Ben Stein gives us another installment of his usual sloppy thinking. In his latest offering, “Exxon Mobil Needs a Hug,” he declares:
After all, Big Oil is big us. And we need us.
Since I don’t consider myself Big Oil, and I imagine most readers would object to being considered to be Big Oil, all Ben can say with certainty is that he is Big Oil. Presuming, of course, that that statement even means anything remotely comprehensible.
Since thinking overly hard about Ben Stein inevitably leads to brain rot, I will limit myself to a few observations.
It’s a sign of Stein’s utter lack of sense, or eagerness to show what a clever defender of the Republican faith he is, to stand up for Exxon Mobil. He waves the flag for the oil company because Obama singled it out in a speech, noting that it had earned $12 billion in the last quarter and wouldn’t part with its profits easily.
Of course, Stein must have forgotten that Exxon Mobil had been actively funding attacks (via think tanks) on the Intergovernmental Panel on Climate Change’s reports, offering scientists $10,000 to say bad things about the work. Given this history, Stein risks being mistaken for another Exxon shill for hire.
The Obama attack was a cheap shot, but it isn’t hard to depict Exxon Mobil as a bad guy. The company is still contesting $2.5 billion of punitive damages assessed for its 1989 Valdez oil spill. The reason for the punitive charge is that the ship’s captain, Joseph Hazelwood, was known by Exxon to be a relapsed alcoholic, yet they continued to let him operate the supertanker. His drunkenness led to the crash. Note that the $2.5 billion they are disputing is a mere 2 1/2 weeks of earnings, hardly big enough to serve the intended deterrent effect.
Now the vague Obama warning about profits may have to do with reviving ideas bandied about in the 1970s oil crisis, such as levying an excess profits tax on oil producers. That never came to pass, partly due to difficulties in determining how to set the tax level fairly, partly because the oil companies could easily game it (just spend more and depress your profits). Unfortunately, the excess profits tax debate kept more sensible proposals for ending oil company tax breaks, like depletion allowances, foreign tax writeoffs, and special benefits for intangible drilling costs, from seeing the light of day.
So what is Stein’s defense of a company that is clearly big and aggressive enough to take care of itself? That “we” are all shareholders, so any attack on Exxon Mobil is an attack on all of us.
This is so dopey as to not be worth discussing, but I will nevertheless belabor the obvious. Not everyone in America owns stocks, either directly or derivatively (only 41% of Americans say they or their spouse has a pension) and of those who do, not all of them own Exxon Mobil (none of the portfolios I am responsible for do, either directly or via indexes).
No, Stein isn’t willing to consider that high profits by Exxon Mobil in an essential product like oil represent a transfer from the have-nots to the haves.
That may strike some readers as a socialistic formulation, and indeed, there is no clear standard for what a fair profit is. But this expansion (2001 onward) has been characterized by an unprecedented proportion of GDP growth going to corporate earnings as opposed to workers. Indeed, this is the first time the profit share has exceeded the labor share. So the Exxon Mobil example merely illustrates a broader issue.
Cut Stein’s argument to its core, and it’s blatant free market run rampant: we shouldn’t interfere with the God-given right of any company to earn a profit because it will hurt the investors. But Stein goes further and claims that the interests of investors are identical with those of the US public. Was he asleep when they talked about class warfare in school?
In fact, a September 2007 Pew Research Center study found that the US population increasingly sees itself divided along class lines. There was an even split among respondents as to whether they agreed or disagreed with the notion that the country was split along economic lines, while in 1988, 71% rejected it. Similarly, only 45% today consider themselves to be among the “haves.”
Now there are plenty of arguments Stein could have made against Obama’s jab at Exxon, particularly since the candidate was discussing the need for changes in US energy policy. High oil prices do encourage conservation, which is the most effective short-term move we can take to reduce energy consumption. Thus, any move to lower oil company profits, if it was used to relieve oil prices directly, would be highly counterproductive (not that that’s where Obama was going, but just about any line of thought would be an improvement on the argument Stein made).
But no, to take on Obama, Stein would have had to dig a bit to find out what the senator’s stand on big oil and energy generally is. That would be work. It’s much easier to resort to Republican default rhetoric.
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Stein’s a Republican?
I fuckin love you, Yves. Nobody else ever gives the finger to rich powermongers so elegantly.
I generally enjoy your posts.
However when the topic becomes political, your skills deteriorate. You write: “This is so dopey as to not be worth discussing, but I will nevertheless belabor the obvious.”
If it is not worth discussing, don’t discuss it. If it is worth discussing, get to the discussion and avoid the fluff.
The fact that Ben is a cheerleader leads me to a question: Can any of you shed any light on how many
nations, where professional sports teams play, make
use of professional cheerleaders? I also wonder how long it will be before we get them for baseball and ice hockey.
As a North Texan, I will simply make the comment that if we wish to return to the pre-change, pre-hope politics of the 20th (actually 19th) century, then the real center of uber class aggression in America resides in New York City.
The link you cited about the profit share exceeding the labor share actually states that the share of the INCREASE in GDP going to profits exceeds that going to labor, which is not the same thing.
The profit share has been rising (and labor share) falling over several decades but actually the extent of this rise is smaller in the US than in many countries in Europe. There are a number of reasons for this, I suspect. Executive remuneration goes into labor earnings so that might be offsetting things a bit.
Yves,
Following up on yesterday and cute pictures, you provide great material and offer a great take on reality! Obviously, fools like Stein should be phased out ASAP and or, allowed to die on the fruitless vines of stupidity! As for other stories, bring it on and dont let up!!
As a society, we have been lied to for decades, perhaps centuries, but in the last eight years, we have been held hostage by journalistic lies and manipulated information — the likes of which are beyond historical compare! Our Constitution has been destroyed alongside our nation.
Thus, to offer hopeful truth or different viewpoints which find fault in falsified information — from places like NAR or the financial industry, like the fat SIFMA pigs pushing synthetic derivates (like toxic dope) or the broad bush-strokes abstractions from The Retarded Psychopathic Whitehouse — these lies along with false and misleading disinformation must be exposed!
If free speech is to have a small fraction of a place in our future, then, thank you for providing a bridge between the lies that have been out there and the truth that reveals the level of decay from these devils!!
Thank you, thank you, thank you!!!!
P.S. Thank you!
Anon of 11:49 AM,
If you read the sentence prior, it clearly says “share of GDP growth.”The next sentence says “this is the first time” referring to the prior sentence, which is talking about GDP growth.
I believe that what Stein is really trying to say is that if you are found guilty of drunk driving and cause substantial harm and injury you should not be subject to a civil lawsuit and putative damages :)
9:00, so you don’t like it when Yves gets annoyed with Stein and other dumb defenders of the rich? I enjoy it when he gets exercised. And this is something worth getting exercised about. You can’t show outrage in stripped-down prose.
The notion of Exxon Mobil as “big oil” is almost a bit anachronistic. The real power now, by far, is with state-owned oil companies. The traditional privately-owned Western oil companies now collectively have only a single-digit percentage of the world’s oil reserves, and are increasingly being cut out of the picture entirely by technology-only companies like Schlumberger who happily sell their services to the state-owned companies and don’t seek to own any resources for themselves.
To have any hope of reduced dependence on unreliable and possibly hostile foreign-controlled sources of energy, the future lies in energy resources that are difficult to exploit (such as oil sands in Canada) or speculative (oil shale, which the US has in abundance), not to mention even more speculative alternatives. However, all of those take a tremendous amount of money for both research and development.
Making it less attractive to be a shareholder of a Western oil company and draining money out of such companies on purely populist grounds is hardly the optimal way to ensure that such R&D gets done in the future. Cutting Exxon down to size only means you’ll be left dealing with bigger, completely untouchable foreign players.
And class warfare is rarely the road to prosperity or happiness. China’s bitter experience in this regard in the 1960s, and the ensuing backlash, is partly the reason why the Chinese have embraced the ferocious brand of capitalism that has made them such feared competitors.
Dear Yves,
Without wishing to be picky, the sentence is misleading. The prior sentence is correct, but the sentence starting “Indeed” really does read as if your claim is that the unprecedented proportion of GDP growth going to profits has cumulated to make a difference to levels of the shares, ie that the profit share is now larger than the labor share. The “profit share” is a share of GDP, not of GDP growth.
I would suggest the following alternative: “Indeed, this is the first time that profits’ share of GDP growth has exceeded that of labor”. Only two more words, but they make a big difference.
Anon of 3:41,
To be clear, I am not defending Obama’s statement (it isn’t even clear what he meant) but taking down Stein for stupidity.
I’m not deeply into the energy issue, but the analyses I’ve seen say that conservation produces the quickest results and the biggest bang for the buck. A McKinsey Global Institute study found that the vast majority of global executives said that fixing global warming profits can boost profits. For instance, BP in 1997 decided to lower its carbon emissions below the 1990 level by 2010. It achieved the goal in 3 years rather than 13 for an outlay of $20 million. Oh, and it happened to save $650 million. But McKinsey also found few companies are acting.
As for shale oil, aside from the cost, it’s a bad solution. It yields oil that produces a high level of emissions.
As for the class warfare comments, I’m not advocating it, merely observing. The right for the last 25 years has passed off the line that, per Stein, what is good for the capital-owning classes is good for everyone. Many may have believed it, but the proof is in the pudding, and we’ve had a big redistribution of income and wealth towards the very top echelon and no gains by the rest.
Now given the march of technology, international trade (and the Stopler-Samuelson theorem) we probably would have seen some redistribution regardless, but not as extreme (at a minimum, tax policy has reinforced it).
We have the very real possibility of serious social dislocation. This blog is for the economically/financailly literate; it focuses on topics like monoline insurers and credit default swaps. That means it is almost certainly attracting a white collar readership, probably heavily skewed towards investors.
On this blog, and other econblogs where I read comments, there is real anger about the way people at the top have managed to extract more while leaving everyone in the dust. There is also deep-seated disgust with Wall Street and banks.
If we have a bad, protracted recession, you may see forms of rebellion that haven’t been witnessed heretofore. I don’t anticipate riots, but consider the fact that homeowners who can apparently afford to service their mortgages are nevertheless walking from them. The banks have behaved so badly (in terms of treating customers as wallets to be picked clean) that there could be orchestrated forms of debtor revolt or non-compliance.
Just because the morally bankrupt and intellectually stunted New York Times editorial board provides column space to clowns like Ben Stein does not mean we should honor him with constructive criticism. I mean, for the love of God.
Just because the morally bankrupt and intellectually stunted New York Times editorial board provides column space to clowns like Ben Stein does not mean we should honor him with constructive criticism. I mean, for the love of God.
Just because the morally bankrupt and intellectually stunted New York Times editorial board provides column space to clowns like Ben Stein does not mean we should honor him with constructive criticism. I mean, for the love of God.
I think we all need to stop speaking in metaphors. It makes things fuzzy and we are speaking in code that only makes sense to our own emotions.
Oil companies are not “us”…and if i, or a company i found, dig up oil refine it (and whatever else) then sell it to people, IT IS NOT A TRANSFER (AS IN ONE-WAY) IT IS AN EXCHANGE… the person voluntarily gives money to the company in exchange for oil.
I hate to pick at the details because I’d rather blast the whole post… but to be honest I’ve never liked Ben Stein either. As often as he makes some ludicris statement that sounds republican, he makes seme equally dopey (and economically inconsistent) argument favoring a reasonably leftist position.
However…
“Cut Stein’s argument to its core, and it’s blatant free market run rampant: we shouldn’t interfere with the God-given right of any company to earn a profit because it will hurt the investors. But Stein goes further and claims that the interests of investors are identical with those of the US public. Was he asleep when they talked about class warfare in school?
In fact, a September 2007 Pew Research Center study found that the US population increasingly sees itself divided along class lines. There was an even split among respondents as to whether they agreed or disagreed with the notion that the country was split along economic lines, while in 1988, 71% rejected it. Similarly, only 45% today consider themselves to be among the ‘haves.'”
I dealt with this same logical fallacy when arguing with my far-left uncle. The basic argument here is “he’s wrong because the majority believe it so.” In fact, he’s not wrong because the majority believe his statement is wrong, he’s wrong because the majority of poeple believe in class warfare…
“Stein goes further and claims that the interests of investors are identical with those of the US public”… this is the argument that you’ve failed to disprove. Alcoholics would never willingly give up alcohol… nor many smokers cigarettes.
If manufacturers of these goods bought grain & tobacco cheap and the cost of these goods rose… and as a result they made massive profits… alcoholics and smokers would no doubt complain about the profits.
However, if the new price level was the price level that efficiently allocated resources… and optimized the investment of labor on the margin…
…then it would be the optimal allocation (on average) for all involved…
Despite his regular mistakes, Stein happens to be right on the point that you take least seriously… that is if you bother with the economics rather than assuming that a vote is sufficient to make something true…
Clayton, I don’t know what you think you are saying, it makes almost as little sense as Stein.
Did you read Stein? He said Exxon making huge profits was good for all of us because we are supposedly all shareholders. That’s bunk, and moreover, that people no longer accept that what’s good for owners of capital is good for everyone. That’s what Yves is arguing it, as I read it, hence the reference to class warfare. What benefits the moneyed classes cannot be assumed to be in the interest of the population as a whole.
I thought one of the premises of economics is that people are assumed to be rational and capable of acting in their best interest. So if people say they think they’ve lost out (and income disparity data confirms it) you are saying they are wrong? So they are smart in one context and morons in another?
You also make the mistake of assuming that the market prices are set in by physical demand and supply, as opposed to speculation. I’ve seen several stories discuss how oil prices are set (I think it’s on the Brent exchange) based on a very teeny % of total world oil trading, I recall less than 1/2%. A lot of the recent price runup is believed to be due to speculation (Bloomberg and other MSM sources have said that the price based on underlying price and demand ought to be more like $80, in fact a lot of experts has forecasted a decline for that reason). The Monday Financial Times says the same thing, that the run-up in commodities is due to investors piling in because they don’t like stocks or bonds right now. If you aren’t satisfied with the returns on cash or Treasuries, it’s where you put your dough.
So Exxon and the majors may have a direct role in oil prices being as high as they are.
Clayton,
I’ve been trying to get the gist of your post but I realized I could not, for the simple reason that there are no logical arguments to discuss.
I had to stop reading this really bad writing after the 3rd paragraph. Paragraph #1 should have been deleted as it had zip to do with the oped’s topic. Paragraph #2 noted it was about Obama and paragraph #3 noted it was about Exxon. Most writers would have told us the topic in ONE SENTENCE. But then I did go back later to see what it was Stein was babbling about. Oh yea, peole are shareholders of Exxon. To which I ask: SO?
Never mind his serial stupidity wrapped in his arrogance. This fellow CAN’T WRITE. So why is he paid to do so?
Here’s a “dumbed down” version of the logic.
Buy low… price increases… sell high. Profit does not imply that the good was not sold to the optimal user of that good. Efficient markets use prices to allocate goods optimally. Not inconsistent. Simple enough to digest?
On the other hand, here are actual illogical/inaccurate statements…
“I thought one of the premises of economics is that people are assumed to be rational and capable of acting in their best interest. So if people say they think they’ve lost out (and income disparity data confirms it) you are saying they are wrong? So they are smart in one context and morons in another?”
Income inequity does not necessarily imply that they are actually worse off. If you had half as many goods but were more equal, few would seriously argue that you’re better off.
… and we assume choices are “rational” because we cannot get into their head to improve their decision making. People need not actually make the best choices… we can assume that they’re rational so long as we can’t do a better job by interfering.
“You also make the mistake of assuming that the market prices are set in by physical demand and supply, as opposed to speculation. I’ve seen several stories discuss how oil prices are set (I think it’s on the Brent exchange) based on a very teeny % of total world oil trading, I recall less than 1/2%.”
You make the greater mistake by assuming that speculation is not rational. If you anticipate the price of oil will double, it’s worthwhile to buy it and stock it on the risk that the price does not increase.
In the case that the price *does* increase, you’ve rational shifted consumption from the past (less value) to the future (more value). Sometimes it doesn’t pay off.
Again, price distributes resources to their most valuable uses… both among people and through time. Markets working properly.
That doesn’t make speculation implicitly a bad use of funds/goods nor the resulting prices illogical.
Clayton,
A certain amount of speculation provides useful price discovery and liquidity. Excessive speculation distorts resources allocation, first by drawing too much capital into speculation as opposed to productive activities, and second, by distorting prices. Exhibit A is our recent housing bust, which has managed to even damage municipalities due the the fact that monoline insurers guaranteed both muni debt and subprime debt, leading to cross pollenization.
Speculators can also pump and dump markets, that’s a favorite activity. All indications are that some commodity markets are suffering from that behavior. Energy prices are well out of line with physical demand/supply (by at least $20 a barrel of oil) and if the economy goes into a bad recession, non-ag commodity demand will fall. Serious recessions are deflationary for asset prices, and given the instability in the financial system (it hasn’t hit Europe as hard as it will due to differences in their accounting regimes, but they are going to be hitting the wall too) commodities look seriously overbought.
Anon of 10:14 PM,
Oh, so you are a completely free agent, not making any use of US roads, local police, Federal defense, the legal system, our air transportation system, public water and sewage systems. And you made all your money all on your own, with no help from your education, your initial employers, other institutions.
If you are so independent of the US, go live in Bermuda or Hong Kong where the taxes are lower. If not, put up and shut up.
Clayton,
There is a lot of solid research that says high income disparity leads to shorter lifespans even among the wealthy in those countries. Guess living in gated compounds is pretty stressful. So we all are taxed by worse health, this isn’t just about dollars and cents.
There are an article on that in the Financial Times a while ago. It’s pretty well documented in public health circles
Warrren Buffett is on my side in this debate, not yours.
And you have your facts wrong. 27% of the federal budged goes to the military, 3% to veterans’ benefits (oh, but those are socialistic, right?) 19% to interest on debt.
So you admit that your success is not created in isolation, that it is built on the backs of others. You enjoy the roads, the infrastructure built over the years, the educational and legal system, the scientific and business know-how that have been created over time. But no, you just want to take what you can and the hell with the rest.
You just proved my point. If your success was not dependent on this society, you would pack up and go to where they tax rates are more favorable.
Taxes are the price of civilization. Quit whining and act like an adult. I’ve had four Forbes 400 members as clients and worked with them closely. None of them are greedheads like you. And I have a sneaking suspicion I pay more in taxes than you do.
Yves,
Do not expend your considerably intellectual energies on slobbering fools like 1:31 AM. He is clearly narcissistic, perhaps psychotic, capable only of calling names in lieu of making a sensible argument.
He is profoundly selfish, and whatever success he has will not last long. With America’s standing falling as rapidly as the dollar, the easy money is gone in the US. In the countries I’ve done business in (many), his attitude will be quietly and firmly rebuffed.
If you can block or delete his comments, I would.
Per the advice above, I removed the latest comment from the “slobbering fool” Anon of 1:31 AM.
Yves,
So you got rid of that jerk? Good. Anyone who throws mud at his host deserves to be bounced.
There was one reason to keep him around: he’s so pathetically stupid he kept digging a deeper hole the more he ranted. Talk like that will guarantee tax increases.
Yves,
I decided to check back and see you found that abusive poster intolerable.
Have you seen this week’s column by Stein? He argues for tax increases targeted at the rich. This comes from a card-carrying Republican.
I suggest you get your fact in order before making simple-minded, emotional statements.
The rich have far more ability to leave the country and live in lower-tax domiciles if they choose than the poor or middle income. They either think being here is worth the taxes or do not have similar opportunities to earn money elsewhere. I choose to live in New York, a very high tax state. I don’t whine about how unfair is.
The effective tax rate on the top 1% is 25% and has been at roughly that level since 1975. That is hardly confiscatory.
The record in the US when taxes were more progressive and overseas shows that countries with progressive tax systems show higher growth rates. Progressive taxes leave more cash in the hands of lower and middle income people who have a higher propensity to consume. That in turn leads to more growth.
As for “socalistic” programs, that is a matter of interpretation. America has weaker social nets than most advanced economies. So most people around the world would take issue with your view, as would a lot of people in America.
Last I checked, the US was a democracy, one person, one vote. Despite that the rich already have considerable sway over policies via lobbying (I suggest you read Dean Baker’s The Conservative Nanny State, which details at length government subsidies for business and moneyed interests).
If you don’t like the results that produces, you can always move somewhere else.
If you wanted the lower income cohort to pay more, the US could raise its minimum wage (over a period of years to make the impact more tolerable). The US has one of the lowest minimum wages of any advanced economy. Wage demand at the bottom is fairly inelastic, so job losses (yes there would be some) are more than offset by wage gains overall. Moreover, countries like Australia with high minimum wages and high growth rates suggest that high minimum wages are not anti-growth (restrictive work rules seem to be more problematic).
But I assume you would regard that as too “socialistic”.
Your ignorance is breathtaking. Australia is far more socialistic, as you would like to say, than the US, yet it has higher growth rates (I am sure I could add other countries to the list, but since you are not willing to do any work to prove your empty assertions, I am not about to put much effort into this). US GDP growth also overstated by at least 1/2 % per year due to the use of hedonic adjustments, which no other OECD nation uses.
The US also does not have the highest GDP per head. Luxembourg, Ireland, and Norway are ahead of us, and they are more socialistic than the US. And that’s using a PPP parity, which is pretty flattering given the current state of the dollar. More countries would be ahead of us in per capita GDP were I to use nominal GDP.
The rich have been getting richer since 1975. The top 1% now controls 38% of the assets, versus roughly 20% in 1980. The fact that the concentration of wealth has risen belies the notion that they are overtaxed. Their wealth would be shrinking, not growing, if they were.
If your next comment is more mere dogmatic ranting with no new supporting evidence, it will be deleted. I don’t have time for uninformed ideologues.
This post has been a magnet for trolls who are unable to even start a discussion without getting abusive. Ironically, they complain about the results a democratic (many would argue plutocratic) political process produces.
This blog is not a democracy. Assholic behavior and persistent stupidity are not tolerated. Additional posts of this sort will be deleted, just as the ones above were.
If you want an audience for your views, start your own blog, My readers deserve better than your tripe.
Yves is your typical demented liberal miscreant. If he and his moron readers of this pathetic marxist blog weren’t so stupid they’d know that after WW2 Europe’s GDP and America’s GDP grew at about the same rate until Europe socialized its economy and fell behind. Today, as a result, Europe’s standard of living is 30% lower than America’s and its inflation and unemployment rates are over 10%.
An objective person can just compare America’s average GDP growth rate, unemployment, and inflation during even Bush’s Presidency to that of Europe’s during the same period and see for themselves.
So why do half-wit leftist twits like Yves continue to ignore facts and refuse to be educated by conservatives? Because they’re demented marxist miscreants. Keyword there is demented. They’re sick in the head and they know it!
Yves Smith wrote in his post that "an excess profits tax on oil producers … never came to pass."
It most certainly did come to pass and was enacted in 1980 as the Crude Oil Windfall Profit Tax Act. What did it accomplish? If anything, it caused the U.S. to become even more dependent on foreign oil.
Yves also wrote, "Unfortunately, the excess profits tax debate kept more sensible proposals for ending oil company tax breaks, like depletion allowances, foreign tax writeoffs, and special benefits for intangible drilling costs from seeing the light of day."
I find it incredible that you would be writing this in 2008 considering what has occurred to the industry over the last 26 years. The number of oil wells drilling for oil in the U.S. has gone from a peak of 4,500 in December of 1981 to averaging about 300 for the last 10 years(I'm not including gas wells which would up the figure to about 1000 rigs for the last 10 years.) This decline in operating rigs started in 1982 and continued its rapid descent until 1986 after which it never recovered. The rig drop-off was primarily caused by oil prices falling from the low $30's to $12. The domestic oil drilling industry has essentially ceased to exist.
Contrary to popular belief, the vast majority of domestic drilling was not done by large oil companies, mythical JR Ewing types or wealthy Yale graduates whose last name is Bush. It was done by independent geologists and bankers working in partnerships. Therefore, removing "tax breaks" like the depletion allowance & intangible drilling costs would have had very little effect on Exxon. Remember Exxon (aka Standard Oil of New Jersey) and Mobil (Standard Oil of New York) are oil refiners by birth that just bought some large drilling companies over time.