Saturday, October 31, 2015
Falling oil clips 7,000 jobs at Chevron; How mergers damage the economy; India intellectuals alarmed at intolerance
1 Falling oil clips 7,000 jobs at Chevron (Sam Thielman in The Guardian) The plummeting price of oil has ripped into the once booming US energy industry so dramatically that the oil sector has laid off 87,000 people so far this year. Chevron became the latest company to dismiss workers, announcing that it would lose between 6,000 and 7,000 jobs – the second four-figure round of dismissals at the company since July.
The company is cutting investment by a fourth. “With the lower investment, we anticipate reducing our employee workforce by 6,000-7,000,” the chairman and CEO, John Watson, said in a statement.
Oil prices have fallen from $115 just over a year ago to under $50 this month causing woes across a once-booming industry. Cheaper energy prices fuelled a 64% drop in third-quarter profit at Chevron, the US’s second-biggest oil company behind Exxon Mobil. Earlier this week Royal Dutch Shell announced an $8bn loss, caused in part by lower energy prices.
2 How mergers damage the economy (The New York Times editorial) In many industries, like airlines, telecommunications, health care and beer, mergers and acquisitions have increased the market power of big corporations in the last several decades. That has hurt consumers and is probably exacerbating income inequality, new research shows.
A paper by two economists, Jason Furman and Peter Orszag, says that consolidation might have contributed to the trend of some businesses earning “super-normal returns” that are about 10 times as large as the median returns, up from three times in the early 1990s. This trend may have driven the rise in income inequality by increasing the income of executives and shareholders of those businesses relative to everybody else.
The George W. Bush administration, for example, allowed Whirlpool to acquire Maytag even though the two companies controlled three-quarters of the market for some home appliances. The Obama administration has also waved through some big mergers. Officials approved two big airlines mergers — United and Continental, and American and US Airways. Just four national airlines now carry the vast majority of domestic passenger traffic, down from six when Mr. Obama came into office.
With fewer competitors to worry about, consolidated businesses can raise prices more easily without worrying about losing customers. Mergers tend to lead to more mergers. In the health care industry, big insurers like Anthem and Aetna say they need to get bigger to have more leverage in negotiations with hospitals and doctors’ practices that have become bigger through acquisitions in recent years.
The presence of a few dominant companies in an industry also makes it harder for entrepreneurs to start new businesses in that sector. The rate at which new businesses are created in the economy as a whole has been steadily falling since the 1970s, according to the Census Bureau. In 2013, the growth rate was 10.2 percent, down from 17.1 percent in 1977.
Given the already high consolidation in many industries, government officials have to be vigilant about investigating businesses that abuse their dominant position. In extreme cases, antitrust laws allow officials to seek the breakup of businesses, as the Justice Department did with the old AT&T monopoly in 1974. Markets work best when there is healthy competition among businesses. In too many industries, that competition just doesn’t exist anymore.
3 India intellectuals alarmed at intolerance (San Francisco Chronicle) First writers then artists, followed by filmmakers, historians and scientists. The chorus of Indian intellectuals protesting religious bigotry and communal violence grows louder by the week with a single message for Prime Minister Narendra Modi: protect India's tradition of secularism and diversity.
Those protesting are angry and worried by a spate of deadly attacks against atheist thinkers and minorities, and by Modi's relative silence through it all. That silence appears to have encouraged some of his party colleagues to make comments asserting Hindu pride and superiority.
Last week, more than 100 scientists, including some of India's top nuclear physicists, space scientists and mathematicians, expressed their anguish at the ways in which they said "science and reason were being eroded in the country." The protest by scientists is significant, given that most work for the government or in state-funded organizations and so could risk being punished for speaking out.
The uproar among intellectuals began in late September, when a village mob beat a Muslim man to death and put his son in critical condition over rumors that their family was eating cow meat. In fact, it had been a goat. There have been other incidents in recent years, including the killings of three atheist scholars who had campaigned against religious superstition, and more mob killings over rumors of cow slaughter or smuggling.
Many Hindus, who make up more than 80 percent of India's population of 1.25 billion, consider cows to be sacred, and many states ban the slaughtering of the animals. India has still largely been seen as overwhelmingly tolerant, with a cacophony of cultures that have lived side by side for centuries. Secularism is enshrined in its constitution.
Since taking office, however, Modi has said very little on the subject of tolerance and diversity, even questioning why his government should be called on to comment on local matters. Indian Culture Minister Mahesh Sharma suggested that unhappy writers could stop writing if they found the country's cultural climate not conducive to their work.