Prof. JW Mason on CNBC talking about “What McDonald’s needs to do to turn around”

What McDonald’s needs to do to turn around: Experts

Thursday, 21 May 2015 | 6:07 PM ET


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McDonald’s needs to forget about big payouts to shareholders and instead focus on investing in its business if it wants to engineer a turnaround, economics professor Josh Mason said Thursday.

The beleaguered fast-food chain has failed to report same-store sales growth since the first quarter of 2014, with U.S. comps lingering in negative territory since the third quarter of 2013.

Mason noted that the company earned about $5.5 billion last year, yet it paid out almost $6.5 billion to shareholders in buybacks.

“If you want to rebuild the business, you have to invest in the business. You’re not going to make the business succeed by disinvesting in it to the tune of $1 billion going out the door to shareholders,” the John Jay College professor said in an interview with “Closing Bell.”

A customer enters a McDonald's restaurant in San Pablo, California.

David Paul Morris | Bloomberg | Getty Images
A customer enters a McDonald’s restaurant in San Pablo, California.

McDonald’s CEO Steve Easterbrook, who took the helm on March 1, announced a turnaround strategy earlier this month that included returning $9 billion to investors.

Shareholder Kevin O’Leary, chairman of the O’Leary Financial Group and “Shark Tank” investor, adamantly disagreed about cutting dividend payouts.

“The reason I own that stock is the fat, succulent dividend payout,” he said. “Don’t even think about dropping that dividend. I would dump that stock so fast and so would a lot of other institutional investors.”

Read MoreMcDonald’s stock could rise to $120: Strategist

He thinks the company should use its existing budget to get right people and strategies in place. For instance, he’d like to see healthier menu options to attract 18-year-olds.

“They’re going elsewhere to get their fix because they care about what they put in their body,” O’Leary said.

Scott Rothbort, also a shareholder, loves the stock for its dividend but isn’t happy with McDonald’s lack of thinking “outside the box.”

“The big problem I have is that all these changes that are coming to McDonald’s are coming from people who’ve been at company for a long time,” said the LakeView Asset Management president and Seton Hall professor.

“They really need to bring some sort of fresh thinking from outside the company into the fold.”

For him, that means a fresh concept that can compete against the likes of Shake Shack, In-N-Out Burger and other “somewhat higher-end, fresher concepts.”

Rothbort also thinks McDonald’s could make a strategic acquisition, perhaps Krispy Kreme, which he also owns and believes is “ripe” for a takeover.

Read MoreMcDonald’s CEO: ‘Ronald is here to stay’

On Thursday, McDonald’s shareholders approved a proposal to make it easier to nominate directors to the board. Despite opposition from McDonald’s, 61 percent of voting shareholders approved the proxy access bylaw proposal.

The shareholder meeting also drew the attention of protesters who are calling for a wage increase to $15 an hour.

John Jay’s Mason, who is also a fellow at the Roosevelt Institute, thinks the company can benefit from paying its workers more.

“You can pay people higher wages and benefit from that in terms of greater loyalty, reduced turnover. But you have to be committed to people,” he said.

However, Mason said that means McDonald’s has to think beyond the next six months to a year.

“You have to be focused on building this business in an ongoing way if you want to get the rewards from paying people better,” he added.

—CNBC’s Tom DiChristopher and Reuters contributed to this report.


Robert Moses: Le maître caché de New York


You wanna know about Robert Moses, Jane Jacobs, and figure out why bridges on parkways were built so low but you are too lazy to read Robert Caro’s 1200 pages bio of Moses? Luckily for you, there is a way!

Step 1: Learn French.

Step 2: Read “Robert Moses: Le maître caché de New York”, a graphic novel by Pierre Christin and Olivier Balez. It’s entertaining, succinct yet rich in content, and is written by a premier French SF graphic novelist, so it is down to earth and accurate.

(Mathieu Dufour)

What Is Finance For?

Why do businesses borrow money and issue stock? We know what the answer should be: to finance investment. Here you are, with extra income and no current need for it; over there is someone with a great business plan but no funds to carry it out. The job of finance is to hook you two up — to intermediate — to put your unwanted funds into her unfunded project. For a small fee, of course.

Economics textbooks all assume this is how finance works. So does economic policy. The reason we think that central banks can control aggregate demand, is that we think making it easier for businesses to borrow will boost their investment spending. And that in turn will lead to higher incomes and employment.

In the real world, though, things aren’t so simple. For one thing, investment is not the only thing businesses borrow for.

The link between corporate balance sheets and investment is the focus of my current work, including a just-published paper for the Roosevelt Institute Financialization Project. My argument is that the relationship between corporate sources and uses of funds has evolved historically, and now looks quite different from the textbook story. Today, there is little reason to think that easier credit for corporations will have a major effect on investment or on real economic activity. Instead, changes in the availability of credit for the corporate sector mainly show up as changes in the money flowing out to shareholders as dividends and share repurchases.

You can find the paper itself here.  There are good discussions of the results in The Washington PostTime magazine, and The Week.  I wrote about the larger implications of this change in the online political journal The New Inquiry.  I’ve also written a great deal on the topic on my blog.

Here are the key points from the working paper:

Over the past six years, the Federal Reserve has taken extraordinary steps to increase the flow of credit to corporations, yet the recovery has been anemic at best. While corporate borrowing returned quickly to its pre-recession levels, the recovery of real investment spending has been sluggish.

This disconnect between corporate borrowing and real investment is an important difference between the U.S. economy of today and the postwar period. A firm in the 1960s that borrowed a dollar would invest about 40 cents of it. Since the 1980s, less than 10 cents of that dollar is invested.

Over the same period, shareholder payouts have nearly doubled; by the second half of 2007 aggregate payouts actually exceeded aggregate investment.

This change in corporate finance is associated with the “shareholder revolution” in corporate governance of the 1980s, which fundamentally transformed the relationship between corporations and financial markets.

The delinking of corporate investment from financing poses a serious challenge for monetary policy. The central bank’s efforts to boost lending will have no effect on output or employment if they only encourage greater shareholder payouts rather than greater spending on real goods and services. Since the beginning of the Great Recession, macroeconomic policy has focused on restoring the health of the financial system, in the hope that increased lending and easier credit will help boost the economy and bring about full employment. But there is good reason to believe that the real economy benefits less from easier credit than it once did.

And here is paper’s key figure:


Correlation across firms of capital expenditure on new borrowing, by year

What this shows is that in the 1950s, 1960s and 1970s, if a given corporation borrowed a dollar more in a given year than other similar-sized firms, you could safely predict that it was investing 30 cents more in that same year. But this relationship weakened abruptly in the early 1980s; over the past three decades, corporations that borrowed more had essentially the same level of investment as ones that borrowed less. At the same time, a new relationship emerged, that did not exist at all before the 1980s: The corporations with the heaviest borrowing were now the ones paying the most out to shareholders. The conclusion of the paper: It appears that finance is no longer an instrument for getting money into productive businesses, but instead for getting money out of them.

I should add that when I first started working on this project, as part of my dissertation at the University of Massachusetts, this was not what I expected to find. Just the opposite: My goal was to show empirically how much the financial crisis of 2008-2009 had contributed to the fall in business investment in the United States. There was a well-established literature on testing the importance of credit constraints for investment, so it seemed like it should be straightforward to apply it to the Great Recession period. But I found myself baffled and frustrated because no matter how I sliced the data, I couldn’t find evidence for substantial credit constraints at all, let alone a a sufficient tightening to explain the dramatic fall in investment in the recession. I pored over the classic empirical papers on credit constraints, trying to understand why they found such clear evidence for a cashflow-investment link that I wasn’t seeing at all. Finally I realized, it wasn’t me, it was the data. The key papers in the empirical literature on credit constraints and investment were largely written in the 1980s, drawing on data from the 1960s and 1970s. The problem, as I discovered, is that the relationships between corporate sources and uses of funds were not the same in that period as in more recent decades.

This is an experience everyone in heterodox economics has had at some point. When you can’t make what you see in front of you match up with what ought to be there, it may not mean you’re doing something wrong. It may mean there’s something wrong with the world.

Student Essay Contest

The Progressive Economics Forum is organising a student essay contest. The topic is “Any subject related to political economy, economic theory, or economic policy that reflects a critical approach to unconstrained markets”. The contest is open to all Canadian students or international students studying in Canada, who are or were enrolled in a university during the 2014-2015 academic year. There is a $1000 prize for the best graduate paper and $500 for the best undergraduate paper. The deadline is May 4th, 2015, and submissions must be sent to

For more details, please see poster linked below or the rules on the PEF website:

PEF Poster 2015 web

Pablo Iglesias y Podemos en Nueva York

Original Published at Claridad
By Ian J. Seda Irizarry

La semana pasada el secretario general de Podemos, Pablo Iglesias, estuvo de visita por la ciudad de Nueva York, donde participó de varias reuniones y actividades con diversos grupos. Éste que les escribe tuvo la oportunidad de asistir a dos de esas actividades, oportunidad que no se podía dejar pasar luego de uno estar siguiendo las actividades de Podemos y sus portavoces desde hace meses, buscando paralelos con la situación de desesperación y oportunidad de la realidad puertorriqueña.

La primera de las actividades a la que asistí fue organizada por el círculo de Podemos en Estados Unidos para la cual uno de sus portavoces, Vicente Rubio, tuvo la gentileza de invitarme. Al llegar a la actividad, celebrada a las 7:30 pm en un magnífico edificio con un salón de banquetes y un área tipo anfiteatro con dos niveles, sentí de inmediato la emoción nerviosa de las cerca de 300 personas allí reunidas que, entre charla y una que otra cerveza, reflejaban una confianza y certidumbre sobre el futuro con las que pocas veces uno se encuentra. Es de notar que, paradójicamente, una vez entrado al edificio llamado “Centro Español,” se notaba un cuadro con el rey de España, individuo que representa una de las instituciones, entiéndase la monarquía, que Podemos y otros partidos quieren convertir en una pieza de museo.

Cuando entré al área de la actividad todas las sillas en el primer nivel estaban ocupadas y detrás de las últimas filas había una batería de cámaras esperando ansiosamente la llegada de Iglesias al evento. Tras estar unos minutos tratando de localizar caras conocidas decidí moverme al segundo nivel. Justo cuando llegué al último escalón, un grupo de 8 personas me pasó por al frente para bajar las escaleras a toda prisa con un Iglesias serio y decidido en el centro de la comitiva. Los primeros aplausos se escucharon cuando finalmente llegó el invitado al primer nivel, con todo el mundo volteándose para recibirlo con una ovación. Tras incorporarse por unos segundos al aplauso, Iglesias tomó asiento en la primera fila mientras Pablo Bustinduy, coordinador de relaciones internacionales de Podemos, subía a la tarima para ocupar el podio que decía “Podemos: The Time is Now!”. Bustinduy ofreció un discurso donde compartió su perspectiva, mientras residía fuera de España, de los hechos en su país y la frustración de “asistir como espectadores pasivos de un espectáculo bochornoso que nos dolía, que afecta a la gente que más nos importa” y cómo trabajaron por las elecciones europeas y se “veía que estaba sucediendo algo” con actividades con personas que venían a ser partícipes del proceso político.
Poco después Pablo Iglesias tomó el podio y devolvió a los presentes la energía con la que lo recibieron. Sus palabras denotaban el tono fuerte y confiado que han caracterizado consistentemente su estilo de oratoria, irrespectivo de si está tratando de ganar adeptos, dar confianza a seguidores, o enfrentando a los perros que le ha lanzado la derecha (ésta última expresión de la boca de Julio Anguita, referente de la izquierda y ex-coordinador de Izquierda Unida, organización en la que militaba Iglesias).

Iglesias abrió su intervención diciendo que “queremos construir una España a la que podáis volver, nunca más una España sin vosotros. Buenas noches Nueva York.” Acto seguido notó que “una vez la gente pierde el miedo y se hace consciente del poder que tiene la democracia, cosas que parecen imposibles se pueden hacer realidad.” De ahí pasó a hablar de los “traidores de la patria”- entiéndase los corruptos, el gobierno, y el propio presidente, Mariano Rajoy- los mismos que dijeron que iban a solucionar la crisis.

Su mensaje terminó exponiendo que el año 2015 es el año del cambio, pero “la clave para que ocurra… no es Podemos” sino el reconocer que “para que la democracia sea real como dijeron los indignados en las plazas es que el poder político realmente lo tenga la gente.” Luego de estas palabras finales no se dio una sesión de discusión y Pablo y su escolta subieron nuevamente al segundo piso, donde pude darle la mano y darle mi apoyo. El líder de Podemos me dio las gracias y se marchó cansado pero satisfecho de haber podido compartir con sus seguidores en la diáspora.

La segunda actividad se llevó a cabo al día siguiente en el Centro de Estudios Graduados de CUNY en Manhattan. Para la misma se había anunciado que Iglesias hablaría sobre las razones y el desarrollo del ascenso de Podemos y la relación de la organización política con grupos sociales. El auditorio, al igual que en la actividad de la noche anterior, estaba lleno a capacidad (muchos se quedaron fuera), y se encontraban varias personalidades de la izquierda norteamericana, como los profesores Stanley Aronowitz y David Harvey, el coordinador del Left Forum Seth Adler, y varios representantes de Syriza en Nueva York.

La introducción estuvo a cargo de Amy Goodman, reconocida periodista y ancla del programa de radio y televisión Democracy Now. Goodman ofreció un enérgico discurso sobre el papel de los medios alternativos y cómo la polémica informada es fundamental en el proceso democrático de un país. Terminada la introducción, Iglesias pasó a hablar de varios de los elementos que se combinaron para explicar la crisis en España. El análisis que proveyó no fue muy diferente de otros que llevan circulando por meses, aunque sí subrayó la cuestión histórica y estructural, en un momento reconociendo que mucho de su análisis provenía de los libros de Harvey.

Sorpresivamente, la presentación de Iglesias se dio por terminada antes de que hablara de los temas que nos habían convocado a la actividad. Eso sí, decidí ir a uno de los micrófonos para ver si se me daba la oportunidad de hacer una pregunta, oportunidad que efectivamente se materializó. Tras identificarme como profesor de economía en CUNY y miembro del Partido del Pueblo Trabajador de Puerto Rico, hice dos preguntas. La primera, pidiéndole a Iglesias que explicara el papel del tratado de Maastricht en la crisis europea, y la segunda intentando de que hablara sobre las tensiones en la práctica política del día a día.

Había muchas maneras de plantear la segunda pregunta, pero decidí señalar la tensión entre el énfasis que hacía Podemos al subrayar cómo el capitalismo mina la democracia y cómo las políticas económicas que proponen son identificadas con uno de los defensores más importantes del capitalismo, entiéndase John Maynard Keynes. Iglesias respondió diciendo que el mundo no se cambia con elecciones o desde dentro del salón de clases y que hay límites con lo que se puede hacer dado las relaciones de poder prevalecientes. Mencionó que “la democracia sirve para limitar los poderes financieros” pero que “no tenemos la fuerza para cambiar el sistema.” Otros luego continuaron diciendo que sí estábamos en una situación revolucionaria a lo que Iglesias respondió que hay una tensión geopolítica que brinda una gran oportunidad, aunque no necesariamente es una situación revolucionaria entendida en el sentido tradicional. Lo que sí es que el papel de la nación estado está regresando, visión que contrasta con la de muchos teóricos que hablan de un imperio global del capital que no necesariamente está anclado en una nación en específico.

En fin, éstas y otras preguntas a Iglesias denotan la gran expectativa que se tiene con lo que se pueda o no lograr en España y eventualmente en Europa, si es que se materializa un bloque de naciones que alcen la bandera de la justicia y la democracia ante las políticas de austeridad de la Troika. Esperemos que las palabras de Iglesias sobre la democracia y el miedo, citadas al comienzo de este ensayo, tengan más peso que su visión, de lo que yo llamaría, “maximizar bajo restricciones” si ganan la elección. La cuestión política es precisamente sobre mover y a veces destruir esas restricciones.

* El autor es profesor de economía de John Jay College (CUNY).

Economic Justice Speaker Series

Spring 2015 Schedule*

Doug Henwood- February 23rd, “USA Today: A Tale of Polarization and Rot”

David Kotz-March 5th, “The Rise and Fall of Neoliberal Capitalism”

Scott Carter-March 18th, “Sraffa 101: An introductory exposition of the Political Economy of Piero Sraffa in light of Archival Evidence (with reflections on method and pedagogy)”

Gerald Friedman- March 19th, “Beyond Obamacare: Healthcare not Health Insurance”

Lenore Palladino- March 26th, “Towards Economic Democracy”

Christine D’Onofrio- April 21st, “Poverty and Policy: New Data from New York City’s Alternative Poverty Measure”

* All events take place in room L2.84 from 1:30-2:40

Why We’re So Mad at de Blasio. Really??

by Geert Dhondt

Law enforcement officers turn their backs on a video monitor as New York City Mayor de Blasio speaks during the funeral of slain NYPD officer Rafael Ramos near Christ Tabernacle Church in the Queens borough of New York

(photo: reuters)


Today’s New York Times (January 8, 2015)  features an Op-Ed by Steve Osborne, a retired NYPD Officer and author of the forthcoming book, The Job: True Tales From the life of a New York City Cop, explaining why the NYPD rank and file are so mad at Mayor Bill de Blasio.  I was excited to read this article.  I wanted a better understanding of the view of the police and I was already thinking about ordering the book.  But the op-ed is no true tale.  The heart of the argument is that being a cop is a dangerous job.  Is this really the case?

The “shoot to kill” policy and the use of deadly force by police officers is often justified by the claim that being an officer is a dangerous job. This is why the death of Eric Garner, Ramarley Graham, Kimani Gray, Tamon Robinson, and most likely Akai Gray will not be see as a murder, but instead as an appropriate use of deadly force by the NYPD.

What about the police? Were they also being killed in the streets during those same years?

In the entire year of 2014, four NYPD officers died on duty.  Two were murdered in their patrol car, the third was killed in a traffic accident, and the fourth died in a fire.  In 2013, zero NYPD officers died on duty.  In 2012 six officers died – all of 9/11 related diseases.  Keep in mind that the NY police force is larger in number and fire- power than most armies in the world.

Now let’s take a more systematic approach to understanding these numbers through some national data:

According to the Bureau of Labor Statistics, over 132 million people were employed in 2013, of that total 4,405 died on the job.  Job statistics are broken down by the bureau related to different job descriptions and charicterizations. From this we can determine if being a cop is as dangerous as we are made to believe. The figure below shows how many people died on the job in different industries.  For Protective Services (includes police, correctional officers, fire fighters, security guards) the death rate is 7.58 per 100,000, for law enforcement officers specefically , the death rate on their “tour of duty” is 7.9 per 100,000.   Other major occupational groups, shown below, have much higher death rates. For example, people who work in Transportation (13 per 100,000), Construction and Extractive (16 per 100,000), and Farming, Fishing and Forestry Industries (52 per 100,000).  Being a police officer is a comparably much safer job than many others. Remember, these numbers don’t take into consideration that most police officers deaths are because of transportation incidents and not by violence.  If you want to have a safe job, don’t  work on a farm or in construction, don’t go to work as a logger or a fisherman, become a cop instead.

Deaths on the Job


(Note: Per 100,000. Source: Bureau of Labor Statistics.)