “excess profits companies can extract from their customers when they face little or no competition — known to economists as ‘rents’ — may be deepening income inequality.”

“In a competitive economy, the real return to capital would be much smaller,” Professor Stiglitz said. Concentration in the financial sector might have something to do with the fact that finance and insurance amass 15 percent of corporate America’s pretax profits, employing 5 percent of its private sector workers.

So there is real reason to worry about this growing corporate oligarchy. Yes, there are agencies designed to monitor these developments and intervene to prevent the stifling of competition. But increasingly the big and bigger businesses are able to muster political clout to hamper regulation and defeat attempts to rein them in.

Squads of lobbyists, descending on congress, many of who are former congressmen, are restraining attempts to impose limits on these bigger and bigger corporations.