Wandering Eye: Proof that trickle-down economics are harmful, UVA fraternities fight back, and more

The Organization for Economic Cooperation and Development (OECD) in Paris has taken a deep, data-driven look at the effects since the 1980s of trickle-down economics, the signature economic-policy achievement of the era of Ronald Reagan and Margaret Thatcher, and concluded that it accomplished two things: increased income inequality and depressed economic growth. Turns out, "countries where income inequality is decreasing grow faster than those with rising inequality," the OECD concludes, and "in Italy, the United Kingdom and the United States, the cumulative growth rate would have been six to nine percentage points higher had income disparities not widened" in the two decades leading up to the Great Recession. The research also looked for but found "no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented." Smart news, coming just in time to inform debate in the new GOP-led U.S. Congress. (Van Smith)

 

If you read only one long-ish business piece this month, make it Nelson Schwartz's "How Wall Street bent Steel" from the Dec. 6 New York Times. It is the story of a little steel mill/precision-bearing manufacturer in Canton, Ohio called Timken. The boss of the fifth-generation family business made $9 million a year. Schwartz shows how activist shareholders bought up a few percent of the publicly traded company and forced radical reform: The company split into two parts to "unlock value." That this also leaves the companies, which are big philathropists in Canton, much more vulnerable to takeover, is the thrust of the story. There is much about the fabric of the community and all that. But the central facts are these: "Pension fund contributions drop from nearly a third of cash flow to near zero, while capital spending is roughly halved. And instead of using 12 percent of cash flow to buy back stock, share repurchases will consume nearly half of cash flow over the next 18 months." This is the sort of thing you do when you want to bleed a company out. It's also SOP in the world of private equity—and it's private equity's world now; the rest of us just struggle in it.  Schwartz talks to M.I.T. professor and author Suzanne Berger:"We've got a financial system in the U.S.," she said, "where California teachers have to protect their pension funds by hurting manufacturing in Ohio." (Edward Ericson Jr.)

 

Unless you've been hiding under a rock since last Thursday, you've probably heard about the shit show that is Rolling Stone's story about a rape on University of Virginia's campus—but in case you've missed it, Jezebel sums it up pretty thoroughly here. Now, the fraternities on UVA's campus are fighting back. The fraternities and sororities have been suspended on UVA's campus since Rolling Stone's story was published, and were scheduled to be suspended through Jan. 9, but three national fraternity and sorority organizations released a joint statement calling on UVA to rescind its suspension. "We believe universities must demonstrate more respect for the fundamental rights to due process and freedom of association for students and student organizations when allegations of misconduct are lodged," the statement says. Furthermore, they write, "we call on Congress and state legislatures to look seriously at the complex issue of how to handle sexual assault on campus. We believe any crime that involves bodily harm—which automatically encompasses any sexual assault—should be handled primarily in the criminal justice system, regardless of the accused's status as a student. Congress should examine whether the public interest is being served by forcing sexual assault cases into a campus judicial process." According to Politico, "A group of fraternities has hired former Senate Majority Leader Trent Lott (R-Miss.) and Squire Patton Boggs to lobby Congress for changes in how campuses address sexual assault incidents." Never mind the fact that the university disciplinary system is set up to protect civil rights, not mimic the criminal-justice system, or that the criminal-justice system is terrible at handling rape allegations. (Anna Walsh)

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