Sunday, May 15, 2016
Norway fund to sue Volkswagen; Tough times for Singapore port; The new era of monopoly
1 Norway fund to sue Volkswagen (BBC) Norway's sovereign wealth fund, the world's largest, plans legal action against Volkswagen over the firm's emissions scandal. "We have been advised by our lawyers that the company's conduct gives rise to legal claims under German law," the company said in a statement.
Volkswagen admitted last year that it had installed secret software to cheat US emissions tests. Norges Bank Investment Management is one of the company's biggest investors. It is worth $850bn (£592bn; €751bn) and has stakes in more than 9,000 companies.
According to the Financial Times, which first reported the story, the lawsuit is expected in the coming weeks. It will be filed in Germany, joining class-action cases which are being prepared there. Volkswagen has put aside some €16.2bn to pay for the emissions scandal.
Last month the German carmaker reached a deal with US authorities in which it agreed to offer "substantial compensation" and car buy-back deals. Final details are expected in June. The Norwegian fund recently announced action to clamp down on excessive executive pay at the companies it invests in, as well as encouraging oil firms to report more on the risks of climate change.
2 Tough times for Singapore port (Straits Times) Maritime and Port Authority of Singapore (MPA) data shows that there were 4,452 container vessel arrivals during the first quarter of the year, marking a 4.5 per cent growth year on year.
But container throughput for the quarter slumped 9 per cent to 7.4 million twenty-foot equivalent units (TEUs) - down from the 8.1 million TEUs in the same period a year ago, and a 0.4 per cent drop from the fourth quarter last year.
"Shipping lines may have been calling more at Singapore, but the intensity of volume is lower," said Mr Victor Wai, a Drewry Maritime Equity Research analyst, adding that port volumes have been "stuck stubbornly in the high single-digit decline" since March last year. He attributed this largely to the alignment of the mega shipping alliances, which helped lift volumes at Malaysia's Port of Tanjung Pelapas and Port Klang instead.
While first-quarter figures for the two lower-cost Malaysian ports are not yet available, Westports, the main operator for Port Klang, said throughput rose 6.6 per cent to 2.4 million TEUs for the period. Ocean Shipping Consultants director Jason Chiang noted that Singapore's ports took a hit in terms of market share relative to the two Malaysian ports.
Prime Minister Lee Hsien Loong noted in his May Day Rally speech that a port workers' unionist had told him that there was a day when the Tanjong Pagar Terminal did not receive a single ship for two shifts out of three.
Mr Andy Lane, a partner at CTI Consultancy, said: "What we will not see is a return to the days of 10 per cent to 15 per cent containerised volume growth year on year, every year." He cited a lack of consumer confidence in the US and Europe that is further worsened by reshoring, as well as disruptive technologies such as advanced robotics and 3D printing.
3 The new era of monopoly (Joseph Stiglitz in The Guardian) For 200 years, there have been two schools of thought about what determines the distribution of income – and how the economy functions. One, emanating from Adam Smith and 19th-century liberal economists, focuses on competitive markets. The other, cognisant of how Smith’s brand of liberalism leads to rapid concentration of wealth and income, takes as its starting point unfettered markets’ tendency toward monopoly.
For the 19th-century liberals and their latter-day acolytes, because markets are competitive, individuals’ returns are related to their social contributions – their “marginal product”, in the language of economists. Capitalists are rewarded for saving rather than consuming. The second school of thought takes as its starting point “power”, including the ability to exercise monopoly control or, in labour markets, to assert authority over workers
In the west in the post-second world war era, the liberal school of thought has dominated. Yet, as inequality has widened and concerns about it have grown, the competitive school, viewing individual returns in terms of marginal product, has become increasingly unable to explain how the economy works. So, today, the second school of thought is ascendant.
After all, the large bonuses paid to banks’ CEOs as they led their firms to ruin and the economy to the brink of collapse are hard to reconcile with the belief that individuals’ pay has anything to do with their social contributions. Of course, historically, the oppression of large groups – slaves, women, and minorities of various types – are obvious instances where inequalities are the result of power relationships, not marginal returns.
In today’s economy, many sectors – telecoms, cable TV, digital branches from social media to internet search, health insurance, pharmaceuticals, agro-business, and many more – cannot be understood through the lens of competition. In these sectors, what competition exists is oligopolistic, not the “pure” competition depicted in textbooks.
Joseph Schumpeter, one of the great economists of the 20th century, argued that one shouldn’t be worried by monopoly power: monopolies would only be temporary. There would be fierce competition for the market and this would replace competition in the market and ensure that prices remained competitive. My own theoretical work long ago showed the flaws in Schumpeter’s analysis, and now empirical results provide strong confirmation. Today’s markets are characterised by the persistence of high monopoly profits.
The implications of this are profound. Many of the assumptions about market economies are based on acceptance of the competitive model, with marginal returns commensurate with social contributions.
This view has led to hesitancy about official intervention: If markets are fundamentally efficient and fair, there is little that even the best of governments could do to improve matters. But if markets are based on exploitation, the rationale for laissez-faire disappears. Indeed, in that case, the battle against entrenched power is not only a battle for democracy; it is also a battle for efficiency and shared prosperity.