The Rural Economy Archive
Reversing the Decline in Rural Economies
August 20, 2023
As the result of decades of misplaced government policies, jobs and livelihoods have gone nowhere but down in Virginia’s rural areas, even as urban and suburban centers have prospered. Republicans have historically been all about big business and free trade while Democrats focused on urban issues.
George H. W. Bush started NAFTA negotiations and China was admitted into the World Trade Organization under Bill Clinton with strong support from big business and Republicans across the country. The result, however, was a devastating hollowing out of manufacturing jobs, including in small cities and towns in rural areas. Furniture, textile and clothing factories across Virginia shut down.
How Big Drug Companies Exploit the Patent System to Stifle Competition and Inflate Prices
June 16, 2022
In principle, pharmaceutical companies should make their money by developing new drugs that improve patient treatment and cure disease. This process, however, is time-consuming, expensive, and filled with uncertainty. All things that CEOs and investors hate. They want to guarantee big profits year after year, and have figured out how to do just that by manipulating their patents.
The U.S. patent system is a wonderful creation. It is supposed to encourage innovation by providing a 20-year window for a company that owns the invention to commercialize it without copycat competition. But drug companies have found a way to exploit our patent system by extending the high prices and profit lifespans of their existing highly profitable drugs.
They pile up dozens of patents on minor tweaks that create “patent thickets” to keep prices high and competitors out, way beyond the original intent. These add-on patents can be as minor as a new way to distribute the drug or a minor improvement to dosing or packaging or manufacturing or even flavor.
As a result, one in four Americans cannot afford the medicines they need, or must opt for less effective but lower-priced alternatives directed by their insurance companies. Seniors frequently must delay taking their medicines until they receive their next social security check.
Gas Pump Prices Feed Record Profits for Big Oil
June 16, 2022
Blaming President Biden for increased as prices has become a national obsession of Republican politicians and their media channels. But profiteering by the oil companies, and many years of subsidies and support of the industry by Republican politicians, is where the blame lays. So does a dramatic post-pandemic imbalance between supply and demand – which is happening all over the world and not just in America.
Big oil disinvested in production when prices were so low during the global covid pandemic that they had to sell it at a loss. Production was cut by about 10% globally. Why have they been slow to increase production to keep up with the bounce back in worldwide demand? Because they are able to get much bigger profits on the same amount of oil they do sell as prices have skyrocketed. It does not help that the war on Ukraine by Putin, whom the radical right supported and praised, has reduced supply, further increasing prices.
The top five oil companies reported 300% more in profits in the first quarter of 2022 than last year. One doubled its earnings from a year ago. Another notched its strongest quarterly profit ever, and a third posted its best earnings quarter in nearly a decade. Their first-quarter profits were almost 28% of the price Americans pay for gas.
Who’s to blame for high gas prices? Not who you think.
March 17, 2022
Our collective pocketbooks are feeling the pinch of gasoline prices now well over $4 per gallon. If your car has a 20-gallon tank, that fill-up will cost you upwards of $80! Ouch! What happened? Not surprisingly, the blame game has already started. And also not surprisingly, the finger-pointing is more about politics than reality.
Certain politicians and pundits are eager to convince us that this is all the fault of the Biden administration – it only it had approved the Keystone pipeline and granted new drilling permits on federal land, our problems would be solved. That sounds simple enough. But is it true? Here are two problems with that argument: first, the Keystone pipeline would mainly have sent existing oil production elsewhere, not produced new oil. Second, as the linked CNBC article reports, big oil firms right now aren’t drilling on land where they already have permits! In short, neither of these two proposals would have done anything to stop the jump in our gasoline prices.
So what’s really going on? The reality is that big oil companies have not been investing in new production for a long time. Remember the Trump administration’s huge corporate tax cut in 2017 – the one that Trump promised would lead to a major increase in corporate investment? It sure didn’t turn out that way in the oil industry. In fact, this year the seven largest oil companies will spend a near record $90 billion on… stock buybacks and increased dividend payments.
Are big corporations profiteering from inflation?
March 17, 2022
As prices of most goods and services keep increasing, U.S. companies are sitting on “a record $7 trillion in cash, up 33% from pre-Covid levels” – this according to a reliable business source, Bank of America’s global investment advisory arm. Inflation may have some of its roots in pent up demand bouncing back so quickly as the global pandemic lockdown has eased, with the resulting supply chain issues. But the data is clear, corporations are benefiting mightily while the average citizen struggles.
The report states that “these cash balances grew at the fastest pace in two decades” during the pandemic. It is hard not to see the connection. Are corporations profiteering from the pandemic, even as they have received massive Republican-driven tax cuts and government stimulus help?
Large shareholders hit record wealth as prices keep rising
March 17, 2022
The vast majority of corporations did not use higher profits from the Trump tax cuts to pay bigger salaries or to invest in new businesses and technologies. What they have been doing is gobbling up competitors so that they can increase prices – and make even more money. Rural Virginians experience this reality every day – suppliers have dwindled for almost everything we buy, as they have been bought up by bigger companies who can then ratchet up prices.
And what have corporations done with the extra profits? Many have poured them into bigger dividend payments to shareholders and to stock buybacks. When a company buys back its shares from the open market, it reduces how many shares are outstanding and has the net effect of raising the stock price for remaining shareholders. And who most benefits from these financial moves? Large shareholders, including CEOs, board directors and wealthy investors.
Farmers for Whom?
October 18, 2021
GOP politicians take a lot more money than Democrats from Big Ag monopolies while farmers get squeezed
Prices farmers get for their cattle have stayed absolutely flat since 2014,
While Big Ag meat processors have seen their income triple!
Why? Big Ag corporations have poured ever more money into political campaign donations – overwhelmingly to Republican politicians – to weaken or block anti-trust and price-fixing laws and regulations,
So that they can grow ever bigger by buying up their competitors. Now only four meat processors control 80% of the beef market.
They are using that monopoly to command higher and higher prices at the supermarket while keeping the prices they pay the cattle farmer as low as possible, as farmers have fewer and fewer choices on to whom to sell to and at what price.
The Biden Administration and Democrats in Congress want to crack down on price-fixing by the giant meat processors – but Republicans in Congress aren’t helping. Why?
First the facts: why farmers suffer while Big Ag prospers? In 2016, cattle prices to farmers averaged $2.60 per pound, nationally. They are now averaging $2.55.