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Today’s buzz is all about J. P. Morgan CEO Jamie Dimon’s
conference call yesterday. (CNBC, via Maggie's Farm.) Dimon presented a harsh a critique of America, of the way
American government functions. Most especially, about the way the American
government stifles economic growth.
Despite the efforts of the government, the economy has eked
out some growth since the Great Recession:
Since
the Great Recession, which is now 8 years old, we've been growing at 1.5 to 2
percent in spite of stupidity and political gridlock. Because the American
business sector is powerful and strong, and is going to grow regardless of —
people wake up in the morning, they want to feed their kids, they want to buy a
home, they want to do things, the same with American businesses — what I'm
saying is it would be much stronger growth had we made intelligent decisions
and were there not gridlock.
And
thank you for pointing it out because I'm going to be a broken record until
this gets done. We are unable to build bridges, we're unable to build airports,
our inner city school kids are not graduating.
Considering that this problem has been ongoing since at
least 2009, Dimon might have mentioned that the policies and the gridlock he
abhors were largely imposed by the anti-business administration of Barack
Obama. Remind me, who did Dimon support for the presidency in 2008 and 2012?
Anyway, by now most of the world understands that the heavy
hand of government bureaucracy crushes economic growth. America, not so much:
I was
just in France, I was recently in Argentina, I was in Israel, I was in Ireland.
We met with the prime minister of India and China. It's amazing to me that
every single one of those countries understands that practical policies to
promote business and growth is good for the average citizens of those
countries, for jobs and wages, and that somehow this great American free
enterprise system, we no longer get it.
One thing we can do is reduce corporate taxes, the better to
allow businesses to repatriate money. We will see if it’s doable or if the
Democrats drown the idea under a flood of “tax breaks for the rich” rhetoric:
Corporate
taxation is critical to that, by the way. We've been driving capital earnings
overseas, which is why there's $2 trillion overseas benefiting all these other
countries and stuff like that. So if we don't get our act together — we can
still grow.
It's
unfortunate, but it's hurting us, it's hurting the body politic, it's hurting
the average American that we don't have these right policies. So no, in spite
of gridlock we'll grow at maybe 1.5 or 2 percent.
Thanks to the Obama administration the economy has
increasingly been run by bureaucrats and lawyers. It wasn't not just Obama. Think of
that major league ranter, Sen. Elizabeth Warren.
Dimon continued:
I don't
buy the argument that we're relegated to this forever. We're not. If this
administration can make breakthroughs in taxes and infrastructure, regulatory
reform —we have become one of the most bureaucratic, confusing, litigious
societies on the planet.
It's
almost an embarrassment being an American citizen traveling around the world
and listening to the stupid s--- we have to deal with in this country. And at
one point we all have to get our act together or we won't do what we're
supposed to [do] for the average Americans.
And unfortunately
people write about this saying like it's for corporations. It's not for
corporations. Competitive taxes are important for business and business growth,
which is important for jobs and wage growth. And honestly we should be ringing
that alarm bell, every single one of you, every time you talk to a
client.
Strangely enough, Dimon is sounding like a Republican.
8 comments:
I wrote about this at my 2006 post Like Swimming in Glue:
http://chicagoboyz.net/archives/004435.html#more
"If this administration can make breakthroughs in taxes and infrastructure, regulatory reform..."
Well, it can't, at least on taxes and healthcare. Largely because the political establishment (including Republicans) are supremely chuffed because they were humiliated by a teetotaling upstart who eats well-done steak with catsup and unapologetically loves his own country more than he loves Somalia or, heaven forbid, the UN and WTO.
Regulation is a different story, and there has been very positive movement there. I hope it's enough.
The issue goes beyond government-driven things like regulations, taxes, and the excessive prevalence of litigation. There are also problems in the business world itself.
Specifically, there is too much fad-following...people & companies chasing the latest cool thing rather than thinking seriously about what needs to be done in their specific circumstances. My linkedin feed is clogged with posts from people posturing as deep-thinking business intellectuals who have never had a creative idea in their lives. Much but not all of this is the doing of academia, as manifested in the business schools.
There is a big problem with lack of intelligent organization design. Prating about the glories of 'teams' and 'boundary-less organizations' and 'de-hierarchicalization' is not substitute for thinking coherently about how things need to be structured.
Well, David, the deterioration in business org design (and recruitment) is not surprising given the (often Federally-mandated) presence of a Political Commissar (aka Diversity Director or Dean) in virtually every large company and all business schools, whose sole job is to enforce ideological purity.
TW...yeah, that's some of it, but the Commissars are not making decisions about, say, line-of-business organization versus functional organization, nor are they requiring higher management to stand back like the Watchmaker God while political infighting over a period of months or years blocks forward progress. Nor are the Commissars imposing flawed incentive systems such as the one at Wells Fargo and then requiring a failure to monitor or tune the behavior induced by these systems. Nor are they forcing top-down logistical systems such as the one that led to a chain store in South Florida being shipped a batch of snowblowers to sell.
Government is part of the problem...a big part...but they are not the whole problem. There are huge differences from company to company, of course, as a JPM shareholder I hope Dimon's company is one of the good one.
I think David and TW are both right. Big business and Government have in essence captured each other and are in relationship for each others benefit to the detriment to everyone else.
Certainly if the republicans accomplish anything before the 2018 elections it will be reduced corporate tax rates. We do assume its only been democrats blocking that. And this will help smaller business more than larger ones, since the larger (and international) ones have already found loopholes to avoid paying taxes.
But whether this will spur new growth, it seems a laughable excuse. And any sort of growth that seems possible now-a-days seems to be to outsource or automate human labor, and lowering corporate tax rates merely reward those who are rich enough to own stocks. And we presume the publicans also want to lower individual top tax rates as well.
The problem that I accept is that if you subtract debt growth from economic growth, we're in a net decline, and we've been here for a while, especially if you accept nearly ever asset is overvalued. And when the newest post-2008 bubbles pop, imaginary wealth disappears, while debt remains.
Interestingly Trump's Steel tariff threat is helping the domestic steel companies, which is surely helping to threaten new trade wars which will reduce the U.S. access to cheap imports.
http://money.cnn.com/2017/07/13/news/economy/trump-steel-stocks/index.html
I do have to imagine protectionism has to the be in the future, not that its going to raise our GDP, or lower our debts, or even necessarily improve the labor force participation rate. Rather it'll raise inflation, and make it more difficult for everyone to repay the debts they've accumulated, and a new economic crisis will come up and the first "too big to fail" bankruptcies will be bailed out, until we find out that doesn't work, and then global trade will collapse on its own.
So it all sounds bad, but you imagine people like Dimon and J. P. Morgan are already prepared their escape plans. They would just prefer taxes be lowered for the final years to help get their profits out of harm's way.
Jamie, put your money where your mouth is.
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