In this issue: the commonality of the Grenfell fire and Flint's toxic water, stealing from low-wage workers, and why Jeff Bezos needs your help on philanthropy.
Not since the news of Flint's toxic water (timeline and basic facts here from CNN) was announced has your editor been so upset. But then happened the out-of-control blaze that was the Grenfell fire near London's Notting Hill, which killed so far an unknown number of people. The fire was caused, so far as reports show, by an astonishing callousness for the safety of low-residents. This highlights the dangers of ignoring basic regulations in the race to privatize. The Guardian's David Lammy called for a criminal investigation, and had this to say as well:
The faces of Grenfell Tower victims are the faces of the residents of tower blocks across Britain: working-class, poor and often reliant on the state for their housing and safety. Yet for decades we have been pushing the state out and bringing the private sector in. We privatise profits for shareholders, but it is the insurance policy the state provides that lets them get away with it, always stepping in when the failures of the private sector spill over...
This goes way beyond party politics and left v right. In 2017 we have to ask serious questions about what we have become when refurbishments were made to the outside of Grenfell Tower last year at great expense, as much to improve the view from the luxury flats that have been built around it as to improve conditions for residents. In one of the country’s richest boroughs there could be no starker encapsulation of the grotesque inequalities that plague our capital city.
Yes, please let that sink in: millions were spent to update the building's facade to placate wealthy neighbors when it lacked basic fire protections such as an alarm system and sprinklers. To add insult to injury, the new exterior cladding was not fully fire retardant.
The fire happened very close to an announcement that some officials in Flint, MI will be charged with involuntary manslaughter in connection with the water crisis, reports NPR:
The involuntary manslaughter charge stems from an outbreak of Legionnaires' disease, a type of pneumonia, that spread in the city following its switch in water source. According to the indictment, Lyon knew about the outbreak but failed to alert the public. The disease killed 12 people and sickened more than 70 in 2014 and 2015, according to MLive.
Last year, the think tank In the Public Interest published a report worth noting on the ways in which privatization worsens inequality. Meanwhile, the Financial Times's Edward Luce looks at why class is becoming such a toxic issue for both the United States and Britain:
Why are they in so much hotter water? Three reasons. The first is that they fell for their own propaganda. No two countries have done more to broadcast their meritocracies than the US and the UK. Yet the two rival each other for the worst records of income mobility in the western world. It is astonishing that on some measures it is harder to move up the income ladder in America than in class-bound Britain. Yet the UK was a supposedly much-changed society since the shake up of the Thatcher years. Classless America and post-class Britain are the west’s most rigid societies on this most critical count...
The US and Britain stand out among western democracies as unmarked by revolution or occupation during the 20th century. The longer a country is stable, the more complacent it becomes. Only the paranoid survive in business. The same is true of political establishments. In markets they call this a “Minsky moment” — asset prices having been so stable for so long that investors take on too much risk. Anglo-American elites have played fast and loose with public trust. Their comeuppance has been long in the making.
In the New York Times, Brookings' Richard Reeves looks at America's blindness on the class divide:
I always found the class consciousness of Britain depressing. It is one of the reasons we brought our British-born sons to America. Here, class is quaint, something to observe in wonder through imported TV shows like “Downton Abbey” or “The Crown.” So imagine my horror at discovering that the United States is more calcified by class than Britain, especially toward the top. The big difference is that most of the people on the highest rung in America are in denial about their privilege. The American myth of meritocracy allows them to attribute their position to their brilliance and diligence, rather than to luck or a rigged system...
The upper middle class is also doing lots right, not least when it comes to creating a stable family environment and being engaged parents. These are behaviors we want to spread, not stop. Nobody should feel bad for working hard to raise their kids well. Things turn ugly, however, when the upper middle class starts to rig markets in its own favor, to the detriment of others. Take housing, perhaps the most significant example. Exclusionary zoning practices allow the upper middle class to live in enclaves. Gated communities, in effect, even if the gates are not visible. Since schools typically draw from their surrounding area, the physical separation of upper-middle-class neighborhoods is replicated in the classroom. Good schools make the area more desirable, further inflating the value of our houses. The federal tax system gives us a handout, through the mortgage-interest deduction, to help us purchase these pricey homes. For the upper middle classes, regardless of their professed political preferences, zoning, wealth, tax deductions and educational opportunity reinforce one another in a virtuous cycle.
In USA Today, Brett Murphy offers this investigative report, a must read, on low-wage workers who at the end of the day wind up in debt:
Samuel Talavera Jr. did everything his bosses asked. Most days, the trucker would drive more than 16 hours straight hauling LG dishwashers and Kumho tires to warehouses around Los Angeles, on their way to retail stores nationwide. He rarely went home to his family. At night, he crawled into the back of his cab and slept in the company parking lot. For all of that, he took home as little as 67 cents a week.
Then, in October 2013, the truck he leased from his employer, QTS, broke down. When Talavera could not afford repairs, the company fired him and seized the truck -- along with $78,000 he had paid towards owning it.
Talavera was a modern-day indentured servant. And there are hundreds, likely thousands more, still on the road, hauling containers for trucking companies that move goods for America’s most beloved retailers, from Costco to Target to Home Depot.
Some Port of Los Angeles workers plan to strike and have filed a law suit claiming they were misclassified as independent contractors and thus denied employment benefits:
The company said that since the drivers signed the independent contractor agreements, they are not entitled to recover business expenses under the California Labor Code, which only applies to company employees...
Port drivers claim they are being denied employee benefits including wages, overtime pay, unemployment insurance and workers’ compensation by being classified as independent contractors rather than employees.
Some said they have been forced to sign predatory lease-purchase contracts for trucks in order to work for the trucking companies, and that there is little, if any, money left over in their paychecks after rent, insurance, fuel and other maintenance fees are deducted.
Brookings' Ryan Nunn looks at arbitration agreements and says we need to make labor market institutions work for workers:
[T]here has been much discussion of worker bargaining power and the ways that some firms try to suppress it, thereby holding down wages. This should be a concern even for those who are not typically inclined to see workers as needing protection. In an effort to protect themselves from open competition, some firms are happy to use government power to their own advantage, but to the detriment of society overall. In a previous article, I discussed concerns regarding non-compete agreements, which can have exactly this effect by preventing workers from taking jobs at competing employers. Moreover, to the extent that firms are successful in reducing worker bargaining power, it may be the taxpayer who is called upon to make up the difference for low-wage workers.
Non-competes are far from the only legal tool subject to abuse. Another potentially problematic labor market institution is the so-called pre-dispute arbitration agreement. Under the Federal Arbitration Act, firms may require as a condition of employment that workers surrender their right to pursue grievances within the court system, instead submitting to binding arbitration.
This May report from the Aspen Institute's Maureen Conway and Mark Popovich says paying workers more should not be bad news for Wall Street:
In 2017, America has a jobs problem: It’s not that we don’t have enough jobs, but that we don’t have enough good jobs. We all lose when pay raises for workers – despite rising productivity and quality service – are unreasoningly restrained.
Corporate leaders say things like, “Our people are our most important asset.” The problem is that too few act like they believe it. And too many face Wall Street brickbats when they do. It’s time to turn down the distraction and up the voices for reasonable investment and due consideration to our workforce. If finance and investing take the right aim, the switch will be made to more good companies and good jobs.
Jeff Bezos is canvassing for philanthropy ideas, reports Futurism:
“I’m thinking I want much of my philanthropic activity to be helping people in the here and now — short term — at the intersection of urgent need and lasting impact,” Bezos wrote in the tweet. It seems like the Amazon CEO was inspired by the philanthropic work done at Mary’s Place in Seattle...
Bezos admitted that much of his time is currently occupied by long-term innovation, as can be seen in his work with Blue Origin. His private space company is currently working on improving its rocket technology as it builds the New Glenn, it’s biggest one yet. The plan, Bezos revealed previously, is to colonize the Solar System, which is obviously a long-term endeavor.
Meanwhile Fast Company reports that philanthropy is growing in the impact space:
In 2016, investors looking for financial returns that demonstrate social good improvement committed $22.1 billion to 8,000 investments. All told, the emerging industry, which is less than a decade old, has at least $114 billion in assets under management, according to a recent report by the Global Impact Investing Network, a nonprofit organization to increase the scale and effectiveness of impact investing...
So far, everyone seems happy with the returns, too: “The overwhelming majority of respondents reported that their investments have either met or exceeded their expectations for both impact (98%) and financial performance (91%),” notes the report. Plus, the annual cash flow is expected to jump another 17%, to around $26 billion next year.
Lastly, you may be interested in this interview with Clara Miller in Crain's Theresa Agovino on Heron's journey and the troubles of the new political climate:
How will the new White House administration affect what you do?
There doesn't seem to be the understanding and dedication to the fact that transparency and disclosure are the brand and currency of the U.S. financial industry. My worry is that regulation won't be done as well as it needs to be done, and then how will we find out the material, social, environmental and governance risk factors of an investment? Reporting through the SEC is really important to that. If we can't assess the risks, the integrity of what we are trying to do is called into question.