2020年10月13日 星期二

What’s good for corporations isn’t good for America

It never was, but now the disconnect is bigger than ever.
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By Paul Krugman

Opinion Columnist

So Donald Trump is back to boasting about the stock market. It’s a peculiar time to be making that boast. Investors are, after all, watching the polls, which are increasingly favorable to Joe Biden; Nate Silver’s FiveThirtyEight gives Trump only a 13 percent chance of winning, and other models put his chances even lower. After 2016, nobody is going to be complacent, but these days Wall Street analysts are all talking about the likelihood of a blue wave — and the market doesn’t seem to mind. So rising stock prices aren’t the endorsement Trump thinks they are.

In any case, as I and many others have said repeatedly, the stock market is not the economy. There has historically been a weak connection, at best, between stock prices and economic performance; Paul Samuelson famously quipped that the market had predicted nine of the past five recessions. And I’ve wondered whether the connection between the market and the real economy — in particular, between the market and what matters to most Americans, namely jobs — has gotten even weaker over time.

Well, recently a paper by Frederik P. Schlingemann and Rene M. Stulz landed in my inbox, and it seems to confirm my suspicions. It’s titled “Has the stock market become less representative of the economy?”, and its conclusion seems to be yes, at least as far as jobs are concerned.

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The authors do a lot of statistical analysis, finding that the correlation between the number of workers a company employs and its market value has gone down steadily over time. An easier way to see what has changed, however, is to look at the top one or two corporations by market value.

Back in the 1950s, when Charles Erwin Wilson declared that “what was good for our country was good for General Motors and vice versa,” he sort of had a point. GM, which consistently was either the most or second most valuable company in America (it kept swapping places with AT&T), employed more than half a million people; as a share of the work force, that would be the equivalent of 1.5 million employees today. And it paid good wages, so what was good for GM was, in fact, good for a lot of American workers.

In 2019, by contrast, the most valuable company was Apple, which only had 90,000 U.S. workers. The company tries to sell itself as a much bigger source of jobs, claiming to have a jobs “footprint” far larger than its direct payroll. Still, the fact is that Apple doesn’t employ many Americans. Its value comes from its technology and market power, not from employing large numbers of people to make stuff.

Also, a lot of Apple’s reported profits come from its overseas subsidiaries (although much of that may reflect tax avoidance strategies rather than genuine investment abroad). All of this may be fine for investors, but it’s not especially relevant for the vast majority of Americans, who own little stock and depend on wages to make ends meet.

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So going back to where I started, Trump boasting about the market is truly silly at this point. Even on its own terms, this is as much or more a Biden market than it is a Trump market; and the market, which was never a good gauge of the economy, is even less of one than it used to be.

Quick Hits

Larry Kudlow, Trump’s top economist, explaining in 2007, that a rising market meant that things were going wonderfully. The Great Recession started six months later.

Small investors using Robinhood have been driving some stocks; some of them are also being hacked and losing their money.

Investment banks are remarkably bullish on the economic impact of a Biden presidency.

One scenario for election night: it will be obvious that Biden has won, but the networks will be hesitant about calling it because of outstanding ballots. Lots of room for mischief.

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Facing the Music

Can’t stand the suspense anymoreYouTube

Some all-American bluegrass from, um, Bob Dylan and, um, Norway.

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