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Economy

When machines suck humanity out of the economy – Open Democracy

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Travaux par aspiration was the slogan on the lorry. Doing building work with a vacuum cleaner. The noise was colossal and the trench long as this vast machine sucked up rocks, slabs of concrete the size of a diner plate, along with all the sand and gravel under the pavement. It left a clean trench, a metre deep for some 30 metres under our kitchen window, done and dusted in the morning of the last working day in July and with only three people on site.

My first paid employment meant digging in the stone and clay of a Chiltern valley. The flints refused to give way under my pickaxe. The knack of swinging it so the point fell with the fullest force possible just where I intended, took several days of training by the lads from Connemara.

You could tell them a mile off by the cut of their hair, their tweed jackets and steady pace of bodies whose assigned function in the economy of the time was to dig into the earth, whether it was the peat of their homeland or the hoggin of the Thames Basin. Between themselves the talk was in a soft, lilting language that switched to English when instructing me in how to make, or rather craft their tea.

This was as strong as their arms. Two half-pound packets of loose Indian from the Co-op round the corner, two pounds of sugar and a pint of milk tossed into a tin bucket of water simmering on a gas ring their ganger had brought by the bus and boat from Galway. As they dipped their cups in, I kept the bucket full with water, extra sugar, milk and tea leaves so the taste never lost its bite.

We knew each other’s names before we had lifted our first shovelful. The camaraderie and generosity to each other and to me was as warm as the language directed against their employer. Their lives, though, were hard and short, their final years solitary ones with a pint of Guinness at the bar and no pension to talk of in the pocket. Britain moved on the roads they built and lived in the homes they erected, but gave back little by way of thanks.

In 1960, on the outskirts of London, as now outside builders’ merchants in Paris, they and their kind waited and wait at the roadside for someone needing a ready hand to do a good job for as little money as the market can enforce. Travaux par aspiration is as much a threat to their restricted livelihoods as the automation of engineering factories or of bureaucratic work is to those who thought their jobs would be careers for life.[i]

Aristocratic sauternes

Where we stayed for part of this summer was a book in praise of Yquem,[ii] about the most expensive wine money can buy. Naturally, it was a song of praise to Alexandre de Lur Saluces as the vineyard in the Sauternes region of Bordeaux had been in the hands of his aristocratic family for centuries. Now, it is majority-owned by the luxury goods empire of France’s richest business figure Bernard Arnault and his LVMH, the company that clothes Brigitte Macron for free.

By a unique happenstance of the soil around the chateau and how it is drained, Yquem apparently gains its unparalleled quality because the vineyard is especially welcoming to an infection that turns the grapes into a shrivelling, fungus-ridden mass. Generations of skilled workers, mostly living in tied accommodation, made of these grapes what the author declares to be “a symbol of perfection”. We learn about what they have done, the skills they developed, the equipment they used, the price the fruit of their labours could command, even the luxurious meals that it should accompany.

The right to a name is granted to only one of them, if spiced with sexist condescension:

“Though uninhabited, the chateau is kept up and the Count often receives. The meals are usually prepared by one of the chefs of Bordeaux. For the more simple occasions, a member of the staff, a woman who knows how to roast a joint of mutton to perfection, is in the kitchen (and) it is Thérèse, one of the ‘vigneronnes du domaine’ who also cleans the house, who serves the wine, always at a perfect temperature, discreetly, with style and a calm pride.”

On page 82, two horses are pictured and named: Popaul and Pompon. The human being leading them out of their stables is left unpersonned amid this glorification of a tipple for the privileged.

In the 1990s, the work of caring for the vines still used ancient technology: perhaps it does today. Bernard Arnault, however, has plenty of experience in outsourcing, delocalising or just automating away jobs. Travaux par aspiration is the name of his game. It helps one understand why, amid all the names that never got scratched on a tombstone as capitalism and its industrial revolution moved centre stage, that of Ned Ludd, the machine breaker, is the only one we ever seem to remember.

To recall why we do, go and taste the crackling anger and sardonic irony of Lord Byron’s prose and poetry from 1812 when the then parliament voted to hang machine breakers: “Stockings fetch better prices than lives— / Gibbets on Sherwood will heighten the scenery, / Shewing how Commerce, how Liberty thrives.”

[i] You can catch up with the machines on the website of their manufacturer, the French company Rivard at https://www.rivard-international.com/en/products/aspiratrice-excavatrice/. Rivard has been part of the US Alamo Group for over a decade.

[ii] Richard Olney, Yquem, Flammarion, second edition, 1997

This piece was originally published in the September edition of Splinters.

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Business

UBS logs surprise 9% rise in Q3 net profit

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UBS posted a 9% rise in third-quarter net profit on Tuesday, as continued trading helped the world’s largest wealth manager to its best quarterly profit since 2015.

Its third-quarter net profit of $2.279 billion far outpaced a median estimate of $1.596 billion from a poll of 23 analysts compiled by Switzerland’s largest bank.

“Our business momentum, our focus on fueling growth, on disciplined execution and on delivering our full ecosystem to clients – all of this led to another strong quarter across all of our business divisions and regions,” Chief Executive Ralph Hamers said in a statement.

In each of the last four quarters, UBS saw double-digit percent gains in net profit as buoyant markets helped it generate higher earnings off of managing money for the rich.

From July through September, favourable market conditions, and higher lending and trading amongst its wealthy clientele, unexpectedly helped raise earnings over the bumper levels reported in the third quarter of last year.

 

(Reporting by Oliver Hirt and Brenna Hughes Neghaiwi; Editing by Michael Shields and Edwina Gibbs)

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Economy

America Inc and the shortage economy – The Economist

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IF YOU LOOK only at the scale of the profits cranked out by American businesses, they seem to be indestructible (see chart). Despite a pandemic and a savage slump in 2020, large listed American firms’ net income for the third quarter of this year is expected to reach over $400bn, at least a third higher than in the same quarter in 2019. Yet as earnings season gets into full swing this week, bosses and investors are watching for signs that three related worries are biting: supply-chain tangles, inflation, and hints that a long era of profitable oligopolies is giving way to something more dynamic and risky. Already big firms such as Snap, Honeywell and Intel have given the jitters to investors. Could there be more to come?

Only a quarter or so of firms in the S&P index have reported results so far. Those that have done so have pleased investors with better than expected figures. Superficially the picture is of “back to business as usual”. Bad-debt provisions taken by banks in the depths of the panic over the economy, which proved unnecessary, have been unwound. JPMorgan Chase got a $2bn benefit to its bottom line from this reversal in the third quarter. Goldman Sachs has shelled out $14bn in pay and bonuses so far this year, up by 34% year on year. American Express reported a leap in revenues as small firms and consumers spent on their cards more freely. United Airlines confirmed it was on track to hit its performance targets for 2022.

Yet look again and the three worries loom. Start with supply chains. The number of ships waiting off California’s big ports remains unusually high at about 80, according to Bloomberg. On 22nd October, Jerome Powell, the chair of the Federal Reserve, said that supply-chain problems may last “well into next year”. The knock-on effects are feeding through industry. Union Pacific, a railway firm, lowered its forecast for traffic volumes because semiconductor shortages (often in Asia) have hit car production, in turn reducing the number of vehicles and components transported by rail. Honeywell, an industrial firm, cut its full year sales target by 1-2% complaining of a shortage of parts. VF Corp, which makes shoes (including white ones that fans of Squid Game, a hit TV show, hanker after) complained of supply-chain problems in Asia. So far the problem is not disastrous but it is inflating costs and forcing firms to adapt.

This supply chain headache is one element of a second, broader worry, about inflation and its impact on profits. Commodity prices are a source of pressure, with crude oil reaching $86 a barrel this week. Wages are too: although there are still 5m fewer people employed across the economy than before the pandemic hit, average hourly pay rose by 4.6% year on year in September. The immediate effect tends to be felt by low-margin firms that employ a lot of people: Domino’s Pizza has complained of a “very challenging staffing environment” and falling sales.

Elsewhere a mild inflationary mindset is slowly infiltrating boardrooms. Procter & Gamble predicted that commodity and freight inflation would raise its operating costs this financial year by about 4% and that sales would rise by up to 4%, owing to a mixture of price rises, and volume and mix effects. Honeywell warned there would be a “continued inflationary environment” in 2022. All firms are weighing how much they can raise prices to compensate for higher costs. So are fund managers who are busy running screens for companies that they judge to exhibit the all-important quality of “pricing power”. The shifting psychology of bosses and investors towards expecting more inflation should concern Mr Powell at the Fed.

The final big issue is whether an economy with shortages that is running hot ultimately forces an end to the managerial consensus of the past decade, which has favoured keeping margins high and being stingy with investment in order to maximise short-run cashflow. Already there are signs that attitudes are shifting in response to shortages and pent-up demand: economy-wide investment, excluding residential investment, rose by 13% in the second quarter of 2021 compared with the preceding year. United Airlines has said it will increase its capacity on international routes by 10%. FreePort McMoRan, a huge miner of copper (used in electric vehicles among a wide array of industrial applications), has said that it is “prepared to make value enhancing investments in our business” in response to red-hot prices. Hertz has announced an order of 100,000 cars from Tesla. And on Wall Street a fund-raising bonanza for speculative start-ups continues, including last week the merger of a special-purpose acquisition company with the social-media ambitions of a certain Donald Trump.

Rising investment is exactly what economists want because it increases capacity today and boosts the economy’s long-run potential. Yet whether investors are prepared to take the plunge remains to be seen. Habituated by years of high margins, they tend to run shy of rising investment and competition. Snap’s share price dropped by over 20% on October 21st as signs that the war over privacy settings on the iPhone between Apple and social-media firms, and the intensifying competition in advertising between a wide array of tech firms, is hurting its results. And Intel, which earlier this year boldly announced plans for a huge rise in investment in order to return to the frontier of the semiconductor industry, alongside TSMC and Samsung, presented Wall Street with the bill in the form of much lower than expected short-term earnings: its shares dropped by 12%. If you run a company or invest in one this is the new calculation: demand is recovering and costs are rising. Can you raise prices? And should you expand capacity? By the end of this earnings season the answer may be clearer.

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Economy

High under-employment and long-term unemployment are keeping an over-heating economy on ice | Greg Jericho – The Guardian

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High under-employment and long-term unemployment are keeping an over-heating economy on ice | Greg Jericho  The Guardian



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