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The Sort Of Idiocy That Disqualifies You From Economic Commentary – Robert Reich Edition

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It’s possible to have different views about the economy, sure it is. Perhaps the workers should be getting more, possibly it’s the entrepreneurial drive – and thus their incentives – that makes the world a better place for us all. My views on such matters are correct of course, yours being valid only where they accord but then that’s the way all humans work as we peer out from those little holes in the skull.

As that bloke who set up The Guardian specifically and exactly as a tax avoiding institution put it though, comment is free, facts are sacred. And some beliefs are so far from any reality that believing in them entirely revokes your licence to comment upon matters economic. This is, again, our insistence that it’s the things that ain’t which are dangerous.

Today’s example comes from Robert Reich who some, alarmingly, think has useful things to say about said economy:

Why has Bezos set the bar so low for the rest of corporate America? It can’t be the cost. Amazon can afford the highest safety standards in the world. Last quarter, its revenue surged 26 percent and its profits soared to $75.5 billion.

That was published on May 21 this year. The latest quarter for Amazon’s accounts was Q1 2020, released on April 30. Sure, trying to figure out what’s going on in Reich’s head is always difficult but it’s a reasonable assumption that that’s what he’s referring to.

A quick snapshot of those results being:

Profit, to those of us who have a basic understanding of how this works, was $2.5 billion and change. Those who don’t know how this works might get confused between gross profit and profit. That would give a figure of about $31 billion (subtracting only cost of sales from revenue). That would be wrong of course but understandably so.

So where in hell does this $75 billion come from? The only figure there at all that it could be is gross revenue. Reich is thus telling us that Amazon has no expenses at all, gross revenue equals gross profit. Which is insane of course, even Luckin Coffee hasn’t tried to tell us that.

This being the sort of mistake that really does disqualify from any further commentary upon economic matters. Even if we’re to soft soap the explanation – that is that Reich isn’t really this stupid or casuistic, he just made a mistake – and agree that he just read the wrong line of the accounts it’s still disqualificatory. Because no one can be so ignorant as to think that a $75 billion profit at Amazon is even vaguely possible in the one quarter. $300 billion a year? Nonsense, no one makes that much nor anywhere close. – total corporate profits in the US are around $2 trillion a year and no, Amazon does not make 15% of all profits. That being the sort of nonsense that among people qualified to write about the economy will set off that little alarm bell.

It also means that we should never believe any numbers The American Prospect offers us upon anything of course. For their editing process should have caught this too – and it’s the sort of error that if it doesn’t it means their editors are all ignorant of the economy too.

Of course, we’ve known much of this about Reich and the A Prospect for a long time but it is nice to see it confirmed.

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  1. The peerless (should that be clueless?) Polly Toynbee made a similar error yesterday, informing readers that “The 1,000 people featured in the 2019 Sunday Times Rich List together earned £771bn: that’s six times the cost of the NHS.”

    Naturally this was lapped up by those eager to believe anything that fits their jaundiced and dystopian worldview, regardless of how stupid or obviously untrue it is.

    Polly’s colleague, Owen Jones, the ludicrous Marxist 3rd-former did the same several years ago, claiming that the cabinet had rewarded themselves thanks to a change in the tax rate. He named a figure of £40k and, when challenged by Andrew Neill, was happy to show his workings. 14 cabinet ministers were millionaires therefore they’d received an additional £40k for every million they earned. Even when it was pointed out to him that being a millionaire doesn’t mean earning £1m a year he still blustered along, trying to not look a fool (and failing miserably).

    But, to people like Jones and la Toynbee, facts are of negligible importance compared to narrative. If a stat can be bent to support their emotive polemic of the day then they’ll wheel it out front and centre. Any fact or stat that runs counter to the narrative will be ignored altogether or framed in such a way as to render it meaningless.

    Hence why Polly LOVES the “Relative Poverty” metric. It always gives you victims. It always offers a convenient stick with which to beat the Govt.

    One wonders how the Guardian’s editors can still put out CP Scott’s dictum every day with a straight face.

    It ought to be changed to “Facts are scarce. Comment is all we’ve got.”

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