Category: US business

Gannett vs. newspapers

John Temple:

From 20 feet away, one designer used to tell me, all newspapers look the same: vertical rectangles with black ink on them. But the announcement earlier this month that the country’s two largest newspaper companies have agreed to merge is a reminder that there are actually two very different ways to look at them. To some, local newspapers are simply cash machines, from which investors can make withdrawals until there’s nothing left. To others, they are community trusts, essential civic resources to be sustained.

The acquisition of Gannett, publisher of USA Today and other papers, by GateHouse Media represents the apotheosis of the newspaper as a financial instrument. GateHouse, the buyer, is the largest owner of U.S. newspapers by titles. Gannett is the largest owner of U.S. newspapers by circulation. The new company, to carry the Gannett name, would have a print circulation of more than 8.5 million.

Should the Department of Justice approve the deal, it would be allowing the creation of a behemoth that dwarfs other newspaper companies, one that would dominate local journalism in many states, and have unparalleled national reach in print. The new company says its first order of business will be to realize $275 million to $300 million a year in “run-rate cost synergies.” In plain English, that means many journalists will lose their jobs.

Print advertising and print circulation are declining at a rapid rate, and digital growth is not making up the difference. Gannett and GateHouse are hoping that, together, they can grow efficient enough to survive. But the deal makes me think of two drowning giants grabbing onto each other to try to save themselves. While I long ago learned to be careful about predicting the future in print, my guess is that it won’t be too many years before they pull each other under.
Just consider these recent findings from the Pew Research Center. U.S. newspaper circulation is now at its lowest level since 1940, even as the national population has grown from 132 million to nearly 330 million. Last year, daily circulation—print and digital—was down 8 percent, and Sunday circulation was down 9 percent. The numbers were even worse for print, which posted 12 and 13 percent declines, respectively. While overall digital advertising spending increased by 23 percent in 2018, that wasn’t enough to offset the losses in print advertising—total ad revenue for newspaper companies was down by 13 percent. In consequence of this decline, newspaper-newsroom employment continues to shrink. It’s down 47 percent since 2004.
But even if the new Gannett manages to beat the odds and stay afloat, the prognosis for the papers it owns is grim. Gannett papers today largely look and sound the same. They feature similar, centrally produced news reports, and offer little individuality or quirky local flavor.

Gannett was the pioneer of this approach. As it grew, from the late 1960s until the early 1980s, it boasted that its quarterly profits were always bigger than the one before. The result, according to the Pulitzer Prize–winning journalist Ben Bagdikian in his 1983 book, The Media Monopoly, “Profit squeezes and indifference to comprehensive local news is the norm.” GateHouse came along in the late 1990s and one-upped the earlier generations of newspaper chains. It went bankrupt in 2013 after it had spread across 330 markets in 21 states. The reborn company now operates in 612 markets in 39 states.

The consequences of this approach for local communities and for the fabric of our country are already clear—and grave. If some of these papers shrivel or even shut down to produce “run-rate cost synergies”—since the merger announcement, GateHouse has already cut staff at four newspapers—we’ll end up with more news deserts, communities without local newspapers. Other papers may be so diminished that they’re local newspapers in name only. That will leave some of the country’s most vulnerable residents without the information to help them participate in public life, including by voting, or the protections that investigative reporting can bring. The decline and failure of local newspapers means fewer eyes on the powerful, higher public borrowing costs, and more.

Something like this has already happened in recent years to local television news. Sinclair Broadcast Group, the nation’s largest broadcaster, is notorious for distributing packaged segments to all of its stations, and for having its anchors across different markets use exactly the same words, sometimes reflecting partisan positions.

It’s reasonable to fear that the new Gannett—which would own more than 260 daily news organizations, and hundreds of weeklies—might have a similarly negative impact on even more parts of our country.

Many dedicated, talented journalists are doing meaningful work today at both GateHouse and Gannett newspapers. I know some of them. In my role at UC Berkeley’s Investigative Reporting Program, I work closely with Gannett journalists I admire. And earlier this year, I was among the judges who gave GateHouse the top award for innovation at a major newspaper conference. Not for its journalism, though. Instead, Gatehouse was recognized for its booming and profitable events business, which it has successfully replicated in many of its markets.

However, the positive efforts of some at the two companies today don’t lessen the profound reason for concern.

There has to be a different path forward, one that doesn’t call for emptying newspapers like ATMs, or consolidating them under the control of a massive corporation. Every community deserves to have a place it can turn to each day to understand itself, to see itself reflected truthfully, and where its members can learn about others who are different from themselves and get the information they need to participate in our democracy.

One promising model is being tested in Pennsylvania. The Philadelphia Inquirer is now a public-benefit corporation, owned by the nonprofit Lenfest Institute for Journalism. Instead of maximizing profit for shareholders, the Inquirer can balance meeting the needs of its community with the need to make a profit. It can seek community support in new ways because it’s acting as a community resource, not a money machine.

It’s not a given that this approach will succeed. But I think it’s our best hope. I heard Terry Egger, the paper’s publisher and CEO, speak at a conference in Las Vegas this spring. He said he tells his colleagues that they don’t work for any of the company’s print or digital titles—they work for the region’s people. He asks them to ask themselves: How are you making their lives better?

His message to the community and his staff emphasizes the importance of a free press. It’s a message that he can offer unequivocally because he’s clear about the mission of his news organization. And he’s using it to seek and receive community support, from foundations and individuals.

It’s possible to imagine a very different kind of network from the one the new Gannett promises to build. Community foundations and leaders around the country, along with people and businesses who care about the health of their local communities, can band together to support their local press.

I was the founding editor of one such news organization, Honolulu Civil Beat. We started it as a for-profit company. But after a few years, its board concluded that it needed to take a different path. As a nonprofit, it could develop deeper ties to the community that would give it a greater likelihood of sustainability.

Today I serve as an adviser to the Colorado Media Project, an effort to help meet the information needs of Coloradans by strengthening the state’s news ecosystem. This effort was triggered by the gutting of The Denver Post by its hedge-fund owner, Alden Global Capital; the rebellion of its editorial page; and the departure of many of its best journalists to form a new local-news organization, The Colorado Sun.

The state, and nation, are facing a crisis in local media. Our answers don’t have to be newspapers as we’ve known them until now, ink on paper. Despite what my designer friend told me years ago, newspapers were never just that. They were reflections of the fabric of their community. Some, frankly, didn’t live up to their calling. Others punched above their weight class. But no matter what, we almost always knew that a community would be worse without them.

What we need is not a giant local-news company along the lines of the new Gannett, structured to reduce expenses and buy time until it finds a way to ride the digital wave. What we need instead is a network of local-news organizations that can offer tools that enable local people to focus on the important job of telling their communities’ stories.

The result may look like a vertical rectangle covered in black ink, or take an entirely different form. But what will really differentiate it is its commitment to the service of a common cause, one that’s essential if the United States is to thrive in the 21st century.

Everyone who subscribes to the Green Bay Press–Gazette, The Post~Crescent in Appleton, the Wausau Daily Herald or the seven other Wisconsin dailies owned by Gannett know what having Gannett as your publisher is like. (Gannett purchased eight dailies from Thomson, which was no one’s idea of a quality newspaper publisher either, in 2000.) The smaller the newspaper is, the more it is like the next-door newspaper, including a couple pages of rewarmed USA Today news (which I call USA Yesterday) and a generic sports section.

I was in Appleton in June for the state baseball tournament, held at Fox Cities Stadium in Grand Chute. I picked up The Post~Crescent on two mornings, and found not one word about state baseball, despite the fact it was held down the street from The Post~Crescent’s office.

How does the Gannett sale apply to the state’s largest newspaper, the Milwaukee Journal Sentinel? Bruce Murphy:

Back in the fall of 2015, when the purchase of the Milwaukee Journal Sentinel by the Gannett chain was announced, I predicted significant cuts for the newspaper under the new ownership. Looking at the staff count at other Gannett papers, and adjusting for market size, I predicted the Journal Sentinel would lose 35 to 40 editorial staff.

I was wrong. Back then the Journal Sentinel had 117 editorial staff (editors, writers, photo, design and online people). Today that’s down to 88 staff, a loss of 29 staff, not quite as bad as I predicted. That may be because the JS has always rated near the top among newspapers in market penetration — the percent of residents subscribing to the newspaper — which makes it a slightly larger readership than its metro population might suggest. 

Still, that was a 25 percent reduction in staff, which is huge, and there is every reason to believe more cuts are to come. That’s because Gannett is having financial problems which may force more cuts, and because it could be absorbed by Gatehouse Media (under a merger plan where Gatehouse would get slightly more stock — just over 50 percent — and thus control the new company). And Gatehouse has a reputation for slashing staff even more aggressively than Gannett has.

But that deal may not go through, because MNG Enterprises, the owner of Digital First Media, has just purchased 9 percent of the stock of the parent company of Gatehouse Media, with the apparent aim of trying to kill the merger with Gannett. Why? Perhaps because Digital First has also had its eye on Gannett, but back in February Gannett’s board of directors rejected the buyout bid from the hedge fund that owns Digital First Media.

If Digital First ever got its hands on Gannett that would be disastrous. As L.A. Times reporter Matt Pearce tweeted back when it was bidding for Gannett: “Digital First Media’s hedge fund owner slashes local newsrooms to the bone, soaks them for profits and then spends money on things that aren’t journalism. If they’re knocking on the door, you should lock the deadbolt.”

With luck Gannett will avoid a buyout that ugly. But it is difficult to see any scenario — even if Gannett continues on its own — under which the JS doesn’t continue to bleed staff. Yet I don’t expect the JS to go out of business. From a market perspective there is sufficient reason to keep the paper going, yet little reason to resist more cuts in staff.

A newspaper like the Journal Sentinel has little market power in the digital ad world, which is dominated by Google, which makes nearly as much from advertising as the entire media industry. And that doesn’t take into account Facebook’s massive impact on where advertising dollars go.

Gannett’s strategy has been to build readership, market power and the ability to negotiate for better ad rates by buying up local newspapers, in essence trying to consolidate a declining industry. The company owns at least 104 local newspapers and more than 1,000 weeklies. Gannett’s goal is to gain as many local markets as possible to wrap some local coverage around its national USA Today stories, which can be republished at little cost in all of its local newspapers and weeklies.

It also consolidates costs by centralizing printing, circulation and copy editing for its newspaper chain. The JS newsroom is managed by the Gannett corporate office in Virginia. The JS website is also managed from the central office based not on the importance of a particular story, but on algorithms measuring traffic and then highlighting the most popular stories.

In short, there won’t be any sleepless nights at Gannett if a key story in city or county government is missed by the Journal Sentinel. First, because Gannet’s management doesn’t live in Wisconsin. Second, because the most popular stories at the Journal Sentinel are sports stories, typically seven to eight of the top 10 most popular stories on any given day. And third because covering city and county government is labor intensive and you can get as much (and probably more) readership at jsonline.com by simply republishing lifestyle or sports stories from USA Today or any of its 100-plus daily newspapers. 

When local and state news stories are published at jsonline, the algorithms take over: they might get buried by the website in half a day. The goal is to direct readers to the most popular stories and that’s typically sports and lifestyle, particularly dining, weather reports and then the national stories done by USA Today. It may also mean grabbing a story from another of its papers that did well and giving it prominence on the JS website.

The recent decision by the Journal Sentinel to put up a harder pay wall for most local and state stories has blocked all the free riders, reducing the readership even more for those stories, compared to those republished from other Gannett papers that have no pay wall.

So if you’re Gannett, from an online traffic perspective, whether it’s city, suburban or county coverage or education coverage, none of it matters much. The JS hasn’t had a full-time county reporter since Steve Schultze took a buyout some four years ago. And it barely covers City Hall any more. When future cuts come the 34 staff listed under News and Investigations will likely be the most vulnerable.

The staff you need to protect are sports reporters and the dining writer, because those stories get way more readership than news. The most important news beat is the state Capitol, because you have more potential readers impacted by state government, and there the newspaper has maintained two reporters. So far. Meanwhile there are 17 staff handling sports for the newspaper.

All of which I’m sure is killing Journal Sentinel editor George Stanley, who truly cares about covering the news, as well as the paper’s news staff. But when it’s not a priority for the owners, and when a reporter’s important but not-so-sexy story is soon buried on the website, it begins to seem silly to go to all that effort.

Apparently Murphy is OK with Stanley’s arrogance toward non-liberal readers, which is probably no surprise since Murphy is quite anti-conservative, and, for that matter, so is Journal Sentinel investigative reporter Dan Bice and whatever people make editorial decisions. Be that as it may …

Meanwhile, Gannett is doing all it can to push readers to drop print subscriptions and switch to digital readership. When everything is centralized and nationalized, an ever-thinner local print edition is not really a priority. Moreover print advertising is dying: the Sunday paper still looks fat, but that’s mostly adverting supplements prepared by businesses who simply pay an insert fee to be stuffed into the paper, which generates much less revenue than a display ad published by the newspaper.

While I have been describing the approach of Gannett, anyone who takes over that chain will operate similarly because of the brutal dynamics of the online ad market. The media is now competing with the massive international scale of monopoly companies like Google and Facebook, who can deliver ads to huge numbers of people, targeted to exactly the audience you want, say a young urban female interested in rock music. Which means news publications need the most online readership they can get, to give them more market power when competing for advertisers.

So Gannett or whoever buys the company has every incentive to keep every local newspaper going in those 100-plus cities. Gatehouse does look to combine papers in nearby cities, and should it take over Gannett would probably do some consolation of the latter company’s three newspapers in Wisconsin’s Fox Valley. But Milwaukee is far too large a market and too far from any nearby city to consolidate with another newspaper. Better to keep the JS going and simply trim its staff as needed.

All of which means the Journal Sentinel won’t go out of business, but will never again be what it once was. The paper is likely to continue losing staff and importance to readers who care about the news.

Temple poses an interesting idea that may work in some markets. His ignorance of how business works shows in the assumption that “nonprofit” means you don’t have to make a profit. “Nonprofit” means that profits aren’t distributed to owners and it doesn’t pay income taxes. “Nonprofit” doesn’t mean it can spend more money than it brings in, or even spend as much money as it brings in. Any venture that doesn’t bring in more money than it spends is doomed to eventual failure.

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How to ruin your business

Back in my previous life as a business magazine editor, I quoted someone in a story who claimed that getting a new customer was five times as expensive as keeping an existing customer.

So what kind of brainiac thinks that alienating your existing customers to get new customers is a good business strategy? (Besides the creators of the eighth-generation Chevrolet Corvette, that is.)

Dwight Longenecker has the answer:

Gillette is the largest shaving brand in the world. For years they’ve been raking in the cash for their overpriced razors and shave cream. But recently they’ve faced stiff competition from online suppliers. Harry’s and Dollar Shave Club ship shaving supplies to the door. Like most online retailers, they shave the price down and provide smooth customer service.

The online retailers appeal to the younger generation and are clearly the wave of the future. So last year Gillette decided to launch an ad campaign they thought would attract the younger generation. Their film We Believe: The Best Man Can Be was a self righteous, politically correct sermon haranguing men in the wake of the MeToo movement.

The ad made broad assumptions about men and the overwhelming prevalence of “toxic masculinity.” Men were portrayed as bullies and sexist, misogynistic, racist brutes. Then in May they launched an ad showing a man teaching his transgender son how to shave for the first time.

The ads bombed big time. They were ham-fisted politically correct propaganda. Not only did people dislike being patronized and preached to, but they resented the sappy, anti-masculine message. It seems men have voted with their wallets. Last week Gillette announced that it had taken a $5 billion dollar loss for the last quarter.

According to Washington Examinerthe head of Gillette is defiant. Defending his choices, CEO Gary Coombe admitted they were hoping to impress young shavers, “It was pretty stark: we were losing share, we were losing awareness and penetration, and something had to be done,” So they decided to “take a chance in an emotionally-charged way.”

The ads were indeed emotionally charged, but it doesn’t take a Madison Avenue professional to figure out that you don’t win customers by insulting them. Making a shaving product ad that insults men is on a par with McDonald’s scolding people for not being vegetarians. Duh.

Coombe was unrepentant, “I don’t enjoy that some people were offended by the film and upset at the brand as a consequence. That’s not nice and goes against every ounce of training I’ve had in this industry over a third of a century,” he said. “But I am absolutely of the view now that for the majority of people to fall more deeply in love with today’s brands you have to risk upsetting a small minority and that’s what we’ve done.”

What interests me about this whole debacle is the larger issue of commercial companies promoting progressive social agendas. Since when is it the business of business to preach to us? During the month of June why did so many American companies feel obliged to drape themselves in the LBGTQ rainbow flag?

Why do the executives at Ben and Jerry’s, Nike, Starbucks and umpteen other name brands feel they must use their platforms as bully pulpits? Even more disturbing, why do the puppet masters behind the scenes of the media giants like Facebook, Twitter and Instagram feel it is their business to monitor, censor and impinge on free speech? …

Fortunately, in a free country the free market brings its own checks and balances. The Gillete company nicked themselves badly with their ill-advised ad campaign.

So now customers are abandoning them and their overpriced products. Boycotts are usually the customer’s best counter attack

I’m using a Harry’s razor now. Better shave, and the company apparently isn’t run by woke idiots.

 

Post-World Cup pre-Olympics new$

The U.S. national women’s soccer team managed to alienate people who should have been fans by stridently dissing conservatives on the way to their Women’s World Cup win.

One year from now, the team will compete in the 2020 Olympics in Tokyo, assuming the team doesn’t do what, if they were serious about their pay situation, it should have done — strike.

Two pieces of news cast new light on the finances of international soccer and the U.S. women’s team. First, from Brad Polumbo:

The United States has the best women’s soccer team in the world, as evidenced by our recent Women’s World Cup win. But we’re told that the women’s team still faces blatant sexism and a pay gap compared to our men’s team.

That’s what woke feminists like USWNT Captain Megan Rapinoe keep telling us. In fact, the women’s team has even filed a lawsuit against U.S. Soccer alleging gender-based pay discrimination. I’ve already made the argument against equal pay and explained why Rapinoe is far from a good role model, but a new open letter and fact sheet released by U.S. Soccer completely refutes the equal pay crusaders’ argument.

First, it reveals that while U.S. Soccer is the target of the USWNT’s equal pay lawsuit, they’re not even the ones paying the men and women unequally. According to U.S. Soccer President Carlos Cordeiro, they actually pay the women more than the men. He writes:

Over the past decade, U.S. Soccer has paid our Women’s National Team more than our Men’s National Team. From 2010 through 2018, U.S. Soccer paid our women $34.1 million in salaries and game bonuses and we paid our men $26.4 million—not counting the significant additional value of various benefits that our women’s players receive but which our men do not.

How’s that for sexist? Cordeiro explains that this pay gap — in favor of the women — is due to different pay structures the men and women have negotiated, as the women’s team is given an annual salary and benefits while the men are paid more sporadically, proportional to participation. This disparity is necessary because the men have more professional soccer opportunities outside of international competition, such as the leagues in Europe and Major League Soccer. National soccer is a side gig for them, not a full-time job.

Now, it is true that the men’s World Cup offers significantly higher prize money, and that when prize money is counted, the men received $41 million from 2010 to 2018 and the women received just $39.7 million despite vastly outperforming the men relative to their own competition. And more generally, the winning team in the last men’s World Cup received $38 million in prize money, while the winners of this year’s Women’s World Cup get a relatively modest $4 million.

But this is up to the International Federation of Association Football, not U.S. Soccer, which means the “equal pay” lawsuit hasn’t even been filed against the right entity. Moreover, the differential in prize money offered by FIFA is explained by differences in revenue generation and viewership, not sexism.

As I wrote before:

Almost half the world watched the men’s 2018 World Cup, with nearly 3.6 billion total viewers tuning in to watch some part of the tournament. The final match alone reached an audience of over 1.1 billion people. Subsequently, the tournament’s sponsor, FIFA, brought in a profit of over $6 billion.
The women’s team garners significant but substantially lower viewership. We don’t have data for the 2019 tournament, but during the women’s last World Cup in 2015, 764 million viewers tuned in for some portion of the tournament. This is quite good, but it still pales in comparison to the men’s tournament’s audience.Unsurprisingly, Cordeiro’s letter explains, “We look forward to the day when Americans choose to spend their time and money equally between women’s and men’s soccer.” But as the U.S. Soccer fact sheet makes clear, today is not that day, and the pay structures reflect that reality.

But Cordeiro wasn’t done. David Hookstead:

U.S. Soccer Federation president Carlos Cordeiro hit back hard at the women’s national team over equal pay.

With the World Cup in the news after we won the whole thing, the issue of pay between the men’s and women’s national teams has once again been a hot topic for debate. A lawsuit is currently underway over the pay disparities between the two teams. The issue at the core is simple. The women are more successful, but women’s soccer doesn’t generate the same kind of cash the men do.

Now, Cordeiro is claiming they actually lose money.

According to TMZ Sports, Cordeiro released a statement on Monday saying the following in part:

From 2009 through 2019 — a timeframe that includes two Women’s World Cup championships — the Women’s National Team has earned gross revenue of $101.3 million over 238 games, for an average of $425,446 per game, and the Men’s National Team has earned gross revenue of $185.7 million over 191 games, for an average of $972,147 per game. More specifically, WNT games have generated a net profit (ticket revenues minus event expenses) in only two years (2016 and 2017). Across the entire 11-year period, WNT games generated a net loss of $27.5 million.

U.S. Women’s National Team spokesperson Molly Levinson responded in part by calling the numbers “false” and the statement from Cordeiro a “ruse.” She also said the women’s team wants to “be paid equally for equal performance.”

If the women’s national team has actually lost money since 2009, then I don’t even know why we’re having this debate. Sports leagues and teams aren’t paid simply by how much they win.

They’re paid in large part by revenue generated. It’s why the worst NBA team still makes much more money than the best team in the WNBA.

It’s called economics, and it’s really not that difficult to figure out.

If the numbers are false, then that’s a different story. Luckily, that seems like that something that would be very easy to fact check.

I have no idea how this lawsuit will end, but I find there to be next to no outcome where it turns out the women generate more revenue than the men historically.

The women should try to get as much money as possible, but they’re only ever going to get cash as it’s tied to revenue.

Anybody who doesn’t understand that fact just doesn’t understand sports.

Or business. Of course, liberals have a well-known hatred of markets.

Here comes the last Corvette

Tonight at 10 p.m. Central time …

… the eighth-generation Corvette gets revealed.

This is destined to be the final Corvette for one of two reasons. It is impossible for GM — the developer of such great leaps forward in automotive technology as the Chevrolet Vega (with melting aluminum engine) and Citation (prominent on the lists of the Worst Cars of All Time), Computer Command Control, V-8-6-4 engine and other examples of Not Ready for Prime Time Tech — to get this right right away, particularly when the rumored all-wheel-drive version comes out, since GM has never manufactured a rear/mid-engine all-wheel-drive vehicle.

The other reason is its price. Either the Corvette is going to be an order of magnitude more expensive than any previous Corvette, or GM won’t make money on it. GM has made money on its Corvettes for decades, but that may end now. Either way, when GM fails to make its profit expectations on this car, that certainly will kill the Corvette.

About that, Raphael Orlove writes:

I’ll start with a little digression. Back in 2007, another gigantic corporate megalith debuted a new generation of one of its classic sports car nameplates. It was controversial in its engine layout, its styling, its size, its weight, everything. But over the years people came to understand it as a legendary vehicle. I’m talking about the R35 Nissan GT-R.

What made that car such an icon was that it offered supercar performance for decidedly not-supercar prices. As we noted a few years ago, at $69,850 was about $30,000 less than a Corvette ZR-1, but not slower.

The thing is, the GT-R has grown increasingly expensive over the years and now is not just as fast as a six-figure car, but priced as a six-figure car. If you want one, you need to drop more than $100,000 for it, at which point it’s not really moving any narrative forward. It’s just a fast car that’s expensive, just like all the other ones, only it has a V6 for some reason. There’s nothing special about it.

The point is, dynamics unchanged, the price is what made the GT-R once iconic and now normal.

The same situation presents itself with the mid-engine Corvette. As anyone who has driven a C7 (or any other modern Corvette) could tell you, the way the car drives is just about faultless. It has tons of power, even in base form. The handling is great. The ride, particularly once you get into the magnetic shocks era, is outstanding. These are usable, practical, exploitable performance cars. They have been for years. There is no reason to doubt that the C8 will be, like the C7 before it, a great driving car.

But if it costs $100,000 or more, there’s no real point to it existing. What’s the point of GM, basically, making a non-turbo McLaren of a few years ago? It’s not new thematically, other than being made by GM. There’s nothing there to prove. There’s nothing meaningful going on there.

But if the car costs what a regular front-engine Corvette does now or even just above it, say, at around an R35-esque $70,000 mark, things are different. Then GM is advancing the sports car narrative. It’s then offering an exotic car platform at a non-exotic price. It’s democratizing a mid-engine powerhouse, and it’s not coming from some low-volume manufacturer. This is Corvette, not DeTomaso Panteras being sold by Lincoln-Mercury dealers.

So while everyone else sweats 0-60 times and power-to-weight figures, keep your eye focused on the MSRP. That’s the only thing here that could make a good car great.

The childlike faith in GM management is pretty disgusting to read. GM seems to believe that one of the great performance bargains in the entire world is not sufficiently exotic enough for buyers interested in Ferraris, Porsches or other overpriced yet unreliable supercars. GM is also catering to the lazy by not equipping this Corvette with a manual transmission. I’m surprised GM didn’t throw in a V-6 instead of a V-8. And, according to Jalopnik

… a square steering wheel.

Not that this matters, since I won’t be buying one of these. In fact, thanks to my career choice and having children, I most likely won’t ever own a Corvette. As someone once put it, life’s a bitch, then you die.

Economic realities

Marian L. Tupy:

Back in May, a young American called Akki caused a minor twitterstorm by seemingly showing what many pundits in the U.S. media frequently assert—that ordinary Americans are worse off today than they were in the late 1970s. A number of better-educated twitterati soon pointed out that Akki, a self-declared member of #TheResistance, engaged in what former U.S. President George W. Bush once referred to as “fuzzy math.”

In the meantime, Akki’s misleading claim scored over 197,000 likes on Twitter. It seems that in addition to the U.S. dollar, Americans have come to crave a new kind of currency: victimhood. Many Americans of all political persuasions relish the feeling of aggrievement and the accompanying sense of moral superiority, and if that means that they have to pretend that their lives are worse than those of their ancestors, so be it.

Per Akki, a loaf of bread in 1977 cost $0.32. In May 2019, it cost $1.98. In the meantime, the median income per person, Akki also claimed, remained the same. Ergo, Americans were worse off in 2019 than they were in 1977. The data from the Federal Reserve Bank of St. Louis, the most authoritative of sources, tells a somewhat different story. The real median income per person in 1977 came to $23,202. It stood at $31,099 in 2016 (the last year for which data are available). Both figures are in 2017 dollars. So, an American in the middle of the income spectrum was about $7,897 (or 34 percent) better off in 2016 than he or she would have been in 1977. And that’s not counting the increase in non-wage benefits that, due to the quirks of the U.S. tax code, continue to expand. As for the price of bread, Akki’s $0.32 would amount to $1.36 today. Target sells a loaf of bread for $1.09.

Thanks to Akki and many other misinformed people on both sides of the political spectrum, a myth of stagnating American standards of living has arisen and continues to spread. According to South Bend mayor and 2020 Democratic presidential hopeful Pete Buttigieg, the supposed stagnation started with the election of Ronald Reagan to the U.S. presidency in 1980. But, of course! “What we’ve seen is that the rising tide rose, right? GDP went up. Growth went up. Productivity went up—big numbers went up and most of our boats didn’t budge. For 90 percent of Americans, you start the clock right around the time I’m born [1982]. Income didn’t move at all—so lower to middle income, really, almost all of us,” Buttigieg said.

Having shown the massively decreasing cost of food in the United States in previous columns, I shall now turn to the cost of other everyday items, including appliances and clothing, between 1979 (the year before Reagan’s election) and 2019. Together with Gale Pooley, associate professor of business management at Brigham Young University-Hawaii, I looked at the prices of everyday items as they appeared in the 1979 Sears Christmas Book and compared them to the prices of identical (or almost identical) items as they appeared on Walmart’s website in 2019. We then divided the Sears’ prices by the hourly wage of unskilled workers in 1979 ($3.69) and Walmart’s prices by the hourly wage of unskilled workers in 2019 ($12.78).

The average time price (i.e., the amount of time that a person has to work in order to earn enough money to buy something) of everyday items relative to the hourly wages of unskilled workers declined by 72 percent. It declined by 75 percent for skilled workers and by 89 percent for upskilling workers (i.e., workers who started as unskilled workers in 1979 but ended up as skilled workers in 2019). That means that for the same amount of work that allowed an unskilled worker to purchase one item in our basket of everyday items in 1979, he or she could buy 3.56 items in 2019 (on average). A skilled worker’s purchasing power increased from one to four and upskilling worker’s purchasing power increased from one to nine.

There are a lot of reasons for the rise of populism in the West, but one, almost trite, reason is often overlooked. Our schools and our media not only fail to educate the citizenry; they actively mis-educate the electorate. Instead of showing the unbelievable progress that humanity has made since the start of the Enlightenment some three centuries ago, history classes, to the extent that history is still taught, are used to whip up resentment and a sense of victimhood among different socio-economic, racial, ethnic, religious and gender groups. The media breathlessly repeat stories of (real and imagined) oppression and (supposed) economic retrenchment, even though people in the West currently enjoy a period of unprecedented peace and prosperity. Akki’s tweet is but a tiny part of a broader trend of victimhood-Olympics.

So, to the question that is so often raised by so many talking-heads on television, professors in the classroom and politicians making stump speeches—Why populism?—I have only one answer: look in the mirror.

What Akki fails to grasp is that there is one area in which prices have skyrocketed. That would be higher education despite, or perhaps because of, steadily increasing government spending on higher education.

 

On women’$ $occer

The U.S. women’s national soccer team plays at France in the Women’s World Cup today at 2 p.m. Central time.

John Phelan writes about the team and its complaint against the United States Soccer Federation, and an ugly truth therein:

The US women’s soccer team is currently playing in the World Cup in France, defending the title they won in 2015. They’ve had an incredible start, scoring 18 goals in the group stage—a record for the tournament—and beating Spain to reach the quarterfinals.

Some see this success as fresh evidence in support of the case for equal pay for male and female players. According to a lawsuit filed on March 8 by the US women’s soccer team, their players are being paid less than the men, in some cases earning just 38 percent of their pay per game.

The United States Soccer Federation (USSF) denies the pay differences are related to sex. This week, the two groups agreed to enter into mediation to resolve the dispute.

The pay gap feud entered the national discussion in 2018 following an impassioned speech from FIFA world champion Abby Wambach. The New York Times reports:

In spring 2018, Abby Wambach, the most decorated soccer player in American history, gave a commencement address at Barnard College that went viral. The player who had scored more goals than any other, male or female, in international competition described standing onstage at the ESPYs the year after she retired in 2015, receiving the Icon Award alongside two peers, Peyton Manning and Kobe Bryant. “I felt so grateful,” she recalled. “I had a momentary feeling of having arrived; like, we women had finally made it.”

As the athletes exited the stage, each having, as Wambach put it, “left it all on the field for decades with the same ferocity, talent and commitment,” it occurred to her that while the sacrifices the men made for their careers were nearly identical to her own, their new lives would not resemble hers in one fundamental way. “Kobe and Peyton walked away from their careers with something I didn’t have: enormous bank accounts,” Wambach said. “Because of that, they had something else I didn’t have: freedom. Their hustling days were over; mine were just beginning.”

I don’t doubt Wambach when she says that she, Manning, and Bryant “left it all on the field for decades with the same ferocity…and commitment” and that “the sacrifices the men made for their careers were nearly identical to her own.” But if there is a case for equal pay, this isn’t it. The first hard lesson is that pay is not dependent on your effort but on your product.

… Abby Wambach was paid less because her efforts generated much less product—revenue—for her employers than Peyton Manning and Kobe Bryant’s comparable efforts generated for theirs. When Bryant played his last game for the LA Lakers in 2016, they sold $1.2 million worth of Bryant merchandise that day. I can’t find similar figures for what Abby Wambach generated for her last team, the Western New York Flash, but I doubt it was anywhere near that.

So what’s the story with revenues for the US men’s and women’s soccer teams? The Wall Street Journal reports:

In the three years after the U.S. women’s soccer team won the 2015 World Cup, U.S. women’s games generated more total revenue than U.S. men’s games, according to audited financial reports from the U.S. Soccer Federation.

Doesn’t this disprove US Soccer’s argument that the difference in pay between the men’s and women’s teams is “based on differences in the aggregate revenue generated by the different teams and/or any other factor other than sex”?

Not so fast. These figures relate to “gate” and “game” revenues. But, as the WSJ points out:

…ticket sales are only one revenue stream that the national teams help generate. U.S. Soccer brought in nearly $49 million in marketing and sponsorship revenue in 2018, nearly half of its $101 million operating revenue, according to federation records.

US Soccer sells these broadcast rights and sponsorships as a bundle, not separately for each team. As a result, it’s hard to tell how much of, say, Budweiser’s sponsorship is attracted by the men’s team and how much by the women’s. Presumably, sponsors are paying to get their name in front of potential customers. Considering that data show TV viewing figures for the men’s team are higher than for the women’s team, this might suggest that the men’s team is the attraction for a disproportionate amount of that broadcast and sponsorship revenue. This would explain the pay disparity.

If pay is dependent on the product, what decides the value of that? This is the second hard lesson. Not only is your product not related to your effort, but the value of that product is also determined subjectively by the consumer.

Abby Wambach and Kobe Bryant play different sports, so maybe it’s unfair to compare them. The US women argue that they are underpaid relative to men playing the same sport. How can the same output be valued differently? …

Why wouldn’t US men’s and women’s soccer be perfect substitutes? Maybe sports consumers are sexist. Maybe the women’s product isn’t as good as the men’s in some objective way. From a pay perspective, the reason is irrelevant. There is no economic reason why similar effort should yield similar pay and no reason why different products should yield similar pay.

The US women currently in France have won three World Cup titles. The US men have never won a World Cup and failed to even qualify for the 2018 tournament. The women’s team’s achievements are hugely impressive. If you want to reward them with cash rather than words, put your money where your mouth is. Show you value their product by spending on it.

Apparently in the view of at least one team member, getting people to spend money on their product is not necessary, based on this CNN report:

American women’s soccer co-captain Megan Rapinoe is not planning to go to the White House if the national team wins the World Cup.

A reporter from Eight by Eight, a soccer magazine that looks at the sport and its place in culture, asked Rapinoe if she was excited about going to the White House if her team wins the Women’s World Cup.

“Psssh, I’m not going to the f*****g White House,” she fired back before the reporter finished the question. “No. I’m not going to the White House. We’re not gonna be invited. I doubt it.” …

In May, Rapinoe called out the soccer’s leadership for not doing enough to level the pitch for men and women players. She acknowledged “strides” had been made toward the better treatment of women, but FIFA essentially has “unlimited resources” and a historic lack of investment in women’s games.

“I would like to see a major paradigm shift,” she said.

Rapinoe is also one of 28 players suing the United States Soccer Federation, alleging the men’s national team earns more than they do even though they play more games and win more matches

But, as Phelan noted, generate less revenue than the underperforming men’s team. And yet apparently Rapinoe is fine if conservatives do not support her soccer team.

(Company you don’t like)‘s taxes

Tyler Cowen:

The main reason Amazon as a corporate entity does not pay much in taxes is because the company so vigorously reinvests its profit. The resulting expensing provisions lower their tax liabilities, in some cases down to zero or near-zero.

That is, in fact, the kind of incentive our tax system is supposed to create, and does so only imperfectly, noting that many economists have suggested moving to full expensing.

Amazon pays plenty in terms of payroll taxes and also state and local taxes. Nor should you forget the taxes paid by Amazon’s employees on their wages. Not only is that direct revenue to various levels of government, but the incidence of those taxes falls somewhat on Amazon, which now must pay higher wages to offset the tax burden faced by their employees.

Not everyone wants to live in NYC or Queens! (Do you agree with Paul Krugman’s charge that the Trump tax cuts are mainly a giveaway to capital? If so, you probably also should believe that the wage taxes paid by Amazon employees fall largely on capital.)

There is no $3 billion that NYC gets to keep if Amazon does not show up. That “money” was a pledged reduction in Amazon’s future tax burden at the state and local level.

When it comes to the discussion surrounding Amazon and taxes, I can only sigh…

As do I, because businesses don’t pay taxes; their customers do as part of the cost of a product or service. Reducing business taxes is the source of considerable campaign spending. So if business taxes were zero, there would be less money donated to candidates. In addition, prices would be lower, or companies would have higher profits, which would be returned to shareholders in higher dividends, reinvested in companies, or sent to workers in higher pay.

 

Trump’s tariffs are so big …

Brett Arends wrote this last week:

I’m used to partisan, inaccurate drivel from all sides these days, but the media’s coverage of President Trump’s tariffs and the so-called “trade war” takes some kind of cake.

There’s no serious doubt that some in the media would absolutely love to tank the stock market. They figure that would hurt Trump’s re-election chances in 2020. Monday’s stock market slump, which saw the Dow Jones Industrial Average DJIA, -1.41% tumble 2.4% and the Nasdaq Composite 3.4%, looked just like what the doctor ordered.

I write this, incidentally, as someone who is no fan of the president. But I remember when politics was supposed to stop at the water’s edge.

And, anyway, facts are facts. Most of what the public is being told about these tariffs is either misleading or a downright lie.

I’ve been following the coverage all weekend with my jaw on the floor.

Yes, tariffs are “costs.” But they do not somehow destroy our money. They do not take our hard-earned dollars and burn them in a big pile. Tariffs are simply federal taxes. That’s it. The extra costs paid by importers, and consumers, goes to Uncle Sam, to distribute as he sees fit, including, for example, on Obamacare subsidies.

It wasn’t long ago the media was complaining because Trump was cutting taxes. Now it’s complaining he’s raising them. Confused? Me too.

And the amounts involved are trivial. Chicken feed.

President Trump just hiked tariffs from 10% to 25% on about $200 billion in Chinese imports. In other words, he just raised taxes by … $30 billion a year.

Oh, no!

The total amount we all paid in taxes last year — federal, state and local — was $5.51 trillion. This tax increase that has everyone’s panties in a twist is a rounding error.

Meanwhile, the total value wiped off U.S. stocks during Monday’s panic was about $700 billion. More than 20 years’ worth of the new tariffs.

Even if Trump slapped 25% taxes on all Chinese imports, it would come to a tax hike of … $135 billion a year. U.S. gross domestic product (GDP) last year: $20.5 trillion.

So even this supposedly scary “escalation” of this “tariff war” would, er, raise our total tax bill from 26.9% of GDP all the way to 27.5% of GDP.

Oh, and isn’t it interesting to see some people’s priorities? Apparently the most shocking part of this trivial tax hike is that it might raise the price of new Apple iPhones.

Last I checked, these were luxury items, right?

Meanwhile, the trade spat seems to be bringing down food prices. China is going to take less of our farm products. So wheat prices are down 20% since the start of the year. Soybeans are at 10-year lows.

Good for consumers, right?

No, no, of course not! Silly you. This is also bad news … for farmers!

And all this ignores the much bigger picture, anyway.

The tariffs are simply a means to an end. The president is trying to get China to start buying more of our stuff. He knows the so-called Middle Kingdom, which now has the second-biggest economy in the world, responds to incentives more than to nice words. These tariffs give China an incentive to open up.

OK, so China’s first reaction is just to retaliate. Big deal. That’s just posturing.

Right now we export less to China than we do to Japan, South Korea and Singapore put together. That’s the point. So the effect of China’s new tariffs on the U.S. are yet another rounding error. Even if China banned all imports from the U.S., that would amount to only 0.6% of our gross domestic product. And we’d sell the stuff somewhere else.

Don’t buy the hysteria. President Trump is simply trying to pressure our biggest competitor to buy more American goods. That should be a good thing, even if you don’t like him.

Arends is not, as far as I know, a Republican or a conservative. Marketwatch lists him as “an award-winning financial columnist with many years experience writing about markets, economics and personal finance. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He has worked as an analyst at McKinsey & Co., and is a Chartered Financial Consultant. His latest book, Storm Proof Your Money, was published by John Wiley & Co.”

So Arends may be right. We better hope he is.

 

A story you probably thought you’d never see

Douglas A. McIntyre:

Fiat Chrysler Automobiles proposed a merger with Renault that would create the world’s third-largest carmaker. The eroding economics of the industry make such deal more likely by the day. Deep trouble at Ford Motor and General Motors’ need for more heft to compete with rivals Toyota and Volkswagen make a marriage between the two largest car companies increasingly probable.

Fiat Chrysler argues that a tie-up with Renault will lead to $5.5 billion in savings. As car sales have flattened in the United States and started to drop in China, the two largest markets in the world offer less hope for revenue improvement. Neither company has much of a sales footprint in China. Renault has none at all. Both have a strong market share in Europe, but it is one of the most competitive markets in the world. At the low end of the market, VW is the dominant force. At the high end, it is BMW and Mercedes.

While GM and Ford both have a strong market share in the United States, Ford has stumbled. It has withdrawn most of its sedans in the American market because sales have shifted from cars to sport utility vehicles, crossovers and pickups. Ford’s only bright spot in the United States is its F-Series full-sized pickup, which is the top-selling vehicle in the nation. Ford’s sales in China are abysmal and falling. GM’s are strong, but it is up against other car companies, both local and global, that need the largest car market to be successful.

Ford’s management, under CEO Jim Hackett and Executive Chair William Ford, has shown it can cut costs. It recently cut 7,000 white-collar workers. That will save $600 million. Hackett has set total savings of $14 billion for the five-year period that began last year. He also said the company will invest $11 billion to have 40 electric and hybrid cars by 2022. Not many outsiders believe he can make his goal. Ford may build more electric cars and hybrids, but selling them is another matter. The competition in this market runs from tech companies like Alphabet’s Waymo to Tesla, startups and every major manufacturer in the world. There is no evidence Ford is ahead of this wave, and so far, it appears the company is behind it. Confidence in Hackett, in particular, is low.

GM is better regarded than Ford, primarily because of the work of CEO Mary Barra. She has been CEO of GM since 2014. It also has cut costs. However, many outsiders believe it is ahead of most of its rivals in both the electric and self-driving car businesses. GM owns 75% of Cruise Automation, a leader in artificial intelligence of future cars.

GM has two other advantages over most global manufacturers. It is among the leaders in car sales in China. With its joint venture partners, it sold 813,973 vehicles in the first quarter. GM is also the leader in U.S. car sales, with about 17% of the market.

One of the primary hurdles GM would have if it took over Ford is that the market share of the two in the United States would be close to 30%. Either U.S. regulators would need to accept that, or the combined company would need to sell or spin out some of its brands. The most likely of these are GM’s Buick or GMC truck business.

While GM may have a future as a standalone car company over the next decade, Ford does not. Its market cap is down 42% over the past five years, while GM’s is close to flat. The savings in a combination would be well into the billions of dollars. A marriage of the two also could compete effectively with Toyota, VW and perhaps the new Fiat Chrysler and Renault combo. GM also has the advantage that it is considered to make among the most dependable American cars.

Who would have predicted a GM–Ford merger at any point?

The possible irony here is that GM has fallen out of favor with many car buyers due to its bailout in 2008. And GM clearly has issues with those not turned off by the bailout, as GM Authority reports:

During GM’s Q1 2019 earnings call, a Barclays Capital analyst asked GM CEO Mary Barra a rather interesting question: whether the automaker’s products lack the desirability of key rivals, particularly when it comes to vehicle design and effective marketing tactics that attract buyers.

“We’ve talked over the years about the cultural change you did at GM and a greater focus on cost accountability, making sure you’re in the right product and geographies to drive profit,” asked Brian Arthur Johnson of Barclays Capital. “But one thing I do hear from investors is, if they look at GM design, broadly speaking, both the vehicles, the interiors, the advertising it just doesn’t, in some people’s view, have the kind of pizzazz as you might see. I don’t always like going back to Tesla, but it’s not lost on some of us that one of your designers created Elon’s vehicle lineup.

So just, how are you thinking about the state of design overall at GM? Is it an important differentiator? Or do you think it’s more important to get capable vehicles out there and kind of play it more on the profit and the cost game? And if it is more important, what would you — what are you trying to do to kind of move it to the next level?”

GM CEO Mary Barra responded with the following, providing some insight into the automaker’s thinking and processes:

“I think it’s incredibly important. You have to do everything to win in this market. And design is a very important piece of it. I think we have a very disciplined process where we clinic data and understand the customers in segment and what they’re looking for, how they view products. Full-size truck is different than a Cadillac is different than a compact SUV like the Chevrolet Equinox. And so, we have a very rigorous process on how we develop trucks and really focus on putting the customer at the center as we do those designs.

But all aspects are critically important. I think if you – you mentioned advertising as well. I think Cadillac is a really good example as you’ve seen the shift that we’ve made. And Steve Carlisle can do a better job of telling you, but the list that we’ve had with Cruise, with the right campaign has been very very successful. And I would also say, when you look at brand building, there’s been tremendous improvement across all of our brands and strengthening from the key brand metrics.

So we’re focused on having beautifully designed products that people want and desire and got to have to having the right contenting, so we could have the right package and efficiency and affordability for the customer and winning in the marketplace and then having advertising that breaks through. But sometimes the advertising that breaks through and is most effective with the customers isn’t the one that wins all the awards.”

That seems like a nice reply, but it still doesn’t really explain what the automaker will do to solve the elephant in the room, which is that a significant amount of U.S. car buyers do not desire GM, its brands or products when shopping for a car – whether due to prior quality or reliability issues, image-related factors, or an entire list of other potential reasons. It’s a serious problem, one that leaves GM competing for a smaller portion of buyers.

Meanwhile, some of the automaker’s newest vehicle designs have been critiqued for being bland or unattractive, including such models as the all-new 2019 Chevrolet Silverado, refreshed 2019 Camaro, and the all-new 2020 Cadillac CT5.

In addition, the Super Cruise campaign mentioned by Barra might make for a good talking point, but its success is very limited. The spot in question – called Pioneers – isn’t focused on Super Cruise, but rather mentions it in passing, while also bringing up a whole bunch of other Cadillac attributes. But apparently, it’s effective.

Or not if it’s not actually selling GM cars.

This will be really interesting to watch.

 

贸易战中的输家

I’m not sure I buy Tyler Cowen‘s claim, but it is an interesting point of view:

With the U.S.-China trade talks now at a halt, odds are that the recent U.S. tariffs on China will continue — and perhaps even rise and multiply. So it’s worth considering what effects those tariffs will have. One prominent argument, which can also serve as a criticism of President Donald Trump, is that the U.S. consumer is the loser. Yet in reality, China is probably in the more vulnerable position.

To be clear, there are well-done studies showing that the recent tariffs have translated into higher prices for U.S. consumers. I am not contesting that research. The question is whether those studies give sufficient weight to all relevant variables for the longer run.

To see why the full picture is more complicated, let’s say the U.S. slaps tariffs on the industrial inputs (whether materials or labor) it is buying from China. It is easy to see the immediate chain of higher costs for the U.S. businesses translating into higher prices for U.S. consumers, and that is what the afore-mentioned studies are picking up. But keep in mind China won’t be supplying those inputs forever, especially if the tariffs remain. Within a few years, a country such as Vietnam will provide the same products, perhaps at cheaper prices, because Vietnam has lower wages. So the costs to U.S. consumers are temporary, but the lost business in China will be permanent. Furthermore, the medium-term adjustment will have the effect of making China’s main competitors better exporters.

Obviously, no final long-run estimates are possible right now. But it is quite plausible that China will bear the larger costs here, not the U.S.

Another risk for China is this: As its access to U.S. markets becomes more difficult, China may be tempted to look to Europe. It remains to be seen whether the European Union will adopt additional protectionist measures, but China must consider that the possibility is more than zero.

To understand another feature of the longer-term perspective, consider that the impact of tariffs can be felt in at least two ways. In highly competitive markets, prices have to match costs, and so a cost-boosting tariff really does translate into higher consumer prices. (This is the case with many of the recent U.S. tariffs on China.) But for profitable branded goods, the economics aren’t the same. If the U.S. puts higher tariffs on Mercedes-Benz, for example, the prices of those cars will still exceed their costs of production. Mercedes, wishing to keep some of its strong market position, will probably decide to suffer some of the cost of the tariffs in the form of lower profits, rather than passing them along to its customers.

China has prominent brands as well, be it Huawei in electronics or other firms in exotic food products, and over time it aspires to climb the value chain and sell more branded goods to Americans. In fact China has an industrial policy whose goal is to be competitive in these and other areas. Tariffs will limit profits for these companies and prevent Chinese products from achieving full economies of scale. So this preemptive tariff strike will hurt the Chinese economy in the future, even if it doesn’t yet show up in the numbers.

There is also a broader reason why a trade war with the U.S. hurts China, and this gets to an important point with trade agreements more generally. A U.S. trade agreement with China would (if enforceable) certify China as a place where foreigners can invest and be protected against espionage, intellectual property theft and unfair legal treatment. That prospect of certification is now suspended. That makes investing in China less desirable for many multinationals, not just U.S. ones. That, in turn, limits Chinese domestic wages as well as long-term learning and technology transfer. A U.S. certification of China might even boost Chinese domestic investment, but again that is now off the table.

In my numerous visits to China, I’ve found that the Chinese think of themselves as much more vulnerable than Americans to a trade war. I think they are basically correct, mostly because China is a much poorer country with more fragile political institutions.

And finally: My argument isn’t about whether Trump’s policy toward China is correct. I am only trying to get the basic economics straight. Next time you hear that the costs of the trade war are simply being borne by Americans, be suspicious. In their zeal to make Trump look completelywrong, on tariffs or other issues, too many commentators pick and choose their arguments. A more fair and complete economic analysis indicates that China is also a big loser from a trade war. Trump’s threats are exerting some very real pressure on the country.

This question of who is worse off omits one important detail. If Trump wants to stay president, he has to run for reelection next year, as do Congressional Republicans supporting and opposing his trade policies. China’s leaders have no such concern; they could tank their entire country’s economy and remain in power. So ask yourself what China really has to lose from this trade war.