Low Interest Rates Increased Zombie Firms After Economic Crisis of 2008

ZombieFirmsIncreaseGraph2018-10-03.png

Source of graph: online version of the WSJ article quoted and cited below.

(p. A1) Italian clothing maker and retailer Stefanel SpA became famous for its knitted coats and cardigans.

Many economists, investors and bankers know Stefanel as something starkly different: a zombie company. It has posted an annual loss for nine of the last 10 years and restructured its bank debt at least six times, including several grace periods when Stefanel only had to pay interest on what it owed.
After booming during Italy’s post-World War II expansion, Stefanel and its lumbering factories were overwhelmed by Spanish fast-fashion giant Zara and then battered by the economic slowdown that hit Italy in 2008.
Stefanel is still alive but staggering. So are hundreds of other chronically unprofitable, highly indebted companies being kept afloat with new infusions from lenders and shareholders, especially in Southern Europe.
Economists and central bankers say zombies undercut prices charged by healthier competitors, create artificial barriers to entry and prevent the flushing out of (p. A10) weak companies and bad loans that typically happens after downturns.
Now that the European economy is in growth mode, those zombies and their related debt problems could become a drag on the entire continent.
“The zombification of the corporate sector and banks [is] a risk for future living standards,” Klaas Knot, a European Central Bank governor and the head of the Dutch central bank, said in an interview.
. . .
In some ways, zombie firms are an unintended side effect of years of easy money from the ECB, which rolled out aggressive stimulus policies, including negative interest rates, to support lending and growth. Those policies have been sharply criticized in some richer eurozone countries for making it easier for banks to keep struggling corporate borrowers alive.

For the full story, see:
Eric Sylvers and Tom Fairless. “Zombie Companies Haunt Europe’s Economic Recovery.” The Wall Street Journal (Thursday, November 16, 2017): A1 & A10.
(Note: ellipsis added.)
(Note: the online version of the article has the date Nov. 15, 2017, and the title “A Specter Is Haunting Europe’s Recovery: Zombie Companies.”)

Wrecking Ball for Bureaucracy That “Is Killing the Country”

(p. B4) America’s big tech companies are facing some of their toughest political challenges as they flirt with or surpass trillion-dollar valuations. Before lawmakers try to rein them in, Reid Hoffman argues government officials better be careful what they wish for.
Mr. Hoffman was chief operating officer of PayPal while it was still a small payments startup before he co-founded the professional social-network LinkedIn.
. . .
WSJ: You’re vociferously opposed to President Trump and even commissioned an anti-Trump card game. Does Silicon Valley have a problem with liberal bias?
Mr. Hoffman: I do think that there is a reflexive bias to liberalism that causes discomfort. I think you have that kind of left bias within the Silicon Valley culture, too, which is, “I’m so convinced that’s idiotic, I’m not listening to anything about it.” And that’s the problem. The problem is not actively listening. But that’s human. It’s not only here. Part of the reason [for strong negative reactions] to Trump is the flat-out lies.
WSJ: When you talk politics with Peter Thiel, PayPal’s co-founder and a well-known Trump supporter, what are those conversations like?
Mr. Hoffman: He’s a friend of mine, but we’ve disagreed about politics since we were college undergraduates. One thing we argue about is how much does Trump lie? I’ve been trying to advance him the case that there’s always been some lying around politicians, but Trump is one or two orders of magnitude worse than ever before. He says Obama is a bigger liar than Trump–based on, for example, the claim that under Obamacare you’d be able to spend as much time with your primary doctor as you did before Obamacare.
Peter thinks that the bureaucracy is killing the country and that you need a wrecking ball to shake it up, and maybe Trump is the only wrecking ball you get. His pro-Trump arguments are that someone needed to stand up to China. Trump at least is, [while] everyone else gave it lip service.

For the full interview, see:
Rolfe Winkler, interviewer. “A Silicon Valley Warning.” The Wall Street Journal (Thursday, Sept. 27, 2018): B4.
(Note: ellipsis added; bolded and bracketed words in original.)
(Note: the online version of the interview has the date Sept. 26, 2018, and the title “LinkedIn’s Co-Founder Warns of Perils in Regulating Big Tech.” The last question and answer quoted above, is included in the online, but not the print, version of the interview.)

AMD Chips Leapfrog Intel Chips

(p. B2) A.M.D.’s shares are easily the best performing among the chip makers in the Standard & Poor’s 500-stock index.
That is quite a reversal.
. . .
For years, A.M.D. produced processors whose main attraction was price. When Lisa Su took over as chief executive of the company in 2014, she sought to change that. But in the semiconductor industry, new products take years to develop, and so the efforts have only recently borne fruit.
The company’s Ryzen chips, used in high-performance enterprise and gaming computers, outperform Intel’s flagship processors. Many computer makers, including Acer, Asus, Dell, HP, Huawei, Lenovo and Samsung, have begun using them in their devices.

For the full story, see:

Jamie Condliffe. “Chip Maker, Once Lagging, Outpaces Its Competitors.” The New York Times (Saturday, Aug. 25, 2018): B2.

(Note: ellipsis added.)
(Note: the online version of the story has the date Aug. 24, 2018, and has the title “Why A.M.D.’s Stock Is Outperforming Intel’s.”)

For Job Creation, Firm Youth and Fast Growth Matter More than Small Size

(p. C3) Economist David Birch of the Massachusetts Institute of Technology claimed in the late 1970s–inaccurately, as it turned out–that small businesses were the jobs engine of the economy, which allowed advocates to argue that aid to small businesses was a driver of economic growth. This narrative was reinforced by the wave of startups in the tech sector in the 1980s and 1990s. By 2000, all new businesses, no matter how technologically primitive or undercapitalized, were being called startups. A new biotech company was a startup, but so was a new three-person lawn-mowing business. Only child-labor laws prevented lemonade stands from being classified as startups, too.
A 2010 study published by the National Bureau of Economic Research showed, however, that it is the age of a firm, not its size, that matters for job creation. Just as children grow faster than adults, young firms grow faster than mature ones.
. . .
Government at every level can certainly do more to eliminate unnecessary regulations and to streamline those regulations that serve crucial public ends. But such reforms should benefit all businesses, regardless of size.
. . .
Beyond the injustice of it, small-business favoritism reverberates throughout the economy, slowing growth in two ways. First, subsidies and other size-based industrial policies slow productivity growth by enabling less efficient small firms to gain more market share than would otherwise be the case. Second, discriminatory policies provide an incentive for small firms to remain small. Why add five more workers when doing so would subject you to a host of new regulations and restrict your access to government handouts?

For the full commentary, see:
Robert D. Atkinson and Michael Lind. “Stop Propping Up Small Business.” The Wall Street Journal (Saturday, April 7, 2018): C3.
(Note: ellipses added.)
(Note: the online version of the commentary has the date April 6, 2018.)

The commentary quoted above, is based on:
Atkinson,‎ Robert D., and Michael Lind. Big Is Beautiful: Debunking the Myth of Small Business. Cambridge, MA: The MIT Press, 2018.

The published version of the 2010 National Bureau of Economic Research working paper, mentioned above, is:
Haltiwanger, John C., Ron S. Jarmin, and Javier Miranda. “Who Creates Jobs? Small Vs. Large Vs. Young.” Review of Economics and Statistics 95, no. 2 (May 2013): 347-61.

China Will Fail to Corner the Lithium Market

(p. B12) Since emerging as an industrial superpower in the 2000s, China has repeatedly tried to lock up essential resources like iron ore and so-called rare earths. The latest example is lithium, a key battery element: . . . .
. . .
The reality is more mundane.
. . .
. . . it will take just $13 billion in investment to satisfy annual lithium consumption as of 2030, against more $100 billion for nickel and copper.
Even if only a relatively small amount of mining capital spending migrates from mainstays like iron ore into lithium over the next decade, supply probably won’t be a huge problem.

For the full story, see:
Nathaniel Taplin. “China Won’t Be Able to Dominate Lithium Mining Forever.” The Wall Street Journal (Friday, May 18, 2018): B12.
(Note: ellipses added.)
(Note: the online version of the story has the date May 17, 2018, and has the title “China Won’t Dominate Lithium Forever.” The last sentence quoted above appeared in the online, but not in the print, version of the article.)

Assigning Property Rights to Internet Data Creators

(p. C3) Congress has stepped up talk of new privacy regulations in the wake of the scandal involving Cambridge Analytica, which improperly gained access to the data of as many as 87 million Facebook users. Even Facebook chief executive Mark Zuckerberg testified that he thought new federal rules were “inevitable.” But to understand what regulation is appropriate, we need to understand the source of the problem: the absence of a real market in data, with true property rights for data creators. Once that market is in place, implementing privacy protections will be easy.
We often think of ourselves as consumers of Facebook, Google, Instagram and other internet services. In reality, we are also their suppliers–or more accurately, their workers. When we post and label photos on Facebook or Instagram, use Google maps while driving, chat in multiple languages on Skype or upload videos to YouTube, we are generating data about human behavior that the companies then feed into machine-learning programs.
These programs use our personal data to learn patterns that allow them to imitate human behavior and understanding. With that information, computers can recognize images, translate languages, help viewers choose among shows and offer the speediest route to the mall. Companies such as Facebook, Google and Microsoft (where one of us works) sell these tools to other companies. They also use our data to match advertisers with consumers.
Defenders of the current system often say that we don’t give away our personal data for free. Rather, we’re paid in the form of the services that we receive. But this exchange is bad for users, bad for society and probably not ideal even for the tech companies. In a real market, consumers would have far more power over the exchange: Here’s my data. What are you willing to pay for it?
An internet user today probably would earn only a few hundred dollars a year if companies paid for data. But that amount could grow substantially in the coming years. If the economic reach of AI systems continues to expand–into drafting legal contracts, diagnosing diseases, performing surgery, making investments, driving trucks, managing businesses–they will need vast amounts of data to function.
And if these systems displace human jobs, people will have plenty of time to supply that data. Tech executives fearful that AI will cause mass unemployment have advocated a universal basic income funded by increased taxes. But the pressure for such policies would abate if users were simply compensated for their data.

For the full commentary, see:
Eric A. Posner and E. Glen Weyl. “Want Our Personal Data? Pay for It.” The Wall Street Journal (Saturday, April 21, 2018): C3.
(Note: the online version of the commentary has the date April 20, 2018.)

The commentary quoted above, is based on:
Posner, Eric A., and E. Glen Weyl. Radical Markets: Uprooting Capitalism and Democracy for a Just Society. Princeton, NJ: Princeton University Press, 2018.

Google Further Reduces Small Payments to Content Creators

YouTube is a wholly-owned subsidiary of Google.

(p. A15) SAN FRANCISCO — The authorities believe a woman who shot three people at YouTube’s headquarters before killing herself on Tuesday [April 3, 2018] was angered by the social media outlet’s policies.
While the police did not specifically say what those policies were, they likely had to do with a concept called “demonetization.”
. . .
One of those creators was Nasim Najafi Aghdam, the woman the police said had shot YouTube employees in San Bruno, Calif. She frequently posted videos to several YouTube channels and had become increasingly angry over the money she was making from them.
“My Revenue For 300,000 Views Is $0.10?????” Ms. Aghdam wrote on her website, while calling YouTube “a dictatorship.”
. . .
Video creators take a share of the money from ads running before or alongside their videos. But YouTube has been raising the bar on qualifications for running ads.
Last April, the company said it would set a requirement for 10,000 cumulative lifetime views before allowing videos to gain ads. In January, the company raised that requirement to 4,000 hours of watch time in the past year and 1,000 subscribers.

For the full story, see:
NELLIE BOWLES and JACK NICAS. “YouTube Complaints From Attacker Echoed Fight Over Ad Dollars.” The New York Times (Thursday, April 5, 2018): A15.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date APRIL 4, 2018, and has the title “YouTube Attacker’s Complaints Echoed Fight Over Ad Dollars.”)