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Trump’s ties to the Russian mafia go back 3 decades

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My Comments: In a political context, my initial reaction to having Trump in the White House was that it was a healthy step in the evolution of these United States.

We’ve been a formidable leader on the world stage for the past 80 plus years. From time to time, it is useful for the status quo to be upended. It gives everyone a chance to re-evaluate the steps we’ve taken to get us where we are and the values we express to have real meaning.

Though I disliked him personally as a person, I decided I could live with the disruption and existential threat he posed if it meant we’d come out the other side stronger and fully committed to moving forward as a society. I still believe that.

But that doesn’t mean I can ignore the chaos and what it all means to us as a nation. My role in the re-evaluation process means I get to have a blog post and express my thoughts as I deem appropriate. This is one of those times…

by Sean Illing \ November 19, 2018

On November 9, 2016, just a few minutes after Donald Trump was elected president of the United States, a man named Vyacheslav Nikonov approached a microphone in the Russian State Duma (their equivalent of the US House of Representatives) and made a very unusual statement.

“Dear friends, respected colleagues!” Nikonov said. “Three minutes ago, Hillary Clinton admitted her defeat in US presidential elections, and a second ago Trump started his speech as an elected president of the United States of America, and I congratulate you on this.”

Nikonov is a leader in the pro-Putin United Russia Party and, incidentally, the grandson of Vyacheslav Molotov — after whom the “Molotov cocktail” was named. His announcement that day was a clear signal that Trump’s victory was, in fact, a victory for Putin’s Russia.

Longtime journalist Craig Unger opens his new book, House of Trump, House of Putin, with this anecdote. The book is an impressive attempt to gather up all the evidence we have of Trump’s numerous connections to the Russian mafia and government and lay it all out in a clear, comprehensive narrative.

The book claims to unpack an “untold story,” but it’s not entirely clear how much of it is new. One of the hardest things to accept about the Trump-Russia saga is how transparent it is. So much of the evidence is hiding in plain sight, and somehow that has made it harder to accept.

But make no mistake: Trump’s ties to shady Russian figures stretch back decades, and Unger diligently pieces them together in one place. Although Unger doesn’t provide any evidence that Trump gave the Russians anything concrete in return for their help, the case he makes for how much potential leverage the Russians had over Trump is pretty damning.

I spoke to Unger about what he learned, how he learned it, and why he thinks Russia’s use of Trump constitutes “one of the greatest intelligence operations in history,” as he puts it in the book.

A lightly edited transcript of our conversation follows.

Sean Illing

I’ll ask you straightforwardly: Do you believe the Russian government successfully targeted and compromised Trump?

Craig Unger

Yes, absolutely. But let’s go back in time, because I think all of this began as a money-laundering operation with the Russian mafia. It’s well known that Trump likes doing business with gangsters, in part because they pay top dollar and loan money when traditional banks won’t, so it was a win-win for both sides.

The key point I want to get across in the book is that the Russian mafia is different than the American mafia, and I think a lot of Americans don’t understand this. In Russia, the mafia is essentially a state actor. When I interviewed Gen. Oleg Kalugin, who is a former head of counterintelligence in the KGB and had been Vladimir Putin’s boss at one point, I asked him about the mafia. He said, “Oh, it’s part of the KGB. It’s part of the Russian government.”

And that’s essential to the whole premise of the book. Trump was working with the Russian mafia for more than 30 years. He was profiting from them. They rescued him. They bailed him out. They took him from being $4 billion in debt to becoming a multibillionaire again, and they fueled his political ambitions, starting more than 30 years ago. This means Trump was in bed with the Kremlin as well, whether he knew it or not.

Sean Illing

Let’s dig into this a bit. You claimed just now, as you do in the book, that the Russian mafia has been using Trump-branded real estate to launder money for over three decades. What evidence do you have to back this up?

Craig Unger

You really have to go back 20 or 30 years to understand who the key Russians were, what role they played in the Russian mafia, and how they related to Trump.

The very first episode that’s been documented, to my knowledge, was in 1984 when David Bogatin — who is a Russian mobster, convicted gasoline bootlegger, and close ally of Semion Mogilevich, a major Russian mob boss — met with Trump in Trump Tower right after it opened. Bogatin came to that meeting prepared to spend $6 million, which is equivalent to about $15 million today.

Bogatin bought five condos from Trump at that meeting. Those condos were later seized by the government, which claimed they were used to launder money for the Russian mob.

“One thing Vladimir Putin got right was his insistence that American democracy is also corrupt, and I think he’s showing us exactly how corrupt it is”

Sean Illing

Okay, to play devil’s advocate, can we say definitively that Trump knew who he was dealing with or what he was getting into? Or did he just naively have his hands out?

Craig Unger

Look, I can’t prove what was in Trump’s head, or what he knew or when he knew it. But I document something like 1,300 transactions of this kind with Russian mobsters. By that, I mean real estate transactions that were all cash purchases made by anonymous shell companies that were quite obviously fronts for criminal money-laundering operations. And this represents a huge chunk of Trump’s real estate activity in the United States, so it’s quite hard to argue that he had no idea what was going on.

Sean Illing

How did Trump first become a “person of interest” to the Russians? Why would they target this fringe celebrity character 30 years ago, long before his ascent to the presidency was even fathomable?

Craig Unger

First of all, the Russians have always wanted to align with certain powerful businessmen, and they have a history going back to the American businessman Armand Hammer in the 1970s and ’80s, whom the Russians allegedly turned into an asset. But it’s not as though they zeroed in on Trump 30 years ago, and only Trump.

Russia had hundreds of agents and assets in the US, and Gen. Kalugin, the former head of KGB operations in Russia, told me that America was a paradise for Russian spies and that they had recruited roughly 300 assets and agents in the United States, and Trump was one of them.

But it’s not just the money laundering. There was a parallel effort to seduce Trump. Sometime in 1986, Russia’s ambassador to the US, Yuri Dubinin, visited Trump in Trump Tower and told him that his building was “fabulous” and that he should build one in Moscow, and they arranged for a trip to Moscow.

According to Gen. Kalugin, that was likely the first step in the process to recruit and compromise Trump. Kalugin told me he would not be surprised in the least if the Russians have compromising materials on Trump’s activities in Moscow, something they were quite good at acquiring.

Sean Illing

But we still don’t have any evidence that such compromising material exists, right? Did you talk to anyone who has seen it or is sure of its existence?

Craig Unger

No, and I won’t say that I’m 100 percent certain that it exists. I spoke to several people who assured me that it exists, but I could not corroborate those accounts. I have no idea if they’re right or if any tapes will ever emerge. But in a way, all of that is beside the point. The real evidence of compromise is already out there, and we’re talking about it now.

Sean Illing

Speaking of which, tell me about Bayrock Group, a real estate company that operated in Trump Tower.

Craig Unger

Bayrock was a real estate development company located on the 24th floor of Trump Tower. The founder was a guy named Tevfik Arif and the managing director was Felix Sater, a man with numerous ties to Russian oligarchs and Russian intelligence. Bayrock proceeded to partner with Trump in 2005 and helped him develop a new business model, which he desperately needed.

Recall that Trump was $4 billion in debt after his Atlantic City casinos went bankrupt. He couldn’t get a bank loan from anywhere in the West, and Bayrock comes in and Trump partners with other people as well, but Bayrock essentially has a new model that says, “You don’t have to raise any money. You don’t have to do any of the real estate development. We just want to franchise your name, we’ll give you 18 to 25 percent royalties, and we’ll effectively do all the work. And if the Trump Organization gets involved in the management of these buildings, they’ll get extra fees for that.”

It was a fabulously lucrative deal for Trump, and the Bayrock associates — Sater in particular — were operating out of Trump Tower and constantly flying back and forth to Russia. And in the book, I detail several channels through which various people at Bayrock have close ties to the Kremlin, and I talk about Sater flying back and forth to Moscow even as late as 2016, hoping to build the Trump Tower there.

Sean Illing

I don’t think you say this explicitly in the book, so I’ll ask you now: Is there any evidence at all that Trump actively sought out Russian money by making clear that his businesses could be used to hide ill-gotten gains?

Craig Unger

That’s a difficult question. I’m not sure he made this crystal clear, and I don’t know that he had to. I mean, just look at how these transactions take place. Trump doesn’t have to say anything. Trump’s organization was desperate for money, they knew the caliber of people they were dealing with, and they were either okay with this or deliberately chose not to do their due diligence.

You might say this is something other real estate developers do as well, and maybe that’s true, but those developers don’t become president of the United States.

Sean Illing

A few minutes ago you referred to Trump as a Russian “asset,” and this circles back to the question of whether Trump was actively working with the Russians or whether he may have just been a useful idiot who didn’t know he’d been potentially compromised.

Craig Unger

In the book, I use this term “asset,” and the difference between an “asset” and an “agent” to me is whether or not the person is knowledgeable. And from my point of view, it’s impossible to prove what was in Trump’s mind. I can’t prove that he was actually knowledgeable. At the same time, if he did this kind of money laundering 1,300 times, it’s reasonable to surmise that he was aware of what was happening.

Sean Illing

Part of what’s so puzzling to me is trying to figure out how money and ideology intersect in all this, if they intersect at all. In other words, Trump seems much more motivated by money than political ideology, but I keep wondering if his drift into politics was in any way influenced by his financial entanglements.

Craig Unger

It’s an important question, and it’s not clear what the answer is. One weird anecdote that jumped out to me was this story about Ivana Trump, whom Donald married in 1977. It turns out the Czech secret police were following her and her family, and there’s a fascinating file I quote in the book that says they started tracking her in the late 1980s, and one of the Czech secret police files says that Trump was being pressured to run for president.

But what does that mean? Who was pressuring him? How were they applying the pressure, and why? And did it have anything to do with potentially compromising materials the Russians had on Trump from his 1987 trip to Russia?

What we do know is that Trump returns from that first trip to Moscow and he takes out full-page ads in the Washington Post, New York Times, and Boston Globe — and it’s fascinating because the ads essentially pushed the same foreign policies that he’s pushing today. They were anti-European, anti-NATO — basically they were aligned with the Soviet plan to destroy the Western alliance. And Trump takes out full-page ads in major American newspapers affirming this view. Maybe that’s just what he always believed. In any case, it’s worth noting.

“Trump was working with the Russian mafia for more than 30 years. He was profiting from them. They rescued him. They bailed him out.”

Sean Illing

I’m curious about how you collected all of this evidence. Did you go to Russia? Did you interview most — or any — of the people directly involved in these transactions? Did you compile this information yourself or rely on other sources?

Craig Unger

It’s stunning what you can find out through public sources. I did not go to Russia. I had a source who tipped me off to the name Semion Mogilevich, one of the highest-ranking bosses in the Russian mob, whom I had never heard of before, and that led me to a database online that revealed ownership of homes in the state of New York — purchases and sales.

And so I went to Trump properties, and every time I found a Russian name, I would research it, and it was stunning. I’d often take their name, put in Mogilevich in Google, and it was like hitting the jackpot on a slot machine, time after time after time.

There were countless people who were indicted for money laundering, or they were gunned down on Sixth Avenue, and there was just a huge percentage who seemed to have criminal histories, and that sort of got me started. I also had a wonderful research assistant who speaks Russian and she grew up in Brooklyn, and she was a terrific asset and helped break the language barrier for me.

Sean Illing

The subtitle of your book is “The Untold Story of Donald Trump and the Russian Mafia,” but it’s not clear to me which part of the story is new. What did you uncover here that wasn’t previously known?

Craig Unger

The insights I gained from Gen. Kalugin are completely new, but honestly, a lot of what I did was simply compile all this disparate stuff that was out there but had never been pieced together neatly in one place.

For example, a lot of the Russian-connected stories were published in the crime pages of the New York Post or the New York Daily News, but they were always just straight-ahead crime stories you could see in a tabloid. There was no sense that this had any geopolitical implications or forces behind it.

So part of what I tried to do was assemble all of this in a coherent narrative that laid it all out in a comprehensive way. We have all these seemingly random crime episodes that appeared in tabloids again and again, but it turns out that much of it was connected to a much larger operation, one that ended up ensnaring Trump and the people around him.

Sean Illing

Trump is obviously the focus here, but as you mentioned earlier, he’s not the only asset targeted by the Russians. What do we know about Russian efforts to compromise other prominent American figures?

Craig Unger

One of the things I hope this book shows is that there’s a new kind of war going on. It’s a global war without bombs or bullets or boots on the ground, and the weapons are information and data and social media and financial institutions. The Russian mafia is one weapon in this global conflict, and they’ve been fighting it smartly since the fall of the Soviet Union.

The Russians start businesses and front companies and commodities firms that appear legitimate but essentially work to advance the interests of the Russian state. They’re very good at getting people entangled financially and then using that as leverage to get what they want. This appears to be what they’ve done with Trump, and now he’s president of the United States.

Sean Illing

Maybe the most troubling part of all this is that the Russians simply exploited our own corrupt system. They studied America’s pay-for-play culture, found its weak spots, and very carefully manipulated it. As long as our system remains unchanged, we should expect this kind of exploitation.

Craig Unger

Absolutely. There’s an old saying that sometimes the worst part of the scandal is what’s legal, and the Russians, to their credit, studied our system and campaign finance laws and they exploited it masterfully. They’ve used pharmaceutical companies and energy companies and financial institutions to pour money into our politics, and we really have no idea the extent of their influence.

One thing Vladimir Putin got right was his insistence that American democracy is also corrupt, and I think he’s showing us exactly how corrupt it is. Trump is just the most glaring example, but surely there are others, most of which we know nothing about.

Sean Illing

The case you lay out is pretty damning, but I’m left wondering if any of it really matters. As you said, most of this stuff is hiding in plain sight, and although the special counsel investigation is underway, there’s a subset of the country for whom no amount of evidence is enough to persuade them that something wrong has occurred, and Congress has demonstrated its uselessness pretty clearly. So how do you see all this playing out?

Craig Unger

It’s hard to say. I think we’re on a collision course that will either end in impeachment or with Trump reverting to unconstitutional measures to stay in office. That is simply my opinion. However this plays out, it’s clear that we’re in uncharted territory here, and it’s hard to see how this ends well for anyone.

This article was originally published on 9/12/2018. https://www.vox.com/world/2018/9/12/17764132/trump-russia-business-ties-mafia-putin-craig-unger

 

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The Clear Message in the United States’ Shifting Demographics

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My Comments: In addition to death and taxes, a third ‘truth’ is demographics. A reason for our current political troubles is that the historic white Christian majority believes it is under attack. And it is.

And many in that historically white majority want to live in the past. I’ve long learned we cannot live in the past. We can only live in the present and try to influence the future.

Make America Great Again is a valid argument if you are not trying to turn back the clock. But to MAGA, we must re-affirm the values that MAG and embrace them and include everyone in the process. Caucasian, Asian, African, Hispanic and whomever else wants to live and grow a family anywhere in our 50 states.

by Sam Fulwood \ June 25, 2018

As difficult as it might be for some recalcitrant Americans to believe or embrace — Trumpsters, listen up, this column is especially for you — the United States is in the midst of a profound and irreversible demographic shift.

Two dramatic changes in the nation’s population are occurring simultaneously: we’re getting older, and more racially diverse, according to a U.S. Census Bureau tip sheet released last week. Census figures show that fewer than 17 percent of U.S. counties reported a decrease in median age from April 2010 to July 2017, with the majority of those counties clustered in the Midwest. Nationally, the median age rose to 38.0 years in 2017, up from 37.2 years in 2000.

“Baby boomers, and millennials alike, are responsible for this trend in increased aging,” Molly Cromwell, a demographer at the U.S. Census Bureau, said in a statement released with the report. “Boomers continue to age and are slowly outnumbering children as the birth rate has declined steadily over the last decade.”

As the nation grows older, it’s also becoming more racially and ethnically diverse. “Nationally, the population of all race and ethnic groups, except for the non-Hispanic white alone group, grew between July 1, 2016, and July 1, 2017,” the Census statement said.

Specifically, the Census Bureau reported:
• The Hispanic population increased 2.1 percent to 58.9 million.
• The black or African-American population increased 1.2 percent to 47.4 million.
• The Asian population increased 3.1 percent to 22.2 million.
• The American Indian or Alaska Native population increased 1.3 percent to 6.8 million.
• The Native Hawaiian or Other Pacific Islander population increased 2.1 percent to 1.6 million.
• The population of those Two or More Races increased 2.9 percent to 8.7 million.
• The white alone-or-in-combination population increased 0.5 percent to 257.4 million.
• The non-Hispanic white alone population decreased .02 percent to 197.8 million.

Of course, none of these revelations are particularly earth-shaking. Keen demographers and social scientists have been tracking the so-called “browning of America,” for years.

But in the current political environment, it bears repeating over and over, if for no other reason than to remind more Americans of the inevitability of change. Soon — within the lifetimes of the vast majority of Americans alive today — the U.S. will no longer be a white-majority nation.

And that’s why this column is directed to Trump’s MAGA crowd, which seems hell-bent on returning the country to some idealized era of the 1950s or earlier, when white men were the unquestioned arbiters and beneficiaries of the nation’s politics, culture, and economy.

Indeed, the hateful atmosphere brought about by Trumpism and echoed in archly right-wing media has its roots in a vocal white nationalist movement, which seized on the president’s embrace of their racist rhetoric as permission to openly act on impulses that previously were tucked away from public view.

“Clues in the president’s language and behaviour led the alt-right to hope that he might really be one of them, and critics to accuse him of inciting racial hatred,” The World Weekly, an international online news magazine, reported recently. “Mr. Trump’s flagship campaign promises were music to the ears of self-described ‘white advocates,’ whose numbers swelled under Barack Obama.”

For all their bluster and bravado, however, white nationalists are whistling past their own graveyards. The numbers and unrelenting facts of demography stare in the face of those who believe they can restore some non-existant glory of white supremacy.

Valerie Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy (PREE), estimates that by the year 2043 — about 25 years from now — the U.S. will reach the tipping point when the country transitions to a majority-minority population. Among working-class Americans — made up of working adults without a college degree — she estimates the tipping point may arrive nearly a decade sooner, possibly by 2032.

In a 2016 PREE paper, Wilson observed the significance of these changes, and how important it will be to accept and embrace them, noting “the working class is increasingly people of color, raising working class living standards will require bridging racial and ethnic divides.”

What’s more, Wilson argues that there are policy challenges the nation must address to make the transition better for all Americans. “The best way to advance policies to raise living standards for working people is for diverse groups to recognize that they share more in common than not, and work together,” she wrote.

The sooner most Americans come to terms with this reality, the sooner the public will rally support and encourage politicians to deal with the changing demographics from a position of national strength, and not as the fearsome dilution of white superiority. One thing is certain: the changes coming to America aren’t going to suddenly shift into reverse, no matter how loudly Trump, his subservient congressional leaders, and white nationalists complain.

So, MAGA crowd, get with the future. It’s in your and the nation’s long-term, best interest to embrace the demise of white superiority in America.

Source: https://thinkprogress.org/demographics-adapt-or-die-6c72e4d13e02/

Maybe We Should Take Socialism Seriously

My Comments: To me, it’s both pathetic and amusing to hear political candidates rail against the idea of ‘socialism’ and declare it’s mankind’s greatest threat.

Like so many of the ‘…isms” applied to economic models of all stripes, socialism is no more a threat to the health and welfare of any society than is capitalism or communism. Well, maybe communism, but certainly not capitalism.

Unfettered capitalism, as some would have it today, is not far from the feudalism of long ago in that the masses would be under the thumb of a wealthy elite whose only motivation is the preservation of their power. Does any of that sound familiar to you?

by Noah Smith \ October 26, 2018

When President Donald Trump’s Council of Economic Advisers released a 55-page report called “The Opportunity Costs of Socialism,” many economists scoffed. But the report is important, because it shows that big, systemic economic issues are again being considered. And it provides an interesting jumping-off point for those important discussions.

Two decades ago, it seemed as if capitalism had decisively won the battle of ideas. The collapse of the Soviet Union and the grinding poverty of Mao’s China and communist Vietnam and North Korea clearly demonstrated that the most extreme versions of socialism were disastrous. But even in non-communist countries, attempts at regulation, nationalization and redistribution suffered big setbacks. The License Raj, a system of heavy-handed business regulations in India, was repealed, and the country’s growth leapt ahead. Privatizations and other market-oriented reforms in the U.K. helped the British economy make up ground it had lost. Sweden made its fiscal system much less progressive, and North European countries deeply reformed their labor market regulations.

But as inequality of income and wealth steadily rise in countries like the U.S., and as populism and political discontent roil nations across the globe, some are beginning to question the consensus that emerged at the end of the Cold War. Polls show an increasing number of young Americans responding favorably to the word “socialism”:
Openly socialist candidates are starting to win a few elections in the U.S., and calls to end capitalism are starting to appear in the mainstream news media with increasing frequency.

The CEA’s new report should be seen in this light. It’s an indication that both socialism’s proponents and its opponents have begun to take the idea seriously again. With the world troubled not just by inequality but also by productivity stagnation and the threat of climate change, it’s time to ask whether there are big systemic improvements that could be made.

The CEA report shows just how long it has been since such a discussion was held. A key explanation of socialism is taken from “Free to Choose,” a 1980 book by Milton and Rose Friedman. The economics profession has shifted decidedly to the left since those days, but most economists now concern themselves with highly specific topics rather than the grand sweep of political-economic systems. The people spending their time thinking about socialism, capitalism and other really big ideas are now more likely to be the writers of Teen Vogue or activists on Twitter. Let’s hope the CEA report will prod more economists, who tend to have more empirical knowledge and theoretical depth, to think bigger.

But although it’s an important conversation starter, the report doesn’t do a good job of comprehensively debunking socialism in all its forms. Some of the examples it invokes are particularly inapplicable to the modern day, and it overlooks much of the evidence in favor of an expanded role for government.

For instance, the report highlights collectivized agriculture as a prominent example of a socialist failure. Collectivized farming is indeed a disastrous policy, failing essentially everywhere it has been tried, and leading to widespread famine and death. But modern-day socialists in Western countries are — wisely — not calling for this. Instead, the industries they want to nationalize are health care and (possibly) finance.

Socialized health insurance exists in many countries — for example, France, Canada, and Japan. The costs and benefits of government health insurance systems don’t have to be assumed — they can be observed. The U.S., with its unique hybrid of public and private insurance, pays much more than other rich countries for the exact same medical services — and achieves similar health outcomes. Meanwhile, the U.S. biggest government health insurance system, Medicare, holds down prices much more effectively than its private counterparts:

The Danger From Low-Skilled Immigrants: Not Having Them

My Comments: To Make America Great Again, the presumably well intended mantra for those leading the GOP these day, someone has to overcome ignorance of economics and start paying attention to reality.

A positive corporate bottom line is the driving force for a healthy US economy. To reach that goal, we need people willing to spend time in the trenches doing whatever grunt work is necessary. Despite machines that increasingly automate the grunt work, a supply of young people has to match the demand created until artificial intelligence takes over.

The supply of labor is not going to miraculously appear. A greater number of us are old and fragile, and fertility rates among young men are declining. Exactly who is going to look after all us old folks because we refuse to hurry up and die?

We should be encouraging immigration and refugees. Yes, there is a potential security threat, which implies applying resources to screen and maintain a reasonable level of security. And yes, someone is probably going to get killed or maimed or whatever when someone nefarious sneaks through.

The laws of supply and demand are well known. Right now we have an increasing demand for labor, which can only stabilize with either more people being allowed into the country, or a dramatic increase in the cost of labor to force more of us to get into the trenches. Either that or starve, in which case you die. Some would have that happen since dead people are less likely to vote against those on the right.

Eduardo Porter \ August 8, 2017

Let’s just say it plainly: The United States needs more low-skilled immigrants.

You might consider, for starters, the enormous demand for low-skilled workers, which could well go unmet as the baby boom generation ages out of the labor force, eroding the labor supply. Eight of the 15 occupations expected to experience the fastest growth between 2014 and 2024 — personal care and home health aides, food preparation workers, janitors and the like — require no schooling at all.

“Ten years from now, there are going to be lots of older people with relatively few low-skilled workers to change their bedpans,” said David Card, a professor of economics at the University of California, Berkeley. “That is going to be a huge problem.”

But the argument for low-skilled immigration is not just about filling an employment hole. The millions of immigrants of little skill who swept into the work force in the 25 years up to the onset of the Great Recession — the men washing dishes in the back of the restaurant, the women emptying the trash bins in office buildings — have largely improved the lives of Americans.

The politics of immigration are driven, to this day, by the proposition that immigrant laborers take the jobs and depress the wages of Americans competing with them in the work force. It is a mechanical statement of the law of supply and demand: More workers spilling in over the border will inevitably reduce the price of work.

This proposition underpins President Trump’s threat to get rid of the 11 million unauthorized immigrants living in the country. It is used to justify his plan to cut legal immigration into the country by half and create a point system to ensure that only immigrants with high skills are allowed entrance in the future.

But it is largely wrong. It misses many things: that less-skilled immigrants are also consumers of American-made goods and services; that their cheap labor raises economic output and also reduces prices. It misses the fact that their children tend to have substantially more skills. In fact, the children of immigrants contribute more to state fiscal coffers than do other native-born Americans, according to a report by the National Academies.

What is critical to understand, in light of the current political debate, is that contrary to conventional wisdom, less-skilled immigration does not just knock less-educated Americans out of their jobs. It often leads to the creation of new jobs — at better wages — for natives, too. Notably, it can help many Americans to move up the income ladder. And by stimulating investment and reallocating work, it increases productivity.

Immigration’s bad reputation is largely due to a subtle yet critical omission: It overlooks the fact that immigrants and natives are different in consistent ways. This difference shields even some of the least-skilled American-born workers from foreign competition.

It’s more intuitive than it seems. Even American high school dropouts have a critical advantage over the millions of immigrants of little skill who trudged over the border from Mexico and points south from the 1980s through the middle of the last decade: English.

Not speaking English, the newcomers might bump their American peers from manual jobs — say, washing dishes. But they couldn’t aspire to jobs that require communicating with consumers or suppliers. Those jobs are still reserved for the American-born. As employers invest more to take advantage of the new source of cheap labor, they will also open new communications-heavy job opportunities for the natives.

For instance, many servers and hosts in New York restaurants owe their jobs to the lower-paid immigrants washing the dishes and chopping the onions. There are many more restaurants in New York than, say, in Oslo because Norway’s high wages make eating out much more expensive for the average Norwegian.

Where Immigrants Do the Work

Immigrants take up a disproportionate share of many lower-skill occupations — such as farm or janitorial work — as well as some higher-skill ones, like computer science.

Similar dynamics operate in other industries. The strawberry crop on the California coast owes its existence to cheap immigrant pickers. They are, in a way, sustaining better-paid American workers in the strawberry patch-to-market chain who would have to find a job somewhere else if the United States imported the strawberries from Mexico instead.

One study found that when the Bracero Program that allowed farmers to import Mexican workers ended in 1964, the sudden stop in the supply of cheap foreign labor did nothing to raise the wages of American farmworkers. From the cotton crop to the beet crop and the tomato crop, farmers brought in machines rather than pay higher wages.

Another found that manufacturing plants in regions of the United States that received lots of low-skill immigrants in the 1980s and 1990s were much slower to mechanize than plants in low-immigration regions.

A critical insight of the new research into the impact of immigration is that employers are not the only ones to adapt to the arrival of cheap foreign workers by, say, investing in a new restaurant or a new strawberry-packing plant. American-born workers react, too, moving into occupations that are better shielded from the newcomers, and even upgrading their own skills.

“The benefits of immigration really come from occupational specialization,” said Ethan Lewis, an associate professor of economics at Dartmouth College. “Immigrants who are relatively concentrated in less interactive and more manual jobs free up natives to specialize in what they are relatively good at, which are communication-intensive jobs.”

Looking at data from 1940 through 2010, Jennifer Hunt, a professor of economics at Rutgers, concluded that raising the share of less-skilled immigrants in the population by one percentage point increases the high school completion rate of Americans by 0.8 percentage point, on average, and even more for minorities.

Two economists, Giovanni Peri of the University of California, Davis, and Chad Sparber of Colgate University, compared the labor markets of states that received lots of low-skilled immigrants between 1960 and 2000 and those that received few. In the states that received many such immigrants, less-educated American-born workers tended to shift out of lower-skilled jobs — like, say, fast-food cooks — and into work requiring more communications skills, like customer-service representatives.

Interestingly, the most vulnerable groups of American-born workers — men, the young, high school dropouts and African-Americans — experienced a greater shift than other groups. And the wages of communications-heavy jobs they moved into increased relative to those requiring only manual labor.

It is not crazy for American workers who feel their wages going nowhere, and their job opportunities stuck, to fear immigration as yet another threat to their livelihoods. And yet for all the alarm about the prospect of poor, uneducated immigrants flocking across the border, this immigration has been mostly benign.

Take the Congressional Budget Office’s analysis of the immigration reform bill submitted without success by a bipartisan group of eight senators in 2013. By 2033, it estimated, the plan would have increased average wages by 0.5 percent, and do next to nothing to the wages of the least skilled. It would have made the economy some 5 percent bigger, over the long term, mainly because there would be 16 million more people.

If there is anything to fear, it is not a horde of less-educated workers ready to jump over the border. The United States’ main immigration problem, looking into the future, is that too few low-skilled immigrants may be willing to come.

As the National Academies noted about its report, “The inflow of labor supply has helped the United States avoid the problems facing other economies that have stagnated as a result of unfavorable demographics, particularly the effects of an aging work force and reduced consumption by older residents.” There will be an employment hole to fill.

Source article: https://www.nytimes.com/2017/08/08/business/economy/immigrants-skills-economy-jobs.html

Is Capitalism Killing America?

My Comments: In the minds of many, capitalism is the antithesis of communism. And they are essentially right. In the minds of many, communism and socialism and fascism are one and the same. And they are essentially wrong.

Communism is an economic model where the state owns everything involved in providing goods and services to the members of society. All members of that society are bound by a framework that starts at the state and ends at the state. History has shown this is a fatally flawed model.

At the other end of the economic model continuum is capitalism, where the state has no say in the production of goods and services to benefit the members of society. Everything is determined by the individual first and then slowly upstream as determined by the collective will of many individuals. Rules and regulations are anathema and are to be opposed and vilified at every opportunity.

Into this mix appears religion and other social pressures that have evolved over the millennia to create a mechanism which allows us to survive and thrive. I argue that capitalism in it’s unfettered state is an equally flawed economic model.

Bring all this into the 21stt Century and you have arguments pro and con. How does society find that spot along the continuum between the two models to best meet the needs of ALL OF US? It matters not that it doesn’t have a convenient name. What matters is that we focus our time and energy on the creation of a balance between the rights of individuals and the rights of society. The goal is to preserve society such that both individuals and society can survive and thrive.

We are in the midst of such a discussion today. The emergence of Trump and the push back from the non-Trumps will structure the framework that our children and grandchildren will experience as they travel through life. Without an economically viable middle class, we are doomed to failure. Your voice needs to be heard.

September 18, 2017 by Theodore Kinni

On August 2, 2017, the Dow Jones Industrial Average hit a record-breaking 22,000—its fourth 1,000-point advance in less than a year. That same day, I read the first sentence in Peter Georgescu’s new book, Capitalists Arise! End Economic Inequality, Grow the Middle Class, Heal the Nation: “For the past four decades, capitalism has been slowly committing suicide.”

How does Georgescu, the chairman emeritus of Young & Rubicam (Y&R) and a 1963 graduate of Stanford Graduate School of Business, reconcile the Dow’s ascent with his gloomy assertion?

“The stock market has nothing to do with the economy per se,” he says. “It has everything to do with only one thing: how much profit companies can squeeze out of the current crop of flowers in the garden. Pardon the metaphor. But that’s what corporations do—they squeeze out profits.”

In the latter half of the 1990s, Georgescu shepherded Y&R through a global expansion and an IPO. He has served on the boards of eight public companies, including Levi Strauss, Toys “R” Us, and International Flavors & Fragrances. He also is the author of two previous books, The Constant Choice: An Everyday Journey from Evil Toward Good and The Source of Success. An Advertising Hall of Fame inductee, the 78-year-old adman is still pitching corporate leaders. Now, however, he is trying to convince them to fundamentally rethink how—and for whom—they run their companies.

The fault lines in capitalism

Capitalism is an endangered economic system, Georgescu says. He sees a dearth of demand across the global economy, even as American corporations record their highest profits ever. “How does this magic happen?” he asks rhetorically. “You engineer it. You buy back your stock at 4% and change. Your earnings per share go up and the market says, ‘We like that.’”

What does he mean? He cites the seminal research by economist William Lazonick, who studied S&P 500 companies from 2003 to 2012 and discovered that they routinely spend 54% of their earnings buying back their own stock (reducing the number of outstanding shares and driving up share prices) and 37% of their earnings on dividends—both of which benefit shareholders. That leaves just 9% of earnings for investment in their business and their people.

This financial legerdemain obscures two fundamental fault lines in capitalism, and particularly in the US economy, according to Georgescu. The first is a lack of investment by companies in their own futures. “Our companies are not competitive because they don’t invest in themselves,” he says. “Total R&D investment is down. Total basic research, which is the precursor of innovation, is down dramatically. Investment in infrastructure has fallen to critical levels.”

The second fault line is the lack of investment by companies in their employees. “Innovation is the only real driver of success in the 21st century, and who does the innovation? Our employees. How are we motivating them? We treat them like dirt. If I need you, I need you. If I don’t, you’re out of here. And I keep your wages flat for 40 years,” says Georgescu, who points out that growth in real wages has been stagnant since the mid-1970s.

The engines of capitalism are sputtering

The lack of investment by US corporations in their businesses and people is not only causing the engine that powers innovation gain to sputter, but also slowing the engine of demand that produces topline growth. Why? Median household income in the U.S. is less than 1% higher today than in 1989, according to the Census Bureau. “There’s no middle class, and the upper middle class has very little money left to spend, so they can’t drive the economy. The only people driving the GDP are the top 20% of us,” Georgescu says.

In Capitalists Arise!, Georgescu shows how these issues are impacting the American public. Nearly 60% of American households are technically insolvent and adding to their debt loads each year. In addition, income inequality in the U.S. is reaching new peaks: The top layer of earners now claim a larger portion of the nation’s income than ever before — more even than the peak in 1927, just two years before the onset of the Great Depression.

Georgescu lays the blame for all of these conditions on the ascendency of the doctrine of shareholder primacy. “Today’s mantra is ‘maximize short-term shareholder value.’ Period,” he says. “The rules of the game have become cancerous. They’re killing us. They’re killing the corporation. They’re helping to kill the country.”

Back to responsible capitalism

Georgescu is convinced he knows how to beat this cancer, and he’s pitching it to corporate leaders across the country. “The cure can be found in the post–World War II economic expansion. From 1945 until the 1970s, the US economy was booming and America’s middle class was the largest market in the world,” he says.

“In those days, American capitalism said, ‘We’ll take care of five stakeholders,’” he continues. “Then and now, the most important stakeholder is the customer. The second most important is the employee. If you don’t have happy employees, you’re not going to have happy customers. The third critical stakeholder is the company itself — it needs to be fed. Fourth come the communities in which you do business. Corporations were envisioned as good citizens—that’s why they got an enormous number of legal protections and tax breaks in the first place.”

In Georgescu’s schema, shareholders are the last of the five stakeholders, not the first. “If you serve all the other stakeholders well, the shareholders do fine,” he says. “If you take good care of your customers, pay your people well, invest in your own business, and you’re a good citizen, the shareholder does better. We need to get back to that today. Every company has got to do that.”
We welcome your comments at ideas@qz.com. This post originally appeared on Insights, by Stanford Business.

Source URL: https://www.gsb.stanford.edu/insights/capitalism-killing-america

Can the Country Survive Without a Strong Middle Class?

My Comments: Most of the recent talk about the Constitution comes in the wake of the tragedy in Parkland, Florida, for obvious reasons. The attention is well deserved but I’d have you think about more than just the 2nd Amendment.

At the national level, if not across the globe, society is re-evaluating itself. Are the values we hold dearly still valid? Are the roles played by the various participants serving our best interests? Are you willing to let the so called ‘elite’ change the economic and social landscape that most of us enjoy without allowing us to express our thoughts? Have we given them so much power that it now makes no difference?

If you’ve followed me for long, you’ve heard me talk about income inequality and the subtle effects it has on not just our society, but in virtually every society on the planet. I hope you will read this, regardless of your political leanings, as it will influence every aspect of the lives of your children and grandchildren. And the clowns in Washington, DC are not helping matters.

Rebecca J. Rosen / Mar 21, 2017

In a powerful new book, the legal scholar Ganesh Sitaraman argues that America’s government will fall apart as inequality deepens.

The U.S. Constitution, it is fair to say, is normally thought of as a political document. It lays out the American system of government and the relationships among the various institutions.

But in a powerful new book The Crisis of the Middle-Class Constitution, the Vanderbilt legal scholar Ganesh Sitaraman argues that the Constitution doesn’t merely require a particular political system but also a particular economic one, one characterized by a strong middle class and relatively mild inequality. A strong middle class, Sitaraman writes, inspires a sense of shared purpose and shared fate, without which the system of government will fall apart.

I spoke with Sitaraman about his book last week at The Atlantic’s offices in Washington, D.C. A transcript of our conversation, edited for clarity, follows.

Rebecca J. Rosen: Your new book, The Crisis of the Middle-Class Constitution, is premised on the idea that the American Constitution is what you call a middle-class constitution. What does that mean?

Ganesh Sitaraman: The idea of the middle-class constitution is that it’s a constitutional system that requires and is conditioned on the assumption that there is a large middle class, and no big differences between rich and poor in a society.

Prior to the American Constitution, most countries and most people who thought about designing governments were very concerned about the problem of inequality, and the fear was that, in a society that was deeply unequal, the rich would oppress the poor and the poor would revolt and confiscate the wealth of the rich.

The answer to this problem, the way to create stability out of what would have been revolution and strife, was to build economic class right into the structure of government. In England, you have the House of Lords for the wealthy, the House of Commons for everyone else. Our Constitution isn’t like that. We don’t have a House of Lords, we don’t have a House of Commons, we don’t have a tribune of the plebs like they had in ancient Rome.

At the time, people debated having a wealth requirement for entry into the Senate, but that didn’t happen. That would have been a common thing in the generations and centuries prior to the creation of the U.S. Constitution. So there’s actually a radical change in our Constitution that we don’t build economic class directly into these institutions. The purpose of the Senate, with its longer terms, is to allow representatives to deliberate in the longer-term interest of the republic, and that’s the goal of the Senate.

What we have is a constitutional system that doesn’t build class in at all, and the reason why is that America was shockingly equal at the time in ways that seem really surprising to us today.

Rosen: Of course, the point here isn’t only that class is ignored, or left out of the Constitution, but that the Constitution actually relies on a kind of equal society in order to function. Could you explain the premise there?

Sitaraman: That’s exactly right. The idea is that the Constitution relies on a relatively equal society for it to work. In societies that are deeply unequal, the way you prevent strife between rich and poor is you build class right into the structure of government—the House of Lords, House of Commons idea. Everyone has a share in government, but they also have a check on each other.

In a country that doesn’t have a lot of inequality by wealth, you don’t need that kind of check. There’s no extreme wealth, there’s no extreme poverty, so you don’t expect there to be strife, to be instability based on wealth. And so there’s no need to put in some sort of check like that into the Constitution.

That’s how our Constitution works. The reason why it works this way is that when the founders looked around, they thought America was uniquely equal in the history of the world. And I know that seems crazy to say, but when you think about it, it makes sense. If you imagine in the late 18th century, America is a sparsely populated area, just on the coast of the Atlantic, with some small towns and cities, and lots of agrarian lands, and it’s really at the edge of the world, because the center is western Europe. It’s London, it’s Paris, and when Americans look across the ocean at those countries, what they see is how different it is. They see that there’s a hereditary aristocracy, something that doesn’t exist in America. There’s feudalism, which doesn’t exist in America. There’s extreme wealth, there’s extreme poverty, neither of which really exists in America. As a result they don’t need to design a House of Lords and a House of Commons, they don’t need a tribune of the plebs in order to make their constitution work.

“The assumption of our original Constitution was that society would be relatively equal.”

Rosen: Of course, there was slavery at the time—and it was built directly into the Constitution.

The Danger From Low-Skilled Immigrants: Not Having Them

My Comments: To Make America Great Again, the presumably well intentioned mantra for those leading the GOP these days, someone has to overcome ignorance of economics and start paying attention to reality.

A positive corporate bottom line is the driving force for a healthy US economy. To reach that goal, we need people willing to spend time in the trenches doing whatever grunt work is necessary. Despite machines that increasingly automate the grunt work, a supply of young people has to match the demand created until artificial intelligence takes over.

The supply of labor is not going to miraculously appear. A greater number of us are old and fragile, and fertility rates among young men are declining. Exactly who is going to look after all us old folks because we refuse to hurry up and die?

We should be encouraging immigration and refugees. Yes, there is a potential security threat, which implies applying resources to screen and maintain a reasonable level of security. And yes, someone is probably going to get killed or maimed or whatever when someone nefarious sneaks through.

The laws of supply and demand are well known. Right now we have an increasing demand for labor, which can only stabilize with either more people being allowed into the country, or a large increase in the cost of labor to force more of into the trenches. Either that or starve, in which case you die. Some would have that happen since dead people are less likely to vote against those wanting to restrict immigration.

Eduardo Porter \ August 8, 2017

Let’s just say it plainly: The United States needs more low-skilled immigrants.

You might consider, for starters, the enormous demand for low-skilled workers, which could well go unmet as the baby boom generation ages out of the labor force, eroding the labor supply. Eight of the 15 occupations expected to experience the fastest growth between 2014 and 2024 — personal care and home health aides, food preparation workers, janitors and the like — require no schooling at all.

“Ten years from now, there are going to be lots of older people with relatively few low-skilled workers to change their bedpans,” said David Card, a professor of economics at the University of California, Berkeley. “That is going to be a huge problem.”

But the argument for low-skilled immigration is not just about filling an employment hole. The millions of immigrants of little skill who swept into the work force in the 25 years up to the onset of the Great Recession — the men washing dishes in the back of the restaurant, the women emptying the trash bins in office buildings — have largely improved the lives of Americans.

The politics of immigration are driven, to this day, by the proposition that immigrant laborers take the jobs and depress the wages of Americans competing with them in the work force. It is a mechanical statement of the law of supply and demand: More workers spilling in over the border will inevitably reduce the price of work.

This proposition underpins President Trump’s threat to get rid of the 11 million unauthorized immigrants living in the country. It is used to justify his plan to cut legal immigration into the country by half and create a point system to ensure that only immigrants with high skills are allowed entrance in the future.

But it is largely wrong. It misses many things: that less-skilled immigrants are also consumers of American-made goods and services; that their cheap labor raises economic output and also reduces prices. It misses the fact that their children tend to have substantially more skills. In fact, the children of immigrants contribute more to state fiscal coffers than do other native-born Americans, according to a report by the National Academies.