Latest news with #MiltonFriedman
Forbes
4 days ago
- Business
- Forbes
The Current Stupid CEO Flex: Everybody's Replaceable (Including Them)
caucasian senior businessman - spooky portrait The Wall Street Journal had an interesting recent article about a change in the way executives talk about workers. What they think of as artificial intelligence has given them the confidence to say that everyone is replaceable. Wholesale elimination of jobs has been developing for at least the last decade — much longer if you consider the broader development of automation. Will new AI technologies enable even more job destruction? Certainly, but it will come at a cost and likely spread further than prudent and intelligent business strategies would allow. Possibly including their own jobs. The Myth Of Profit Maximization Chief executives typically look to improve the fortunes of a company and returns to shareholders. Many take to heart the argument Milton Friedman made in a 1970 New York Times op-ed that the 'social responsibility of business is to increase its profits.' That has been further interpreted as meaning the responsibility to maximize return on investment to shareholders. This is both legally incorrect and strategically troubling and mistaken. Experts in corporate governance have, across many years, tried to find a legal basis for the prescription. It has yet to appear. In the 2014 Supreme Court decision in 'Burwell, Secretary of Health and Huma Services, et. al. v. Hobby Lobby Stores,' the Court addressed whether a for-profit corporation could give money to religious causes. 'While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so,' Justice Samuel Alito wrote for the Court.' Corporate law and governance also recognize that a company's board and executives have duties to the company. They are charged with strategy and operations for the company's benefit, with the shareholder's benefit being an offshoot. In basic calculus, math students learn that you cannot maximize for more than one variable at a time. That doesn't necessarily mean one factor cannot benefit while another does as well, but maximization mathematically means something has to come first. Everything becomes subject to that desire. Confusing People And Machines There is a peculiar attitude among executives, which has been around for a long time, that people are infinitely extensible. The signs come up with every wave of layoffs, and if you've ever been one of the people who survived a round of staff cuts, you have likely experienced this. Those left are expected to pick up and complete the extra work with neither additional pay nor schedule adjustments. Everything is supposed to be compressible. Employees are expected to contort themselves, making operations look as though they were normal. Forbes contributor Bryan Robinson discussed a study last year that noted 88% of layoff survivors experience burnout, and 25% suffer from mental and physical exhaustion. A developing and increasing trend is the desire to replace people with actual machines. Bring in not only the robots to do everything physical, but software to do everything mental. Chief executives want to make shareholders happy, which drives up share prices and the CEO's own holdings. Replace people with mechanisms to drive labor costs down and profits up. Ten years ago, I wrote about how automation was already coming for white collar jobs, including professional ones. A study at the same time said 'highly creative' professionals would remain safe. That didn't last long. When all work becomes something to be done by mechanisms — robots, artificial intelligence, or people — human needs become unimportant. Ultimately, there is only the need to cut costs, to increase profits. Three Rising Risks The decisions may seem obvious to the MBA crowd, but they bring three risks to business. One is the loss of institutional knowledge. It is people who hold the understanding of how processes work, the things a company needs to know about its customers. Again, this has been known for many decades. Lose people and you lose understanding. In theory, a company could use technology to capture and store much of this, but they don't tend to. Next is the risk of mediocrity, which is particularly true of large language model software that works on complex statistical algorithms. These products don't think. Instead, they're trained on vast examples of how words connect and then respond accordingly. What seems like intelligence is clever repetition, in a way. This brings up average responses. Furthermore, increasingly repeating what others have done undercuts creativity and innovation. The third and biggest risk is the undermining of the jobs and incomes of a growing portion of the populace. What happens when fewer and fewer people can make a good living? Who's going to buy all the products and services that companies need to sell to make their growing profits?
West Australian
6 days ago
- Business
- West Australian
Dimitri Burshtein & Alex Sanchez: Taxpayer-funded green bank serves ‘grifters and rent-seekers'
The Clean Energy Finance Corporation is one of several off-budget entities operated by the Commonwealth government that, as S&P has observed, are 'increasingly obfuscating Australia's fiscal position and borrowing needs.' It is time to begin an orderly wind-down of the CEFC with the proceeds redirected toward reducing debt and easing the burden of interest payments. Like its Future Fund cousins, the CEFC no longer fulfils a necessary role, if, indeed, it ever served a purpose beyond centralised economic planning. Established in 2012, the CEFC was created to channel finance into the clean energy sector. Initially seeded with $10 billion in borrowed funds, it now manages roughly $30b including $19b earmarked for the Rewiring the Nation initiative. These commitments contribute to Australia's mounting national debt pile, which now approaches $1 trillion dollars. The CEFC is tasked with generating returns of 2 to 3 per cent above the five-year government bond rate yet it does not release data on its investment performance, raising questions as to whether it is achieving its benchmark. Had the CEFC actually achieved its target mandate, it would today be managing well over $50 billion. It is classified as an off-budget entity on the assumption that it generates commercial returns yet no robust evidence supports this premise. The Government cannot have it both ways. It cannot say that the CEFC does not crowd out private capital at the same time as spruiking that private money is freely flowing. If private money is flowing, logic dictates that there can no longer be a case for the CEFC. When the CEFC was formed, clean energy investment faced considerable hurdles: capital was scarce, perceived risks were high, and the technologies were still emerging. Today, the landscape has fundamentally changed. Private capital is plentiful and actively flowing into renewable projects. Risk-adjusted returns are attractive, and technologies have matured. Simply, anye market failure that once may have justified government involvement no longer exists. There is another contradiction with the CEFC — this time between its stated goals and its actual accountability. While it claims to support Australia's transition to net zero emissions by 2050, it has yet to produce clear, measurable data demonstrating emissions reductions attributable to its activities. Despite more than a decade of operation, its reports and public statements are heavy on references to 'net zero' but light on verifiable outcomes. For an organisation that purports to be outcomes-focused, this lack of transparent emissions reduction data is striking. In focusing on activity rather than results, the CEFC serves as a textbook example of Milton Friedman's observation that 'nothing is so permanent as a temporary government program.' Its persistence appears to reflect not market need, but a desire to preserve high-paying public sector jobs and ongoing benefits to grifters and rent-seekers. Effectiveness and efficiency comparisons to the Future Fund are also illuminating. The Future Fund publishes quarterly portfolio performance reports while the CEFC provides no performance information. In terms of scale, the Future Fund manages $300 billion with 305 employees, whereas the CEFC manages $30 billion with 152 staff. Such contrasts are striking. Proponents may argue that the CEFC reduces project financing costs or facilitates complex transactions. But at what cost to taxpayers. And for how long must the public subsidise a now-thriving, profitable industry? Each resource consumed by the CEFC is a resource not used elsewhere for better purposes. This means that rather than closing investment gaps, the CEFC now just distorts the market. By supplying subsidised capital backed by taxpayers, it competes with private investors, crowding them out and diminishing market discipline. In doing so, it transfers financial risk from the private sector to the taxpayer. Considering mounting budgetary pressures, there is little justification for maintaining a government-run, taxpayer-funded 'green bank.' Especially when the private sector is already well-equipped to drive the clean energy transition, free from the moral hazards and political interference associated with public funding. Every dollar committed to a redundant institution like the CEFC is a dollar not used to reduce public debt or fund essential services. The CEFC may have had a valid role in 2012. But in 2025, that role has essentially vanished. It is time to shutter the CEFC, liquidate its assets, reduce national debt, and allow the private market to operate without unnecessary government intervention. Dimitri Burshtein is a principal at Eminence Advisory and former government policy analyst. Alex Sanchez is an economist and former adviser to the Albanese Government.
News18
17-07-2025
- Business
- News18
Who Really Gains from the Big Beautiful Bill?
The bill may well be remembered not for its symbolism, but for the long-term structural imbalances it entrenched, in debt, in distribution, and in institutional accountability 'The burden of government is not measured by how much it taxes, but by how much it spends." As Milton Friedman wrote in Free to Choose (1980), this principle illustrates the foundational economic concept that public expenditure, whether financed by taxes or debt, diverts scarce resources from the private sector. Four decades later, President Donald Trump's newly enacted 'One Big Beautiful Bill" stands as a direct challenge to that maxim. The legislation is expansive in rhetoric and even more so in fiscal consequence. It combines permanent tax cuts with historic spending increases and deep cuts to welfare, all at an estimated cost of $3.3 trillion over the next decade. At nearly 900 pages, the legislation is not only one of the most extensive tax-and-spend packages in recent American history, but it also represents a significant structural shift in federal fiscal architecture. The Congressional Budget Office (CBO) estimates that the bill will increase the federal budget deficit by 1.3 percentage points of GDP annually over the next ten years. If temporary provisions are extended, as political economy suggests they often are, the Penn Wharton Budget Model projects the total deficit impact could rise to $5.5 trillion by 2034, raising the debt-to-GDP ratio to 127 percent. This would exceed the peak debt level recorded in the aftermath of World War II. The core of the bill centres on the permanent extension of the 2017 Tax Cuts and Jobs Act. While proponents argue this will preserve current tax rates for middle-income households, the distributional benefits remain highly skewed. According to estimates from the Tax Policy Centre, the top 0.1 percent of earners will experience an average annual after-tax gain of $290,000. By contrast, households earning below $18,000 per annum will see their after-tax income decline by approximately $165, once changes to Medicaid and food assistance are included. The tax provisions are supplemented by a range of new deductions, including a $25,000 deduction for tip income, a $12,500 deduction for overtime pay, and a $10,000 deduction for interest on car loans for domestically manufactured vehicles. These provisions are, however, temporary and will expire after the 2028 tax year. More importantly, these deductions are income-capped and structured in such a way that the majority of benefits accrue to middle- and upper-middle-income earners. Households earning more than $150,000 annually will see these benefits phased out entirely. On the expenditure side, the legislation makes structural changes to the American welfare state. Medicaid will see the introduction of stringent work requirements, increased eligibility checks, and mandatory cost-sharing for recipients. Enrollees with incomes between 100 and 138 percent of the federal poverty line (approximately $33,000 for a family of four) could face out-of-pocket healthcare costs of up to $1,650 per year. These changes, according to the CBO, will result in 11.8 million individuals losing Medicaid coverage by 2034. An additional 4.2 million are projected to lose coverage due to the rollback of Affordable Care Act subsidies. The bill also restructures the Supplemental Nutrition Assistance Program (SNAP). States will now be required to contribute between 5 percent and 15 percent of benefit costs if their administrative error rates exceed 6 percent. Simultaneously, new federal work requirements will apply to able-bodied adults without dependents and to parents of children aged 14 and above. These measures are expected to remove 270,000 vulnerable individuals from SNAP rolls over the next three years, according to the Centre on Budget and Policy Priorities. In the domain of energy policy, the legislation repeals key tax credits introduced under the Inflation Reduction Act (IRA) for wind, solar, and battery storage projects. While these credits had catalyzed a surge in renewable investment, their removal is expected to reverse that trajectory. Princeton University's ZERO Lab estimates that clean energy projects initiated after 2026 will face capital cost increases of up to 50 percent. A 2024 Energy Innovation analysis projects that the average electricity bill in Texas will rise by $777 annually by 2035, with similar increases expected in other high-demand states such as California and Michigan. The repeal occurs at a time when national electricity demand is projected to increase by 15 to 20 percent over the next decade, driven by the expansion of artificial intelligence infrastructure and electrified transport. On education, the bill eliminates all existing income-driven student loan repayment plans, replacing them with a fixed 'Repayment Assistance Plan" (RAP). Under the new scheme, a typical borrower with a college degree will pay approximately $2,900 more annually compared to the Biden-era SAVE plan. Graduate and professional students will face borrowing caps of $100,000 and $200,000 respectively, along with exclusion from previously available forgiveness programmes. Moreover, the bill expands school voucher programmes by providing a 100 percent federal tax credit for donations to private school scholarship funds. The Joint Committee on Taxation estimates that this provision could cost up to $51 billion annually. In contrast, federal allocations for the Individuals with Disabilities Education Act stand at only $14 billion, and Title I funding for low-income schools at $18 billion. The disproportionate allocation of resources is expected to exacerbate funding challenges for rural and public schools, which serve more than 80 percent of all US students. The bill also includes a significant expansion of federal enforcement capacity. The budget for Immigration and Customs Enforcement (ICE) is increased from $8 billion to $30 billion annually. This is the largest single increase in federal law enforcement funding in modern US history. In parallel, the Office of Management and Budget receives a $100 million fund to 'identify efficiency gains" across the executive branch. Critics have described this as a discretionary slush fund that allows executive overreach without Congressional appropriation oversight. Collectively, the One Big Beautiful Bill constitutes a comprehensive recalibration of American fiscal priorities. It reduces the redistributive role of the state while increasing the fiscal burden on future generations. It amplifies tax expenditures for the wealthy while shrinking welfare entitlements for the poor. And it does so at a moment of already-elevated debt levels, persistently high interest rates, and increased macroeconomic uncertainty. President Trump has claimed that this bill will launch the American economy 'like a rocket ship." Yet historical experience and mainstream macroeconomic modelling suggest otherwise. According to Goldman Sachs, continued fiscal expansion at this scale may require an eventual fiscal adjustment equivalent to 5.5 per cent of GDP, exceeding the austerity levels implemented in the eurozone post-2010. If such an adjustment proves politically infeasible, the US may resort to financial repression, inflationary finance, or other distortions to stabilise its debt trajectory. Milton Friedman warned that fiscal illusions have a way of catching up with economic reality. The Big Beautiful Bill may well be remembered not for its symbolism, but for the long-term structural imbalances it entrenched, in debt, in distribution, and in institutional accountability. The burden of government, as Friedman cautioned, lies not in what it collects, but in what it commits. By that measure, the burden just got heavier. Aditya Sinha (X: @adityasinha004) writes on macroeconomic and geopolitical issues. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18's views. tags : donald trump United states us economy Location : United States of America (USA) First Published: July 05, 2025, 15:54 IST News opinion Opinion | Who Really Gains from the Big Beautiful Bill?
NZ Herald
04-07-2025
- Business
- NZ Herald
NZ urged to trim government size amid rising spending concerns
New Zealand's government spending has nearly doubled in a decade, now hitting $162 billion. Photo / Mark Mitchell THE FACTS The great American economist Milton Friedman was fond of saying that 'the real tax on American people is what the Government spends'. Change the name of the country and the message rings true. While the Prime Minister has been on the road, 'growing the economy', the gremlins
Business Times
26-06-2025
- Business
- Business Times
Data is changing shareholder capitalism
IF AMERICA'S CEOs have learned one lesson over the last half decade, it's this: Avoid politics. It is the right lesson – as usual, Milton Friedman was correct, the primary purpose of a business should be to increase its profits – but the rapidly changing nature of the economy calls for an update: Avoid politics whenever possible, but never when necessary. The recent history of corporate activism is instructive. Just before the pandemic, the chief executives of 181 of the largest US corporations signed a pledge to 'lead their companies for the benefit of all stakeholders', not just shareholders. They essentially promised to pursue a better world beyond profits. It did not go well. After several prominent instances of companies or executives getting burned for taking political stances – just ask Budweiser or Elon Musk – most companies now just stick to business or at least stay silent. But as data and data analysis become more valuable commodities, neutrality and apoliticism will become harder to maintain. Perhaps Friedman's shareholder capitalism no longer makes sense in the modern economy – especially if your business is working with data. And especially if your software aids the military or helps governments monitor their citizens. Two recent books illustrate how there is no such thing as neutral values when it comes to data. One is critical of Meta, alleging it used its data to assist the Chinese government in monitoring and censoring its users. That decision surely increased profits – China is a huge market – but was it ethical? It is one thing to sell sneakers in China, quite another to sell data. Either you assist the Chinese government in its efforts, or you don't. Another book, by Palantir co-founder and CEO Alex Karp and corporate affairs chief Nicholas Zamiska, argues that more companies need to be explicit about how their values should guide their work. Palantir, a data analytics company that is known (some might say notorious) for its contracts with the Pentagon and ICE, was co-founded by tech entrepreneur and libertarian donor Peter Thiel. Karp, meanwhile, has said that he agrees with progressives on most issues. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Politics aside, on its website Palantir says it was 'founded to help Western democracies and open societies harness data to protect citizens without compromising civil liberties'. It would be naive to take that statement at face value. Yet, even expressing these principles carries risks. Google also grew up as a values-driven company, with its (since discarded) slogan of 'Don't Be Evil'. Its employees took that to heart when they refused to work on a contract with the Department of Defence in 2018. The US$229 million contract went to Palantir instead, four years later. Was that a case of values paying off, or values aligning with profits? Google's old mission statement has become a bit of a punchline, and it's worth asking why. For one, it was never clear what 'evil' meant. Is it evil to help US special forces wage war, or is it evil to stay neutral in a fight against the Taliban? Again, regardless of what you think of Palantir's values, they are clear – so unlike Google, Palantir tends to attract employees who agree with its values. Another requirement for corporate mission statements is that they be related to the corporation's product. There's no need for a beermaker, for example, to take a political stance. One of the more grating aspects of Silicon Valley culture in recent years is how sanctimonious every tech startup became about its work, even if it is just another version of Groupon. There are other risks to a value-driven strategy. Karp argues that founder-led companies do better. Google is no longer run by its founders. Perhaps if it were, 'evil' would have been better defined. Palantir may one day face the same issue. It may be clear to Karp and his advisory board what Palantir should do when there is a conflict between morals and profits. But he won't be the CEO forever. How do values change under his successor, and the one after that? All of which raises the larger question: If the most valuable commodity in the world is the ability to analyse and interpret data, is shareholder capitalism now out of date? It isn't – but the Friedman doctrine is in need of an update. The goal should be to have a clear corporate mission that is consistent with what it does and can transcend successive generations of CEOs. The mission may be as simple as, 'We sell beer and hope to make money'; there is no reason to say, 'We make beer and try to save the world'. If a company is involved in data or weapons, it may require delving into some geopolitics, because there is no such thing as neutrality in that line of work. That's why Palantir makes a point of saying it stands for Western values, but you won't find anything on its website about its view of transgender athletes in women's sports. As the world economy enters the artificial intelligence era, and as more defence technology is developed in the private sector, companies like Palantir and Facebook will become more important, and ones like Budweiser and Nike less. That means some big companies will find it harder to avoid politics completely – and will have to consider their positions carefully. BLOOMBERG
