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      in US Politics

      GameStop hearing: Robinhood founder defends halt to trading

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      Robinhood’s chief executive defended the app’s decision to halt trading in GameStop shares at a congressional hearing on Thursday, calling allegations that the company acted to help hedge funds that were hemorrhaging money “absolutely false”. The comments triggered accusations the company is creating a “smokescreen” to deflect blame.Vlad Tenev and other players in the GameStop saga appeared before the House financial services committee in the first public hearing in a wide-ranging investigation into trading in GameStop, AMC and other companies whose share values soared as small investors piled into the stocks.“The buying surge that occurred during the last week of January in stocks like GameStop was unprecedented, and it highlighted a number of issues that are worthy of deep analysis and discussion,” Tenev said.Tenev once again apologized for the trading ban. “Despite the unprecedented market conditions in January, at the end of the day, what happened is unacceptable to us,” Tenev said.The sometimes fractious hearing was largely divided along party lines, with Democrats calling for more oversight and Republicans arguing against more regulation.“Don’t you see something has gone terribly wrong here?” said Democrat congressman David Scott. He called social media-led stock market bubbles “a threat to the future of our financial system”.Republican Bill Huizenga called the hearing “political theater”, a comment that drew admonition from the committee chair, Maxine Waters.GameStop’s shares surged 1,600% in January as small investors worldwide – many coalescing on the Reddit forum WallStreetBets – piled into the troubled retailer’s shares betting against Wall Street hedge funds that had bet the share price would collapse – a practice known as short-selling. At one point, short-sellers had borrowed far more of GameStop’s shares (140%) to sell short than were available on the market.According to Tenev, Robinhood and other brokers had no choice but to suspend trading in GameStop and other hot investments during this period of “historic volatility”.Robinhood is required to place a deposit using its own funds at a clearinghouse to cover risks until trades are settled between a buyer and seller. On 28 January, the company was informed by its clearing house, NSCC, that it had a deposit deficit of approximately $3bn – up from $124m just days before.With trading in hot stocks suspended, Robinhood moved to raise $3.4bn from investors and trading was resumed.But the suspension triggered a firestorm of criticism among small investors and in Washington, with Republicans and Democrats attacking Robinhood and accusing it of backing the losing hedge funds over small investors.Christopher Iacovella, the chief executive of the brokerage-industry group American Securities Association, dismissed Tenev’s explanation and said the system had worked as it should to defend the US’s financial system.“As the GME [GameStop] short squeeze unfolded, the clearinghouse recognized that an inadequately capitalized broker-dealer could pose a risk to our markets and it took the action necessary to protect the system,” Iacovella said in a letter to the House committee. “Attempts to blame the clearinghouse or the timing of the settlement cycle for what happened during the short squeeze are a smokescreen.”Thursday’s hearing, titled Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, is the first of a series and addressed a number of issues including the “gamification” of investing, the role of social media and potential conflicts of interest.The representatives questioned the role of Citadel, an investment firm that executes Robinhood clients’ trades and also invested in Melvin Capital Management after the hedge fund’s bets against GameStop collapsed.Both Citadel’s founder, Ken Griffin, and Melvin’s founder, Gabe Plotkin, testified at the hearing. In his testimony, Plotkin denied that Citadel “bailed out” Melvin. “It was an opportunity for Citadel to ‘buy low’ and earn returns for its investors if and when our fund’s value went up,” he said.Plotkin said January’s frenzied trading in GameStop was “untethered to fundamentals” and quoted racist messages aimed at him and others, including antisemitic statements such as “it’s very clear we need a second Holocaust, the Jews can’t keep getting away with this.”“The unfortunate part of this episode is that ordinary investors who were convinced by a misleading frenzy to buy GameStop at $100, $200, or even $483 have now lost significant amounts,” said Plotkin.GameStop’s share price has now collapsed from a high of $483 on 28 January to just over $44. But one of the small investors who helped drive the stock to dizzy heights is still a believer.In his testimony Keith Gill, a trader variously known online as Roaring Kitty and DeepFuckingValue, said his investments had made him a millionaire.“GameStop’s stock price may have gotten a bit ahead of itself last month, but I’m as bullish as I’ve ever been on a potential turnaround. In short, I like the stock,” he said. More

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      in US Politics

      Why is Texas suffering power blackouts during the winter freeze?

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      Millions of people in Texas have spent days in below-freezing temperatures without power in what officials have called a “total failure” of the state’s electricity infrastructure. How did oil- and gas-rich Texas – the biggest producer of energy in the US – get here?While there are many factors that led to the power outages in Texas, the state’s power grid has come under intense scrutiny in light of the storm. Here’s what we know so far about Texas’s power grid and the role it played in the state’s winter disaster.Who controls Texas’s power grid?The “Lone Star” statelikes to go it alone when it comes to delivering power to its residents. Texas is unique among the 48 contiguous US states in that it relies on its own power grid. The other 47 states are all part of the two power grids that service the eastern and western halves of the country.The Electric Reliability Council of Texas, known as Ercot, manages the state’s power grid. Ercot is technically a non-profit corporation, and while it functions independently from the state’s government, the corporation is overseen by a state agency called the Public Utility Commission of Texas. Members of the commission are appointed by the state’s governor.Texas is the only state in the country, besides Alaska and Hawaii, that is not part of either the Eastern Interconnection or Western Interconnection, the two main power grids in the US. This means that Texas is not regulated by the Federal Energy Regulatory Commission (Ferc), the agency that oversees interstate electric transmission. Instead, Texas is basically “an electrical island in the United States”, as described by Bill Magness, CEO of Ercot. While this means that Texas has more control over electricity in the state, it also means there are fewer power plants the state can rely on for power.Parts of Texas are not serviced by Ercot. El Paso at the western tip of the state gets power from the Western Interconnection, which is why the city has been saved from the most brutal effects of the power outages.Why are so many people without power?Ercot turned off power for millions of customers after several power plants shut down due to the below-freezing temperatures the state is experiencing. Officials at Ercot said the equipment at the plants could not handle the extreme, low temperatures. The choice was either shutting down power for customers or risking a collapse of the grid altogether.Why is Texas on its own power grid?For as long as electricity has existed in Texas, the state, which prides itself on its independence has relied on itself for power. Officials in the state have long had a stubborn will to stay out of the hands of federal regulators.While Magness, Ercot’s CEO, said that the shutdown was due primarily to “reasons that have to do with the weather”, critics have said Texas’s energy market incentivizes cheap prices at the cost of delaying maintenance and improving power plants. In 2011, the state experienced similar blackouts, though for a shorter period of time compared with what has been seen this week.Following those blackouts, the Ferc gave a series of recommendations to Ercot to prevent future blackouts, including increasing reserve levels and weatherizing facilities to protect them from cold weather.Ed Hirs, an energy fellow at the University of Houston, told the Washington Post that Ercot “limped along on underinvestment and neglect until it finally broke under predictable circumstances”.Did renewable energy play a role in the grid’s malfunction?While Republicans have been blaming frozen wind turbines for the state’s blackouts, officials and experts say that malfunctions in natural gas operations played the largest role in the power crisis.Ercot said all of its sources of power, including those from renewable sources, were affected by the freezing temperatures. The state largely relies on natural gas for its power supply, though some comes from wind turbines and less from coal and nuclear sources.Natural gas can handle the state’s high temperatures in the summer, but extreme cold weather makes it difficult for the gas to flow to power plants and heat homes. Michael Webber, an energy resources professor at the University of Texas Austin, told the Texas Tribune that “gas is failing in the most spectacular fashion right now”.With the climate crisis likely to trigger more freak weather events like the one Texas is suffering it is noteworthy that there are places that experience frigidly cold weather that rely heavily on wind turbines and manage to have electricity in the winter. In Iowa, a state which sees freezing temperatures more often than Texas, nearly 40% of electricity is generated by wind turbines.What are officials doing to prevent future blackouts?With millions still without power as of late Wednesday, officials in Texas remain focused on getting power back to residents and remedying the damage from the storm. Politicians from both major parties have criticized Ercot for its handling of the storm, but officials have steered clear of providing examples of specific fixes. Texas’s governor, Greg Abbott, has called for an investigation into Ercot, declaring it an emergency item for the state’s legislative session.But some Texas leaders have made it clear that they believe Texas should remain independent from the national power grids. Rick Perry, a former governor of the state who also served as Donald Trump’s energy secretary until 2019, said: “Texans would be without electricity for longer than three days to keep the federal government out of their business.” More

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      in US Politics

      GameStop: US lawmakers to quiz key players from Robinhood, Reddit and finance

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      Frenzied trading in the shares of GameStop and other companies will be the subject of what is expected to be a fiery hearing in Congress on Thursday, when US politicians get their first chance to quiz executives from the trading app Robinhood, Reddit and other players in the saga.The House financial services committee will hold a hearing at noon in a first step to untangling the furore surrounding trading in GameStop, AMC cinemas and other companies whose share values soared to astronomical levels as small investors piled into the stocks.The hearing, titled Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, is expected to be fractious.Shares in GameStop, a troubled video games chain store, soared 1,600% in January, as an army of small investors, many using the trading app Robinhood, appeared to have bet that Wall Street hedge funds had overplayed their hand when betting the stock price would collapse – a practice known as short-selling.Spurred on by meme-toting members of the Reddit forum WallStreetBets, investors kept buying the shares, driving up the price and triggering huge losses for some hedge funds.Robinhood briefly suspended trading in GameStop and other hot stocks at the end of January and sparked allegations that the hedge funds and others may have pushed Robinhood and other trading platforms to stop the rout.The news managed to – briefly – unite Washington’s deeply divided political elite. Both the rightwing senator Ted Cruz and the progressive representative Alexandria Ocasio-Cortez attacked Robinhood’s decision to halt trading in GameStop by small investors.Ocasio-Cortez sits on the bipartisan financial services committee.Among those testifying are:Robinhood’s CEO, Vlad Tenev.
      Reddit’s CEO, Steve Huffman.
      Gabe Plotkin, founder of the Melvin Capital Management hedge fund, which was forced into a rescue after retail traders crushed its bets against GameStop.
      Ken Griffin, billionaire CEO of Citadel, an investment firm that executes Robinhood clients’ trades and also helped to bail out Melvin.
      Keith Gill, a trader variously known online as Roaring Kitty and DeepFuckingValue and a longtime GameStop booster.
      The hearing marks the first time the major players in the GameStop controversy have all been forced to publicly reckon with the anger the episode provoked among small investors and across the political spectrum.Gregg Gelzinis, associate director for economic policy at the Center for American Progress, said: “The GameStop drama raised quite a few public policy questions but first it’s important for members of Congress to understand how events played out.”Gelzinis said there were still questions about the timeline of events. More broadly, he said, GameStop had highlighted many crucial issues for regulators, including the role and regulation of hedge funds, whether or how Wall Street is using social media to drive investment strategy, the “gamification” of investing by trading apps and the economic incentives at play for the trading platforms.“What would have happened if Robinhood had failed? What would have been the knock-on effects for financial markets?” he asked. “These are huge investor protection questions.“I saw someone on Twitter describe it as a Rorschach test for financial regulators,” he added.The hearing will not be the last inquiry that the executives at the center of the controversy will face. Federal prosecutors have begun an investigation, according to the Wall Street Journal, and the Securities and Exchange Commission, the US’s top financial watchdog, is reportedly combing through social media posts for signs of potential fraud.In the meantime, evidence has emerged that small investors were not the largest buyers of GameStop and other hot companies. According to an analysis by JP Morgan, institutional investors may have been behind much of the dramatic rise in the share price.“Although retail buying was portrayed as the main driver of the extreme price rally experienced by some stocks, the actual picture may be much more nuanced,” Peng Cheng, a JP Morgan analyst, told clients in a note.Gelzinis said Thursday’s hearing was likely to raise as many new questions as it answered but was a necessary first step to understanding the seismic changes in investing that GameStop highlighted.“This is only the start of the story,” he said. “It’s clear this is not just a clearcut small investor versus Wall Street story. It’s a fairly messy picture but hopefully by the end we can paint a clearer picture and draw up some public policy conclusions from it.” More

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      in US Politics

      Democrats urge Biden to fire USPS chief Trump ally who decimated mail service

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      Even in a drama-filled election unlike any other, the postmaster general, Louis DeJoy, and his assault on the postal service stood out.After Trump appointed the businessman to run the agency, DeJoy largely failed in his mission to help the former president discourage voters from casting ballots by mail, but evidence suggests his policies and the pandemic have decimated the postal service. Now many, including Democratic lawmakers, are calling on Biden to act swiftly to remove him and the Trump-majority UnitedStates Postal Service board of governors.Though Biden doesn’t have the authority to remove DeJoy himself, he could immediately appoint a Democratic-majority board that could fire the postmaster general, but the administration has yet to act. That’s left many asking “Why?”“We think he can move quickly and should move quickly and should be bold – there’s no debate about anyone being confirmed by the Senate, so let’s make it strong and powerful,” said Mark Dimondstein, president of the American Postal Workers Union.But it might take some time for that to happen. Representative Gerry Connolly, chair of the subcommittee on government operations, which oversees the postal service, labeled DeJoy a “huge problem” and is calling on Biden to fire the entire board, but told the Guardian he doesn’t think it’s “a fair question” to ask why the president hasn’t acted during his first three weeks in office.“Give him a little bit of time. We’re dealing with huge problems – a pandemic, huge economic challenges, he’s got to make cabinet appointments, he’s got his environmental agenda,” Connolly added. “But this needs to be on the priority list and I believe it will be.”Representative Tim Ryan, who in January sent a letter to Biden calling on him to “clean house”, stressed that late bill payments, late checks and delayed medication deliveries cause problems for many Americans and underscored the urgency. Though DeJoy has refused to release 2021 on-time delivery data, December numbers made public in lawsuits shows that only about 40% of first class mail was arriving on time – down from about 92% the year before.Those who spoke with the Guardian agreed that the delays affect Americans’ daily lives more than sub-cabinet appointments at a federal agency like the Department of Commerce.“We’ve got to hit the reset button because there’s no confidence in DeJoy and the board of governors who obviously have lost all control, and that’s inflicting pain on working-class people in places like Ohio,” Ryan said.Connolly said part of the delay in Biden taking action could stem from the administration “wrestling with” a strategy to remove DeJoy and deal with the board, which currently holds four Republicans and two Democrats. Biden could appoint three new Democrats, and that majority could, in theory, fire DeJoy. But some, like Connolly and Ryan, are calling on Biden to fire the entire board, including its Democrats, who Connolly accused of not providing meaningful resistance to DeJoy’s assault.“They’ve gone along to get along and that’s not what we needed,” Connolly said. “We needed forthright voices calling out DeJoy, so I believe they’re part of the problem, not part of the solution.”Ryan said the Biden administration didn’t respond to his letter, and he suspects that it may fear that immediate action would “create a lot of chaos”.Dimondstein also noted that the board is composed of older white men with no experience in the industry and who want to run the postal service as a business, when it’s actually a service.“We’re asking him to fill the openings immediately with strong postal service advocates and to bring some diversity to the board,” Dimondstein said. That includes someone who represents the interest of rural America, which relies heavily on the postal service because private delivery companies often won’t serve it.There’s also the symbolism: DeJoy, a Trump donor, was appointed to his role in May and immediately set to work enacting controversial changes that dramatically slowed first class mail service in critical swing states where large numbers of Democrats were expected to vote by mail. That’s viewed by many as an attack on democracy and weaponization of an essential service.“If you needed a reminder of how quickly this can become a political hot potato, that was it, and you ignore it at your own peril,” Connolly said.The postal service’s struggles don’t end at DeJoy. Its workforce has been flattened by the pandemic and officials say the operation is in need of a cash infusion and tens of thousands of additional employees. Its ageing equipment and 25-year-old delivery truck fleet are designed to largely handle first class mail but the postal service increasingly delivers packages, which makes the operation significantly less efficient.Meanwhile, a 2006 reform bill required the post office to pre-fund 75 years of its retiree healthcare costs, which has been a financial drag.Bipartisan legislation already introduced in the Senate and House would repeal the 2006 law, but Connolly said he was preparing a “more comprehensive” package that would address other major issues. Democrats are having “internal discussions” about the best approach, he added. Meanwhile, Ryan called on the federal government to provide relief to those who have incurred late fees or had credit scores dinged as a result of slowed mail service.Dimondstein applauded all the ideas, and said the USPS was also well-positioned to expand the services it offers, suggesting ideas like postal banking or electric vehicle charging infrastructure should the fleet be upgraded. That would help generate new revenue, but, regardless of what Democrats do, Dimondstein said they need to move quickly: “People are watching and patience is going to run thin.” More

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      in US Politics

      'Hopefully it makes history': Fight for $15 closes in on mighty win for US workers

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      Fear was the overwhelming emotion Alvin Major felt when, on a chilly November morning in 2012, he went on strike at the Brooklyn KFC where he worked.
      “Everybody was scared,” said Major. He may have been fearful, but what Major didn’t know was that he was about to make American history – an early leader in a labor movement that some historians now see as the most successful in the US in 50 years.
      Major was paid just $7.25 an hour as a cook at KFC, but the consequences of losing his job were dire, as his family was already struggling to make the next month’s rent. “Everybody was scared about going back to work,” he said. “Nobody visualized what this movement would come to.”
      The New York strike by hundreds of majority Black and brown New York fast-food workers was, at the time, the largest in US history – but it would be dwarfed by what was to come. Two years later, strikes had spread across America, and fast-food workers in 33 countries across six continents had joined a growing global movement for better pay and stronger rights on the job.
      In eight years, what became the Fight for $15 movement has grown into an international organization that has successfully fought for a rise in minimum wage in states across the US, redefined the political agenda in the US, and acted as a springboard for other movements, including Black Lives Matter. It now stands perilously close to winning one of the biggest worker-led rights victories in decades.
      Embed map
      This Tuesday, fast-food workers will walk out again, hoping to push through a change that will affect tens of millions of American workers.
      For Major, now 55, it all began in a hall in Brooklyn, where union and community activists had convened a meeting of fast-food workers to see what pressure they could bring on an industry notorious for its low wages and poor conditions, and a state that had shown those workers little interest.
      With a platform to speak, the workers talked about “how you had to be on food stamps, get rent assistance, all these kinds of things, and we’re working for these companies that are making billions”, said Major.
      At one point, a worker showed the burns on his arm he had suffered at work. In a show of solidarity, workers across the room others rolled up their sleeves to show their scars too. Even when injured on the job, workers said, they were too scared to take time off.
      This was not how Major imagined America to be when he moved to the US from Guyana in 2000. “In our family, with 14 kids, my dad’s wife never worked a day. My dad used to work, he took care of us, we had a roof over our head, we went to school, we had meals every day, he had his own transportation.”
      In America, “the greatest, most powerful and richest country in the history of the world”, he found “[that] you have to work, your wife has to work, when your kids reach an age they have to work – and still you could barely make it”.
      Industry lobbying allied to Republican and – until relatively recently – Democratic opposition has locked the US’s minimum wage at $7.25 since the last raise in 2009. Now a raise to $15 looks set to be included in Joe Biden’s $1.9tn Covid relief package – although it will still face fierce opposition.
      Even Biden, who campaigned on the raise, has expressed doubt about whether it can pass. But more progressive Democrats including longtime champion Senator Bernie Sanders are determined to push it through, and it remains in the House Covid relief bill.

      Rep. Pramila Jayapal
      (@RepJayapal)
      I’m thrilled to announce that after working with leadership, we’ve secured a $15 minimum wage in the House’s COVID relief bill!This provision would lift nearly 1 million people out of poverty. It’s long overdue that Congress enacts a minimum wage that is a living wage.

      February 8, 2021

      The stakes are huge. The Congressional Budget Office said this week that 27 million Americans would be affected by the increase, and that 900,000 would be lifted out of poverty at a time when low-wage workers – and especially people of color – have suffered most during the pandemic. The CBO also said the increase would lead to 1.4m job losses and increase the federal budget deficit by $54bn over the next 10 years.
      Other economists have disputed the CBO’s job-loss predictions – the Economic Policy Institute called them “wrong, and inappropriately inflated”. The long-running debate about the real cost of raising the minimum age will no doubt continue. What is certain is that Biden will face enormous political blowback if his campaign promise to raise the minimum wage falls so early in his presidency – a promise that during his campaign he argued was central to his plans to address racial inequality.
      That backlash will also cross party lines – at least outside Washington. The US may be as politically divided as it has been since the civil war, but polling shows the majority of Americans support increasing the minimum wage no matter their chosen party. In November 60% of voters approved a ballot initiative to increase the minimum wage to $15 by 2026 even as they voted to re-elect Donald Trump.
      More people voted for that ballot initiative than voted for either presidential candidate in the state. With Florida, seven states plus the District of Columbia have now pledged to increase their minimum wage to $15 or higher, according to the National Employment Law Project (Nelp) and a record 74, cities, counties and states will raise their minimum wages in 2021.
      The movement, and this widespread support, has changed the political landscape, pushing Democratic politicians, including Biden, Hillary Clinton and the New York governor, Andrew Cuomo, to back a $15 minimum wage, against their earlier qualms.
      Cuomo called a $13 minimum wage a “non-starter” in February 2015. By July, he was racing California to get it into law.
      In the 2016 Democratic presidential primaries, Clinton went from supporting a raise to $12 an hour to $15 as Sanders made ground on the issue. Even Saturday Night Live parodied the pair arguing about who was most for a $15 higher wage.

      [embedded content]

      Big companies including Amazon, Target and Disney have all moved to $15, or pledged to do so. One of Biden’s first executive orders called for federal contractors to pay employees a $15 minimum wage. The federal holdout would be the movement’s biggest win to date, but there is little arguing that they have made significant progress without it – not least for Alvin Major, who now has a union job earning over $17 an hour working at JFK airport and who says he is no longer worried about his bills.
      For Mary Kay Henry, president of the Service Employees International Union (SEIU), this is “the David and Goliath story of our time”. She puts the public support down to the “pervasiveness of underpaid, low-wage work”.
      “Every family in America knows somebody that’s trying to make ends meet through a minimum-wage job. And the pandemic has revealed that essential work in a way that many people hadn’t noticed before, and they now understand how grocery store clerks, nursing home workers, janitors, airport workers, security officers, delivery drivers [and] fast-food workers are all people trying to do the very best job they can, and provide for their families.”
      The SEIU has been a longtime funder and supporter of Fight For $15 and for Henry, the first woman to lead the SEIU, the fight for a higher minimum wage is just the beginning of a greater push for workers’ rights – not least the right to join unions, in a service sector where women and people of color make up a disproportionate number of workers.
      “Eighty per cent of our economy is driven by consumer spending. Service and care jobs are the dominant sectors in the US economy, and we have to create the ability of those workers to join together in unions in this century, just like auto, rubber and steel were the foundation in the last century,” she said.
      “If the US Congress can’t see what the American people are demanding, in terms of ‘Respect us, protect us, pay us’, then they’re going to have a political price to pay in 2022,” she added. “Our nation’s leaders need to get this done. Congress has used its rules to pass trillions of dollars in tax cuts for billionaires and massive corporations, so now it’s time for our nation’s leaders to give tens of millions of essential workers a raise.”
      Backing Henry will be a younger generation of activists who cut their teeth in the Fight for $15 movement and have used it as a springboard into a political debate that is now centered around racial and economic justice. One of those leaders is Rasheen Aldridge, one of the first to take action when the Fight for $15 spread to St Louis, who was elected to Missouri state assembly last November.
      Aldridge was working at a Jimmy John’s restaurant in 2013 when he was approached by a community organizer asking him about his pay and conditions. Aldridge had recently been humiliated by a manager who took pictures of him and a co-worker holding signs they were forced to make, saying they had made sandwiches incorrectly and had been 15 seconds late with a drive-through order. “It was so dehumanizing and just a complete embarrassment,” said Aldridge.
      The organizer talked about the strikes in New York, Chicago and elsewhere, and suggested the same could happen in conservative Missouri. More

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      in UK Politics

      Brexit effects ‘considerably worse’ than expected, says JD Sports boss

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      The consequences of Brexit have been “considerably worse” than expected, the boss of JD Sports has said.Peter Cowgill said red tape and delays in shipping goods to Europe was costing the company “double-digit millions”.He told the BBC’s World at One that the company will probably have to move 1,000 distribution centre jobs to the continent, causing job losses in the UK.The sports retailer’s chairman claimed Britain does not really have a free trade agreement with the EU, explaining that if companies such as his import goods from Asia, tariffs are then applied when goods go on sale in Europe.”I actually think it was not properly thought out,” he said. “All the spin that was put on it about being free trade and free movement has not been the reality.”The new system and red tape just slows down efficiency. The freedom of movement and obstacles are quite difficult at the moment.”I don’t see that regulatory paperwork easing much in the short term.”Mr Cowgill said opening a distribution centre in mainland Europe “would make a lot of economic sense,” with the facility employing around 1,000 people.He said while the company’s warehouse in Rochdale would not be closed, “it would mean the transfer of a number of jobs into Europe.”Similar criticisms have been made by businesses across the UK in the wake of new trading rules with the EU coming into force on 1 January.On Monday, the Road Haulage Association (RHA) said exports from British ports to the EU had fallen by 68 per cent last month compared with the same period last year. Richard Burnett, the RHA’s chief executive, largely blamed Brexit for the stunning drop, saying he “warned repeatedly that there was a lack of clarity over how the new arrangements would work and that hauliers, traders and manufacturers were confused, having had insufficient time to prepare” ahead of the end of the Brexit transition period.The environment secretary, George Eustice, said the government had been forced to advise traders that consignments would likely be rejected at EU ports, adding that it was “in the EU’s interest to restore this trade” so its businesses could buy British shellfish. However, Brussels has said the rules have existed for decades and will not be changed anytime soon. More

    • 63 Shares189 Views

      in World Politics

      What Has Amazon Been Withholding?

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      Everyone knows that Amazon is a successful, profitable, world-conquering and, therefore, obscenely rich company. It has made Jeff Bezos the richest man in the world. He keeps getting richer by the day. With his fortune, Bezos doesn’t need to be as careful with his cash, in contrast with normal human beings, who know how important is to save up for a rainy day. That may help to explain why Bezos has just stepped away from his post as CEO. Still, the culture Bezos created at Amazon during his reign insists on being extremely careful with its money. We now learn that this is true even when it’s cash that belongs to other people.

      Facebook Wants to Read Your Brain

      READ MORE

      The New York Times features an article with this headline: “Amazon to Pay Fine for Withholding Tips From Delivery Drivers.” The first sentence gives the gist of the story: “Amazon agreed on Tuesday to pay $62 million to the Federal Trade Commission to settle charges that it withheld tips to delivery drivers over a two-and-a-half year period, in a case that highlights the federal government’s increased interest in gig-economy workers.”

      Today’s Daily Devil’s Dictionary definition:

      Withhold:

      1. When practiced by a government’s tax authorities: to retain the amount of money that is calculated as taxes that must be paid.
      2. When practiced by Amazon: to steal money owed to workers who have no idea what is going on.

      Contextual Note

      With any New York Times article, it is important to pay attention to the verbs. In this sentence, “withhold” appears alongside “agree,” “pay” and “highlight,” a word typically used to introduce the broad theme the article will develop. At no point in the article does the article use the verb that most people would use to describe Amazon’s deed — “steal.” Instead, it describes how the stealing took place: “Amazon had promised its Flex delivery drivers that they would receive 100 percent of all customers’ tips. But starting in 2016, the F.T.C. said, Amazon secretly lowered the hourly delivery wages, which were advertised at $18 to $25, and tried to mask the smaller wages by using customer tips to cover for the smaller hourly pay.” This time, the key verbs are “promised,” “receive,” “lowered,” “mask” and “cover.” Taken together, those verbs may suggest prolonged criminal acts.

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      Once Amazon realized the theft had been noticed, it did what any common thief would be inclined to do when hauled before a court. The company promised to reform and proposed a friendly settlement to compensate the victims and avoid scandal. As The New York Times tell us, “Amazon stopped the practice in 2019, after it became aware of the F.T.C.’s investigation.” Just like any burglar or pickpocket would then gladly do, Amazon “settled without admitting wrongdoing.” Why admit wrongdoing when the crime only took place over a period of two and a half years?

      The settlement demonstrated Amazon’s generosity. It amounted to “tens of millions of dollars,” which of course is small change for a company with a market cap of around $1.7 trillion. Such a small amount hardly deserves the qualification of theft. The misdemeanor merits the label The Times seems content with: “inadvertent withholding.”

      By the end of the article, the only reference to unlawful activity appears in a quote from Rohit Chopra, at the Federal Trade Commission: “Amazon is one of the largest and most feared corporate empires on the planet, and it is critical that global regulators carefully scrutinize whether the company is amassing and abusing its market power through unlawful practices.” Even this mention of “unlawful practices” falls far short of suggesting that Amazon may be guilty of an actual crime. It is now accepted wisdom, as determined by the Supreme Court and reaffirmed by Senator Mitt Romney, that “corporations are people.” But corporations are never punished in the way people are punished. Just ask Jean Valjean.

       Historical Note

      In 18th-century England, capitalism began to take form. Part of its job was to, write a new set of rules for human management. At about the same time, reformers began to call into question slavery, a standard feature of the brutal colonialism that had been fueling European prosperity for at least 200 years. The reason capitalists themselves began to find slavery and serfdom intolerable was the fact that those who controlled the means of production felt some vague sense of responsibility for the well-being of the slaves, who were a form of property that required maintenance. 

      At the beginning of the 19th century, economist David Ricardo described the new industrial approach to employment: the subsistence theory of wages. Market forces became the deciding factor, replacing the relationship of human dependency between employers and labor: “Ricardo wrote that the ‘natural price’ of labour was simply the price necessary to enable the labourers to subsist and to perpetuate the race.” This vision of economic production led to the abolition of slavery. But its real purpose was to liberate employers from any sense of vestigial responsibility for the livelihood of workers, who were merely anonymous, interchangeable suppliers of a new notion of “manpower” rather than humans who might, at odd moments, require the attention of the employer, if only because they tend to be more productive when healthy.

      An approach based exclusively on criteria of subsistence proved untenable for a simple reason: Humans are cultural beings rather than pure economic actors. Both individually and collectively, they can exercise intelligence. They may even succeed in analyzing power relationships and put pressure on the marketplace itself. 

      When capitalists found themselves confronted by the complexity of human psychology and cultural reality, they had to imagine sophisticated strategies to defend the law of subsistence wages. That could have led to the kind of theorizing that is now promoted as “social responsibility,” which many leaders like to praise while avoiding the practice. In most managers’ minds, the subsistence theory remains a foundational idea. Employers do what is necessary to keep wages as close to subsistence level as possible. Amazon is the perfect example.

      One solution is robotization. The subsistence requirements of robots are not only minimal, but devoid of psychology. Robots don’t complain of any form of abuse and they don’t talk to each other — two of the factors that led to the kind of pressure that led to reforms concerning employment itself and working conditions. Amazon has been robotizing as much as it can and will continue to do so in the future. Future generations of artificial intelligence will accelerate the trend.

      Embed from Getty Images

      The New York Times tends to admire rich people and successful companies, though it also allows itself to criticize them, especially when they give to Republican causes or promote Republican talking points. As the owner of The Washington Post, Bezos appears to be on the same side of the fence as The Times, squarely in the establishment Democrat camp. The Times tends to see Bezos as a hero to be admired for his skill and his wealth.

      In its role as an objective reporter of the facts in the news, The Times nevertheless makes a point of acknowledging the real world. In 2015, the paper of record did a thorough piece on Bezos’s management approach at Amazon. The article provided multiple examples of the deeply inhuman management culture Bezos created: “Amazon is in the vanguard of where technology wants to take the modern office: more nimble and more productive, but harsher and less forgiving.” It mentions Bezos’ “eagerness to tell others how to behave; an instinct for bluntness bordering on confrontation; and an overarching confidence in the power of metrics.” It quotes an employee saying that “If you’re a good Amazonian, you become an Amabot … a term that means you have become at one with the system” — an Amazon robot.

      The overall tone of the 2015 article is one of rapt admiration of the originality and assertiveness of a modern, pitiless meritocratic management style that seeks global conquest. The kind of management that can “withhold” tips from anonymous drivers to boost its own highly positive bank balance. This week’s article on the settlement with the FTC offers Amazon the final word, quoting Amazon’s statement that its pay for contract workers was among the “best in the industry,” and that, after the settlement with the drivers, the company is “pleased to put this matter behind us.” The wealthy are always pleased to put embarrassing matters behind them.

      *[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in US Politics

      US economy adds 49,000 jobs as Biden aims for further Covid relief

      by

      The US economy added back 49,000 jobs last month as coronavirus restrictions eased and fiscal stimulus from Washington goosed up the economy, the labor department announced on Friday.The unemployment rate dropped to 6.3%, down significantly from its pandemic high of 14.7% in April. While January’s figure marked a return to growth after job losses in December, the number was weak and big problems remain.On Thursday, the labor department said 779,000 people filed new unemployment claims last week, down from the week before but still close to four times pre-pandemic levels. The latest figures showed some 17.8 million Americans are still claiming unemployment benefits.In December the US lost 140,000 jobs as the latest wave of Covid-19 infections led to more shutdowns across the country and a slowdown in economic activity. That figure was revised to a loss of 227,000 jobs on Friday.Professional and business services (up 97,000 jobs) and local government (up 49,000) saw the largest gains over the month. The US is still losing huge numbers of jobs in leisure and hospitality (down 61,000) and retail (down 38,000) and the stark gap in racial unemployment rates remains.The unemployment rate for white Americans was 6% while for Black Americans it was 9.2% and for Latinos it was 8.6%.The jobs figure come as the Biden administration is trying to push through a $1.9tn stimulus package which would send $1,400 cheques to many Americans and provide fresh aid for struggling businesses. It would also increase the federal minimum wage from $7.25 to $15 – the first increase since 2009.The plan has widespread support from voters, with a Quinnipiac survey showing more than two-thirds of respondents in favor of the plan. But it has met with opposition from Republicans in Congress, who have balked at the size of the stimulus and proposed a far smaller package. Biden’s plan was approved in the Senate early Friday by a 51 to 50 vote, with the vice-president casting the tie-breaking vote, but still faces hurdles and is not expected to become law before mid March.The recovery in the jobs market may embolden opponents but some economists warned that the economic toll of the virus is far from over.Jason Reed, assistant chair of finance at the University of Notre Dame’s Mendoza College of Business, said: “We shouldn’t forget that the economy is still down about 10m jobs since the start of the pandemic. We aren’t anywhere close to where we were this time last year.“The rollout of the vaccine will surely help Americans get back to work, but we shouldn’t expect a return to normal until late 2021 or early 2022.” More