The Rising Tide: When Democracy is Threatened
JAN. 9, 2022 BY DEAN BARBER, PRINCIPAL OF BBA
With Democracy Threatened, so Too is Capitalism
“I think the decline of democracy is a mortal threat to the legitimacy and health of capitalism.” — Rebecca Henderson, Harvard Business School
It is important that you remember Jan. 6, 2021, as it actually happened. For the first time since the War of 1812, the Capitol Building was breached. The attackers were a mob of pro-Trump rioters that had constructed a gallows on the Capitol steps to chants of “Hang Mike Pence!"
On that day, the mob assaulted nearly 140 police officers, four of whom would die by suicide in the following months. But at the end of the day of insurrection, five people had died. Lawmakers came very close to being captured and perhaps executed.
Less than a week later, the U.S. Chamber of Commerce, the nation’s largest business lobbying group, condemned President Trump’s conduct's in instigating the violence.
Chamber CEO Thomas Donohue said Trump's actions were “absolutely unacceptable and completely inexcusable.”
The Chamber, which has traditionally supported Republicans and backed a number of Trump’s policy initiatives, went a step further. It threatened to withdraw support to those members of Congress who objected to certifying President-elect Joe Biden’s victory -- a step the violent mob was trying to prevent.
“There are some members who, by their actions will have forfeited the support of the US Chamber of Commerce. Period. Full stop,” said Neil Bradley, the business lobby group’s chief policy officer.
Two months later, on March 5, Ashlee Rich Stephenson, the chamber’s senior political strategist, wrote in a memo, “We do not believe it is appropriate to judge members of Congress solely based on their votes on the electoral certification.”
The Business Community Faces a Reckoning
The storming of the Capitol building forced a reckoning for the nation's business community. Many companies reevaluated their political lobbying and spending, especially after having supported candidates that opposed certifying the election.
Since that fateful day of Jan. 6, many companies and business groups have stuck to their commitments to support the legitimacy of elections, knowing full well that democracy is a critical foundation for capitalism. American Express and Microsoft, have affirmed that they will not donate any money to the election objectors.
Other companies have found themselves compelled to move beyond campaign contributions to weigh in on political and social issues. As Michael Dell recently said, “If corporations cannot speak out on voting access and ballot security, what can they address?”
Just as some companies have refrained from giving, others have not. Indeed, 717 companies and industry groups have given more than $18 million to 143 of the 147 lawmakers who voted to overturn the election results, according to a report published last week by the nonprofit Citizens for Responsibility and Ethics in Washington.
Businesses that pledged to stop or pause their donations to those lawmakers have since given nearly $2.4 million directly to their campaigns or leadership political action committees. They include prominent companies such as Boeing, Pfizer, General Motors, Ford Motor, AT&T and UPS. The Chamber has given $7.67 million to political groups associated with lawmakers who voted to overturn the election or to PACs that support them.
The good news is that Toyota stopped giving to what CREW calls the "Sedition Caucus" after receiving pushback from the nonprofit. Hewlett Packard and Charles Schwab shut down their PACs entirely. Hallmark Cards went as far as requesting that Senators Josh Hawley (R-MO) and Roger Marshall (R-KS) return its PAC’s donations.
An Economic Issue
Nearly half of business owners said they are very concerned about the state of democracy in the United States while another third shared that they are somewhat concerned, according to a new poll conducted by the data intelligence company Morning Consult.
The survey of 400 businesses revealed that leaders in the business community "view democracy and voting rights as an economic issue," Rhett Buttle, president of the Public Private Strategies Institute told Business Insider.
Overall, most businesses believe that they have a major responsibility in upholding democracy. Buttle said businesses can rebuke undocumented voter fraud claims and push back against laws that make it difficult to vote.
A Dire Warning
Since leaving the helm of his hedge fund Bridgewater, Ray Dalio has become an amateur historian. His analysis of recent U.S. political trends has led him to a dire warning.
“There is an uncomfortably high probability that neither side will accept losing the 2024 elections. If that were to happen, rule of law and the constitution will be less influential than raw power. Imagine what that would mean for America as we know it.”
My take: Business leaders should stand up for truth and the rule of law because in doing so they also stand up for capitalism. January 6, 2021, is not an insignificant date. It should not be dismissed as a romp in the park as some GOP lawmakers would have you believe. It should be remembered for what it was, the day that American democracy was attacked.
Record Number of Jobs in 2021
Despite December's weak job gains, 2021 as a whole was the strongest in U.S. history with 6.4 million new jobs, and on a percentage basis, the best year for job growth since 1978.
Still, it should be noted that roughly 6.3 million Americans remain jobless. Labor force participation remains well below pre-pandemic levels at 61.9 percent, signaling many people have not yet returned to the workforce for whatever reason.
December's payroll gain of 199,000 brought last year's gain to 6.4 million new jobs. That's the biggest one-year gain on record. The Friday jobs report showed the unemployment rate fell more than expected to 3.9 percent, a pandemic-era low and near the 50-year low of 3.5 percent in February 2020.
Strong job creation has been a cornerstone of 2021’s robust economic growth, but the pace of gains could slow in the early part of 2022 because of uncertainty posed by the Omicron variant of Covid-19, especially in restaurants, hotels, and venues where people gather.
Job openings data published last week also showed that job openings remained elevated at 10.6 million in November. Quits, meanwhile, leaped to a record 4.5 million.
Oxford Economics expects employers to add 5 million payroll jobs in 2022, equal to an average of more than 400,000 a month. That would be a modest slowdown from this year, when U.S. employers added an average of 555,000 a month, or 6.1 million jobs through the first 11 months of 2021, according to the Labor Department. This year’s job increase is already the largest on record back to 1940.
Big Developments on the EV Front
There were five rather important developments on electric vehicles just this week alone. All foreshadow a coming massive wave of EVs in this country.
1) General Motors on Wednesday unveiled Chevy’s answer to Ford’s F-150 Lightning during the annual CES technology conference: a fully electric version of the Chevy Silverado with an estimated range of 400 miles on a single charge.
The Silverado EV is expected to launch in 2023 in two stages, starting with a $39,900 WT work truck that will be made available to a group of commercial fleets in the spring.
The all-electric pickup succeeds the GMC Hummer EV that went into production last year and is part of the automaker’s broader $35 billion investment in electric vehicles.
2) Chrysler announced that it will go all-electric by 2028. Chrysler plans to become an all-electric automaker by 2028 as parent company Stellantis seeks to revive the fortunes of the nearly 100-year-old car brand.
Stellantis, formed last year by the merger of Fiat Chrysler Automobiles NV and France’s PSA Group, said it would launch its first Chrysler battery-electric vehicle by 2025.
3) The Department of Energy says there are currently 13 EV battery plants planned or are under construction in the U.S., with all to be in production by 2025. I know of 16 such projects. Expect more to come.
EV battery production has been announced or is planned for in Ohio, Michigan Kentucky, Tennessee, Georgia, and Texas.
4) Ford Motor Co. said it will double the production of its first electric version of the F-150 pickup truck, America's bestselling vehicle.
The surge in production of the F-150 Lightning to 150,000 vehicles per year builds on the automaker's previous announcement in the fall that it would double the manufacturing from 40,000 to 80,000 vehicles at its new factory in Dearborn, Michigan.
Kumar Galhotra, Ford's president of the Americas, said the company has racked up nearly 200,000 reservations from people clamoring for an electric incarnation of the popular model.
5) Sony announced on Tuesday that it was establishing a subsidiary devoted to transportation, taking it a step closer to entering the fiercely competitive electric car market.
The Japanese electronics and entertainment giant unveiled a prototype electric car last year and has begun road-testing the vehicle in Europe.
Speaking at the Consumer Electronics Show in Las Vegas, Sony CEO Kenichiro Yoshida, unveiled a new concept version of the vehicle, an SUV that would allow passengers to play PlayStation 5 video games via the company’s console.
Housing Affordability is a Big Issue
Prediction: Housing affordability will increasingly become an issue for local economic developers in 2022.
The economic benefits of having increased access to quality, affordable housing are varied. They include greater tax generation, more jobs created, and increased job retention. Conversely, if a community becomes too expensive for workers to live in, then economic growth can be inhibited.
Unfortunately, astronomical prices for single-family homes, particularly in metropolitan suburbs, are becoming much the norm. Home prices were up 19.1% in October from the year before, according to the S&P CoreLogic Case-Shiller National home price index.
October's home price gain is the fourth-highest level in the 34 years the data has been tracked. The top three were the three months preceding October.
Price increases were strongest in the South and Southeast, but every region continued to see double-digit gains. All 20 cities tracked by Case Shiller saw price increases in the year ended in October, with Phoenix, Tampa, and Miami reporting the highest year-over-year gains.
Home prices in Phoenix were up 32.3 percent from last year, followed by Tampa with a 28.1 percent increase and Miami with a 25.7 percent increase.
The Miami Herald reports that rising prices in the Miami-Dade area could reach a point in which many people can’t afford homeownership, while more wealthy professionals from other parts of the country will keep relocating there.
I live in Dallas where home prices saw an unprecedented 25 percent spike in the latest nationwide housing comparison.
While some U.S. home markets are seeing a moderation in home price rises, the year-over-year increase for Dallas was the highest ever in the just-released S&P CoreLogic Case-Shiller Home Price Index.
Complicating matters is the fact that mortgage rates this past week rose to their highest levels since May 2020, driving up the costs associated with home buying at a time when home-sales prices are already near record highs.
The average rate for a 30-year fixed-rate loan was 3.22 percent, up from 3.11 percent last week and 2.65 percent one year ago, according to mortgage finance giant Freddie Mac.
Ultralow interest rates have been a major force in the housing boom of the last two years. But with the Federal Reserve on course to raise short-term interest rates this year, mortgage rates are likely to accompany them higher, making home affordability an even greater challenge.
Digital Talent Key to Community Competitiveness
Look, I don't bill myself as a futurist, but this much I do know -- digital technologies will continue to accelerate, propelling breakthroughs and disruptions across industry sectors. And communities will be affected big time.
The day is not so far off when most manufacturers may no longer need parts suppliers, as they will fashion their own parts through combined 3-D or 4-D printing with next-generation materials.
Retailers will wow customers through artificial intelligence, immersive and spatial computing to produce video-game-like experiences.
Science-based industries like pharma will incorporate virtualized functions into their research and development. All most companies' finance departments will become fully automated.
One big question for economic developers: Is your community producing the digital talent to pursue these technological changes?
If the answer is no, then you're already behind the eight ball. But you can play catch up. Your community can start making changes in workforce development programs that meet the needs of employers seeking digital talent.
If community leaders ignore this or refuse to go this route of creating a digital talent pipeline, then their community is destined to fall behind and become almost irrelevant. It will not be able to compete for capital investment projects in the future.
The trend has already begun toward shifting capital expenditure investments in automation technology. Robots are and will become ever-more intelligent and capable.
Consider that 50 percent of today’s work activities could be automated in the next few decades. All this will mean big changes to the future of work, labor costs, and public policy.
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