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U.S. Added 1.8 Million Jobs in July



The American economy gained 1.8 million jobs last month, even as the coronavirus surged in many parts of the country and newly reintroduced restrictions caused some businesses to close for a second time.

Still, the increase reported Friday by the Labor Department was well below the 4.8 million jump in jobs in June and a sign that momentum is slowing after a burst of economic activity in late spring. The unemployment rate fell to 10.2 percent.

Unemployment rate

By Allison McCann·Unemployment rates are seasonally adjusted. The government began collecting standardized unemployment statistics in 1948.·Source: Bureau of Labor Statistics

“The labor market continues to heal, which is encouraging, but there is a long road ahead,” said Michelle Meyer, head of U.S. economics at Bank of America.

She noted that 42 percent of the jobs lost since the pandemic hit had now been recovered, but warned the remainder would be harder to make up.

“In the very early stages of the recovery it’s easier to bring back workers quickly just to have a functioning operation,” she said. “It’s not a snap back to pre-Covid levels by any means. It’s a healing process.”

The Labor Department report follows the expiration of federal supplemental unemployment benefits of $600 a week late last month, payments that kept many households afloat while buoying the economy. Republicans and Democrats have been at odds over a new emergency package that could restore the supplement in full or in part.

Employment in state and local government arrested its decline in July — but the change was largely the result of a quirk in how the numbers are adjusted, and it left the combined work forces much smaller than February.

Local governments have cut about 970,000 jobs since the month before the pandemic took hold, while state governments now employ 200,000 fewer people, on a seasonally adjusted basis. Combined, they have shed nearly 6 percent of their pre-pandemic work force.

Economists and policymakers are concerned that the job losses will continue as local government budgets come under extreme strain. While July offered what seemed to be a reprieve, with state and local hiring ticking up, the improvement was heavily driven by education hiring as seasonal adjustments made the numbers look rosier. On an unadjusted basis, the figures showed continued declines.

“Typically, public-sector education employment declines in July,” the Bureau of Labor Statistics said in its release, but “declines occurred earlier than usual this year due to the pandemic, resulting in unusually large July increases” after the seasonal adjustment.

Aid to state and local governments remains a flash point in negotiations over a new federal relief package. Democrats are pushing for more assistance, something that congressional Republicans and the White House have resisted or opposed.

The Federal Reserve and Treasury Department have established a program to buy short-term municipal debt from certain state and local governments, but it has not been used much. The terms are not generous, experts have said, and many local governments are hoping for grants rather than loans that they would have to pay back.

Without help, further job losses could be in store.

“Unlike small businesses or restaurants — which respond immediately to economic shocks — deep budget and job cuts in state and local government will likely grow in the next few months and fester for years to come,” researchers at the Brookings Institution wrote in a recent post.

Credit…Zack Wittman for The New York Times

When the pandemic hit, David Espy was working as a safety manager overseeing the construction of a resort hotel at Walt Disney World. But in mid-March, when virus-related shutdowns forced entertainment venues to close, Mr. Espy lost his job.

After being unemployed for one month, Mr. Espy was hired by a consulting company called Safety, Solutions and Supply.

The job pays Mr. Espy, 59, significantly less than his old one. Before the pandemic, he was making $125,000 a year. Now, he works roughly 12 hours a day, five days a week, and makes about $75,000.

“I would call myself underemployed,” he said. “I’m working at a reduced rate just to pay my bills.”

The new job does not pay him enough to cover his expenses, including two car loans and the mortgage on his house in Valrico, Fla., where he lives with his wife and a 20-year-old son. To make ends meet, he is spending $2,000 of his savings each month.

Mr. Espy said that at that rate, he would deplete his savings within nine months, and that he was worried about how to pay for his son’s college housing and books in the coming year.

Black men continue to have the highest rate of unemployment

Unemployment rates by race for men, women and overall

By Allison McCann·Rates are seasonally adjusted except those for Asian men and women.·Source: Bureau of Labor Statistics

Black workers have made limited progress toward lowering their very high unemployment rate even as the jobless situation improves for their white counterparts, showing the uneven distribution of the pandemic’s economic pain.

The July jobs report from the Labor Department, released Friday, shows that the seasonally adjusted unemployment rate for Black adults hovered at 14.6 percent in July, down slightly from 15.4 percent the prior month and a little more than two percentage points from its peak in May — but still more than double its 5.8 percent rate in February, before the pandemic took hold.

Unemployment for white workers eased to 9.2 percent in July. While that’s up sharply from 3.1 percent in February, it has fallen about five percentage points from its April peak.

The unemployment rate traces those who are out of work but are looking for new jobs, or who are on temporary layoff, and Black workers have a much higher unemployment rate than whites in the best of times. They are also often slower to regain work in recoveries and expansions.

Credit…Lynsey Weatherspoon for The New York Times

Unemployment among other minority groups also remains elevated. The rate for Hispanic workers was at 12.9 percent, up from 4.4 percent before the crisis began, and Asian workers — who previously had the lowest jobless rate of any demographic — posted a 12 percent unemployment rate in July.

Economic officials have been concerned by the reality that job losses have been concentrated.

“The rise in joblessness has been especially severe for lower-wage workers, for women, and for African Americans and Hispanics,” Jerome H. Powell, the chairman of the Federal Reserve, said at a news conference in late July. “This reversal of economic fortune has upended many lives and created great uncertainty about the future.”

Credit…James Estrin/The New York Times

For Jackie Anscher, the closing of the boutique fitness studio where she taught spinning classes in Long Beach, N.Y., until March meant more than the loss of a job. It was the end of something she was passionate about and halted the deep connections she had built with clients.

“I miss it like I’ve lost a limb,” she said. “What started as an exercise class encompassed so much more. I’m a therapist on a bike. I’m sure a lot of people can relate to the emotional loss.”

Ms. Anscher, who taught eight to 10 classes a week, said her financial situation was stable because of her husband’s job. But there’s nowhere to go to keep teaching as gyms remain closed. “This was a forced retirement,” said Ms. Anscher, 58. “I’m not ready to retire. I’m waiting to see how I can pick up the pieces.”

Stephanie Horowitz, the studio’s owner, didn’t think the moratorium on classes would be the end of her business, Ocean Ride, when it was imposed in March. She offered spinning classes over the internet, she said, “but it never took off the way we needed it to.”

By mid-July, the financial drain was too great, and she decided to shut down after seven years. Some of the bikes have been sold, and Ms. Horowitz has been cleaning out the space on the South Shore of Long Island, a few blocks from the Atlantic. Seven part-time workers, including Ms. Anscher, have lost their jobs.

“We were a staple in the community and we had a good run,” said Ms. Horowitz, 40. “It’s emotional. We had just bought new bikes last year. Who knows what the future holds for any of us?”

Credit…Scott Heins/Getty Images

After the recent lapse of a federal supplement to unemployment payments, and with a patchwork of eviction moratoriums either at an end or set to expire soon, 30 million to 40 million tenants risk losing their homes in the coming months, according to a report released Friday by dozens of academic researchers and housing advocates.

Even if the actual number is a fraction of that figure, it would still be several times the current annual rate of eviction filings — about 3.7 million a year. And it could have a cascade of effects that erode affordable housing and weaken an already hobbled housing system long after the coronavirus crisis has subsided, by pushing small landlords into foreclosure and further weakening state and local budgets as property-tax collections fall behind.

Citing a range of public and private data sources, the report noted that a broad swath of renters had until recently been protected by the $600 a month in supplemental unemployment payments, but many are now falling behind. These bills are accruing just as several federal, state and local eviction moratoriums are expiring, and amid a continued surge in the virus in many hot spots, and a darkening outlook for the economy.

“The public costs of eviction are far-reaching,” the report said. “Individuals experiencing displacement due to eviction are more likely to need emergency shelter and rehousing, use inpatient and emergency medical services, require child welfare services, and experience the criminal legal system, among other harms.”

Stocks on Wall Street lost their footing on Friday, as investors moved cautiously amid escalating tensions between the United States and China and little indication that lawmakers in Washington were close to resolving their differences over the next economic aid package.

It helped, somewhat, that the monthly employment report showed that American employers added 1.8 million jobs in July, continuing a rebound that began earlier this year. But even in that report there were reasons for caution: The rate of hiring slowed dramatically from June, and the unemployment rate remained above 10 percent.

The S&P 500 fell less than half a percent at the start of trading Friday, but it was the index’s first decline in a week. Gains until now have brought the S&P 500 close to its late February record, meaning that stocks have recouped nearly all of the losses they suffered as the coronavirus pandemic first began to spread in the United States.

Hanging over Wall Street was President Trump’s decision late Thursday to order sweeping restrictions on two popular Chinese social media networks, TikTok and WeChat. Two executive orders, to take effect in 45 days, cited national security concerns to bar any transactions with WeChat or TikTok by any person or involving any property subject to the jurisdiction of the United States.

The moves are expected to prompt retaliation from China. A Chinese Ministry of Foreign Affairs spokesman called the executive orders a “nakedly hegemonic act.” Shares in Tencent, the parent company of WeChat, fell almost 6 percent, and markets in Asia dropped.

Investors were also watching talks in Washington over what shape another economic aid package would take. Federal unemployment benefits, a moratorium on evictions and aid for small businesses shuttered during the pandemic hang in the balance, and economists have repeatedly warned that failure to extend the assistance could imperil the American economy.

With little to suggest a compromise was in sight, Steven Mnuchin, the Treasury secretary, said the negotiators were expected to touch base by phone on Friday to determine whether it would be worthwhile to convene in person for more talks.

Credit…Agence France-Presse — Getty Images

China’s exports rose last month at their fastest pace so far this year, the country’s General Administration of Customs announced on Friday.

Chinese factories ran at full throttle this summer, after the government brought the coronavirus almost completely under control within the nation’s borders. Exports were up 7.2 percent in July compared with a year ago, far above what economists had predicted — and even as the pandemic continued to ravage other nations’ economies.

By contrast, the value of China’s imports actually shrank 1.4 percent last month, a worse performance than the modest increase economists had expected. The physical volumes of China’s imports kept rising last month, but that was more than offset by a global fall in prices for oil and other commodities that the country buys from abroad.

The combination of rising exports and cheaper imports means that China’s trade surplus is widening sharply. That could trigger trade tensions in the months ahead, particularly as other countries face job losses from economic slowdowns triggered by the virus.

Despite Friday’s strong export data, share prices had fallen 1.7 percent by early afternoon on China’s stock exchanges. Investors worried about President Trump’s executive order on Thursday that announced broad restrictions on two popular Chinese social media networks, TikTok and WeChat.

Credit…Adam Dean for The New York Times

Late Thursday, the Trump administration issued an executive order that could pull WeChat, China’s most important app, from Apple and Google stores across the world and prevent American companies from doing business with its parent company, Tencent. Light on details, the decree could prove cosmetic, crushing or something in between.

Taken together with Thursday’s twin order against the Chinese-owned video app TikTok, the move against WeChat marks a shift in the American approach to the Great Firewall, which for years has kept companies like Facebook and Google from operating in China. Restricting WeChat and TikTok could be the first steps in an eye-for-an-eye reprisal.

Paul Mozur and Raymond Zhong of The Times write:

In China, WeChat does more than any app rightfully should. People use it to talk, shop, share photos, pay bills, get their news and send money.

With much of the Chinese internet locked behind a wall of filters and censors, the country’s everything app is also one of the few digital bridges connecting China to the rest of the world. It is the way exchange students talk to their families, immigrants keep up with relatives and much of the Chinese diaspora swaps memes, gossip and videos.

If the Trump administration’s executive order is enforced strongly when it takes effect in 45 days, it will take dead aim at China’s single most groundbreaking internet product, which 1.2 billion people use every month. An effective ban on the app in the United States would cut short millions of conversations between investors, business partners, family members and friends. The threat alone will likely start a new chapter in the deepening standoff between China and the United States over the future of technology.

Credit…Paige Vickers

Denmark’s stock market is having a stellar year so far.

The stock indexes for the tiny northern European nation are easily beating out the S&P 500, which is up slightly for the year, and Japan’s Nikkei 225 and the Stoxx Europe 600 index, which are both in negative territory.

The Danish indexes, such as the OMX Copenhagen 25, are up more than 14 percent in 2020, or more than 20 percent if you calculate its return in dollar terms. That’s within spitting distance of other market bright spots, like the tech-heavy Nasdaq Composite, which has climbed more than 23 percent on the strength of lockdown-friendly companies like Amazon and Apple.

What accounts for such a stellar performance? Experts say it’s a combination of several factors:

  • an effective response to the coronavirus crisis (assisted by the country’s robust social safety net)

  • a collection of companies well positioned to weather the crisis

  • a knack for well-balanced management

The main contributor to the Danish stocks’ performance is a matter of what the companies do rather than where they do it: Roughly 50 percent of the market capitalization of Danish stocks is in almost recession-proof health care and pharmaceutical companies — a solid portfolio in the midst of a global pandemic.

“The mix of the Danish market is completely different than you see in the global market, and there you have, sort of, the explanation for why has the Danish market performed so much better,” said Carsten Jantzen Leth, head of Danish Equities at Nordea Asset Management.

Here’s some of the news you might have missed.

  • The Evening Standard, a free daily newspaper in London, is planning to lay off 139 employees, or about a third of the staff, as well as other noncontract workers. The paper’s main readership — commuters in central London — has all but vanished because of the pandemic, but the company was already facing financial difficulty, having reported a pre-tax loss of £13.6 million ($17.8 million) last year. A spokesperson said the company would focus on growing the paper’s digital and live events business. .

  • Uber said on Thursday that its revenue in the second quarter dropped 29 percent to $2.2 billion from a year ago and that its net loss narrowed to $1.8 billion, as the ride-hailing giant deals with the fallout from the coronavirus pandemic. The revenue decline was the steepest since Uber went public in May 2019.

  • Rupert Murdoch’s News Corp reported a $401 million loss for the three months ending in June, with much of the decline related to impairment charges for some of its assets in Britain and Australia and restructuring costs related to the coronavirus pandemic. The company revealed for the first time financial details of its Dow Jones division, the group that publishes The Wall Street Journal. The unit was News Corp’s only growing business on an annual basis.

  • With operations ceased for the entirety of the quarter and most of its employees laid off or furloughed, AMC Entertainment, the largest theater chain in the United States, posted a quarterly loss for the period ended June of $561.2 million. Revenues totaled $18.9 million, a 98.7 percent plunge from the same period last year for the Kansas-based company. The coronavirus has laid waste to AMC’s 1,000 theaters scattered across the globe, calling into question whether it would be able to stay financially viable.

  • The Trump administration is considering forcing Chinese companies to delist their shares from stock exchanges in the United States unless they share their audits with American regulators, a move that would further ratchet up tension between the world’s two largest economies. The President’s Working Group on Financial Markets recommended the move in a report released on Thursday as a way to protect American investors from what it described as the risks posed by Chinese companies.

Credit…Eduardo Munoz/Reuters

With 13 million fewer people working since the pandemic hit, according to the monthly jobs report released on Friday, the economist Kenneth S. Rogoff — an expert on financial crises — says the American economy is at a precarious point.

“We are going to clock the worst recession since the Great Depression, regardless of how fast we bounce back at this point,” he said. “The virus is coming back, hard and fast. It really does look like this is going to have profound long-term impacts.”

A Harvard University professor, Mr. Rogoff is a noted historian of economic calamities. His books include “This Time Is Different: Eight Centuries of Financial Folly,” written with Carmen M. Reinhart in 2009.

Mr. Rogoff said the current state of virus was reminiscent of 1918 Spanish Flu, in which the second wave of virus proved even more devastating from an economic and public health perspective than the first. At this point, the economic damage from the coronavirus has far surpassed the 2008 recession, he said.

Small businesses will be hit hardest, Mr. Rogoff said.

“We’re going to start to see a lot of small businesses fall by the wayside, a lot of people who are unemployed become chronically unemployed,” he said. “We’re in very, very dangerous territory.”

Large corporations will be more shielded from the impact of the virus, accelerating their ability to crush smaller competitors, a trend that the United States has been experiencing over the last 40 years, he said.

“They have cash reserves to survive this,” he said. “And so their monopoly power is going to grow.”

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Minneapolis Police 3rd Precinct Head To Business Owner: ‘Reinforcements Aren’t Coming Any Time Soon’ – WCCO




MINNEAPOLIS (WCCO) — There’s no long-term plan, and reinforcements aren’t coming anytime soon.

That’s what the head of the Minneapolis Police Department’s 3rd Precinct said in an email to a business owner who shared that his employees are scared to go to work.

READ MORE: Temporary Minneapolis Police 3rd Precinct Plan Dropped After Negotiations With Property Owners Reach Impasse

The neighborhood block of shops near East 48th Street and Chicago Avenue has felt the impact of recent crime. Craig Paulson owns Pedego Electric Bikes.

“Couple robberies. Two, three robberies in the area, and some break-ins and a couple of crazy stunts,” Paulson said.

Surveillance video shows a group accused of robbing Chad Stamps’ wife inside her gift shop, 14 Hill, during the lunch hour earlier this month.

“So they stole our car, stole our wallet, checkbook, everything,” Stamps said.

Stamps says one of the suspects punched someone trying to help her.

There’s a window broken at Town Hall Tap. Someone opened fire inside the Pizza Hut. The employee who was there has now quit. And a car flying down the street crashed into a bus stop and business.

Russell Hrubesky lives and works nearby.

“I’m scared for my coworkers, but it’s worrisome to see people that I care about just kind of in a dangerous area,” Hrubesky said.

A nearby business relayed a similar message to the inspector of the 3rd Precinct via email. They also sharing it’s hard to find employees who want to work in the area, and they are asking for a long-term plan.

Here is the response they received from Inspector Sean McGinty:

As far as a long-term plan I don’t have one. I have lost 30% of my street officers since the end of May. Budget cuts from COVID-19 and an additional 1.5 million from the council in August we have let go 17 CSO’s and cancelled a recruit class of 29. A potential Cadet class slated for January of 2021 was also eliminated. I takes about a year to get a police Officer onto the streets with hiring, backgrounds and field training so reinforcements aren’t coming anytime soon. We are doing everything we can with what we have. I hate to see great businesses like yours and the rest of your corridor being victimized and feeling unsafe. Please let me know if you have any more questions.

“It does erode the confidence in the neighborhood of the people and being able to feel safe coming down here,” Stamps said.

The Stamps store was hit a year ago, too. They say they’re not going anywhere, but lawlessness can’t continue.

“Nothing changed before and nothing’s changed now, except that these criminals have gotten more emboldened about doing this,” Stamps said.

Pedego Electric Bikes recently added a lock and doorbell.

“To say it doesn’t make you a little bit nervous, of course it does. And nobody wants a gun drawn on them. It’s always in the back of your mind,” Paulson said.

Lt. Bob Kroll, president of the Minneapolis Police Officers Federation, gave WCCO this statement:

The Inspector gave an excellent summary. I think the only plan city leadership has is to further decimate its police department. Businesses and people will continue to flee the city. And rightfully so.

Minneapolis City Councilmember Jeremy Schroeder, whose ward covers part of the third precinct, said this:

The Minneapolis Police Department currently has a budget of more than $180,000,000. Chief Arradondo reassured the City Council and the public this week that MPD is fully staffed in terms of patrols. The inspector’s stated lack of a plan is frustrating given the severity of safety concerns and the fact that MPD today has one of the largest budgets of any City department.

Council Vice President Andrea Jenkins gave WCCO this statement:

I am deeply disturbed by the increase in violent break-in and robberies specifically in this area near 48th and Chicago, and throughout the city. Small business is the lifeblood of this community and we cannot afford to allow them to continue to suffer these losses. Inspector McGinty and his staff have made some arrests in these incidents, and will continue to do their jobs with the resources that have on hand, but we know that preventing crime has to be a part of our Continuum of Public Safety as well. That means more investments in job training and opportunities, access to safe and affordable housing and other measures to steer young people towards positive pursuits.

The message from the community: City leaders need to sort out what’s going on.

“Kick it into gear, man. You got to figure it out,” Hrubesky said.

The inspector’s email came just a day after the chief assured city council members there were enough patrol officers to respond.

Minneapolis Police told WCCO, “In these very challenging times of COVID, budget cuts and retirements, the MPD continues to evaluate and reallocate the resources that we currently have to best serve the City of Minneapolis, focusing on the core responsibilities of a police department; responding to 911 calls and investigations.”

Police also said the inspector was referencing the George Floyd memorial at East Street and Chicago Avenue when he said he didn’t have a plan. The business owner says that site wasn’t mentioned in their exchange.

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Southport Lanes Bowling Alley Going Out Of Business After 98 Years Due To COVID-19 – CBS Chicago




CHICAGO (CBS) — The Southport Lanes bowling alley and its predecessor, the Nook, survived the Great Depression, the Spanish Flu, and some of Chicago’s worst weather – but not COVID-19.

The virus has wiped out yet another well-known Chicago business.

As CBS 2’s Marissa Parra reported Thursday, stepping into Southport Lanes, 3325 N. Southport Ave., is like stepping back in time. It’s a place where people, not machines, set the pins – and it’s one of the few places left in the country where that happens.

“So here’s the bowling lanes that have been around since 1920,” Southport Lanes general manager Phil Carneol said as he displayed the vintage setup.

From bartender to general manager, Carneol has spent more time at Southport Lanes than he has at home.

“I started bartending here when I was a snotty-nosed kid in 1991,” Carneol said.

The building was built in 1900 by Schlitz Brewery and was originally named the Nook. It was renamed Southport Lanes in 1922, when the 98-year history that is now ending began.

And if the walls could talk, you probably wouldn’t want to know what they’d say.

“This was an old speakeasy, where supposedly, there was a den of ill repute upstairs,” Carneol said. “Supposedly, there was gambling in the back.”

Southport Lanes’ website notes that there is still a dumbwaiter that was once used to bring refreshments to the escorts at the brothel upstairs and their clients. There is also a legend that Mayor Anton Cermak once held a weekly poker game in one of the secret rooms.

After prohibition, a new addition was built east of the bar room. It originally housed a gambling facility with ties to racetracks round the country. As the website put it, “In essence, it was an illegal off track betting parlor.”

But those same walls that survived Prohibition, the 1918 flu, and world wars will not survive COVID-19.

“I was waiting for the phone call,” Carneol said, “and I see the numbers.”

According to a study by Yelp, this is part of a national trend. From the beginning of March through the end of August, Chicago businesses have seen nearly 2,000 temporary closures and more than 3,000 permanent closures.

“We started having to sanitize bowling balls and pool sticks,” Carneol said.

Tedious tasks, expensive cleaning, and less room for paying diners means Southport Lanes can’t make ends meet.

“You’re just not making any money,” Carneol said. “The concern I have is there’s a lot of people who are going to be out of work.”

And for the place that has served the North Side of Chicago for almost a century, Carneol said it is like getting ready to hug an old friend for the last time.

“I’m going to miss the drips on Lane 4, you know?” he said. “It’s like you know your own kid, you know? It’s like you know your own family member.”

Southport Lanes opened for the evening as usual on Thursday, but you have a week and a half to say your goodbyes.

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Schumpeter – What is stakeholder capitalism? | Business




“WHEN DID Walmart grow a conscience?” The question, asked approvingly in a Boston Globe headline last year, would have made Milton Friedman turn in his grave. In a landmark New York Times Magazine essay, whose 50th anniversary fell on September 13th, the Nobel-prizewinning economist sought from the first paragraph to tear to shreds any notion that businesses should have social responsibilities. Employment? Discrimination? Pollution? Mere “catchwords”, he declared. Only businessmen could have responsibilities. And their sole one as managers, as he saw it, was to a firm’s owners, whose desires “generally will be to make as much money as possible while conforming to the basic rules of the society”. It is hard to find a punchier opening set of paragraphs anywhere in the annals of business.

It is also hard to find a better example of their embodiment than Walmart. Listed on the stockmarket the year Friedman’s article was published, it morphed from Sam Walton’s hometown grocery store into the “beast of Bentonville”, with a reputation for low prices as well as beating up suppliers and bossing staff. Its shareholders made out like bandits; since the early 1970s, its share price has ballooned by a factor of more than 2,000, compared with 31 for the S&P 500 index of large firms. Yet in recent years the company has mellowed. It now champions green energy and gay rights. The Globe’s tribute appeared shortly after Doug McMillon, its chief executive, reacted to savage shootings in Walmart stores by ending the sale of some ammunition and lobbying the government for more gun control. This year he became chairman of the Business Roundtable, a coven of American business leaders who profess they want to abandon Friedman’s doctrine of shareholder primacy in favour of customers, employees and others.

In partisan America, riven by gender, race and income inequality, such “stakeholderism” is all the rage. But there is pushback. To celebrate the half-centenary of Friedman’s essay, the University of Chicago, his alma mater, held an online forum at its Booth School of Business in which advocates of his creed argued that giving bosses too much latitude may make things worse for stakeholders, not better. The crux of the problem, they pointed out, was the near-impossibility of balancing the competing interests of stakeholders in any way that does not give God-like powers to executives (what Friedman called the all-in-one “legislator, executive and jurist”). Usefully, some provided data to support their arguments.

Start with Walmart’s ammunition bans—a firecracker lobbed into one of America’s most divisive issues. The retailer portrayed them as mere safety measures, but the National Rifle Association, a lobby group, said they pandered to “anti-gun elites” and predicted customers would boycott Walmart. Indeed some did. Marcus Painter of Saint Louis University has crunched smartphone data measuring foot traffic before and after the restrictions. He found that on average monthly store visits to Walmart in heavily Republican districts fell by up to 10% compared with rival stores; in strongly Democratic areas they rose by as much as 3.4%. Moreover, the apparent Republican boycott continued for months. (Walmart did not respond to requests for comment.)

It is possible that the retailer’s stance helped win over new (perhaps wealthier) consumers. It may even have benefited Walmart’s bottom line—and shareholders. Yet it also showed that amid increasingly polarised politics, what is good for one set of stakeholders may be anathema to another. Whether it is Hobby Lobby, a Christian chain of craft stores from Oklahoma, denying staff contraceptive insurance on religious grounds, or Nike supporting an American football player’s decision to protest against police brutality, some stakeholders will always object to what is done on behalf of others. There are more quotidian trade-offs. A General Motors shareholder who is also an employee may want higher salaries rather than higher profits; a dollar spent on pollution control may be a dollar less spent on worker retraining. But weighing up the costs and benefits to different groups is fraught with difficulty.

Some bosses claim they can do this, keen to win public praise and placate politicians. But they are insincere stewards, according to Lucian Bebchuk, Kobi Kastiel and Roberto Tallarita, of Harvard Law School. Their analysis of so-called constituency statutes in more than 30 states, which give bosses the right to consider stakeholder interests when considering the sale of their company, is sobering. It found that between 2000 and 2019 bosses did not negotiate for any restrictions on the freedom of the buyer to fire employees in 95% of sales of public firms to private-equity groups. Executives feathered the nests of shareholders—and themselves.

Talk is cheap

Such hypocrisy is rife. Aneesh Raghunandan of the London School of Economics and Shiva Rajgopal of Columbia Business School argued earlier this year that many of the 183 firms that signed the Business Roundtable statement on corporate purpose had failed to “walk the talk” in the preceding four years. They had higher environmental and labour compliance violations than peers and spent more on lobbying, for instance. Mr Bebchuk and others argue that the “illusory hope” of stakeholderism could make things worse for stakeholders by impeding policies, such as tax reform, antitrust regulation and carbon taxes, if it encourages the government blithely to give executives freedom to regulate their own activities.

To be sure, trade-offs are an inevitable part of shareholder capitalism, too: between short- and long-term investors, for instance. But stakeholders outnumber shareholders, making for more disparate interests to balance. Moreover, by investing in funds linked to corporate values, or by directly influencing boards, shareholders can show that their goals increasingly extend beyond profit maximisation to broader societal welfare. Shareholders retain primacy, as they should, but they are free to push for different trade-offs if they prefer.

This article appeared in the Business section of the print edition under the headline “The perils of stakeholderism”

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