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Why Cheap Gas Might Not Be Good For The U.S. Economy

Consumers have been benefiting from lower gas prices. Here, prices dip below $2 per gallon at an Exxon station in Woodbridge, Va., on Jan. 5.
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Consumers have been benefiting from lower gas prices. Here, prices dip below $2 per gallon at an Exxon station in Woodbridge, Va., on Jan. 5. Saul Loeb/AFP/Getty Images hide caption

toggle caption Saul Loeb/AFP/Getty Images

Happy times are here again at the gas pump. The price of oil keeps falling, and Americans are filling their tanks for less than $2 a gallon. The government says cheaper gasoline put an extra $100 billion into drivers’ wallets last year alone.

That seems like it would be good for the economy. Turns out, it might not be.

“Is it possible that lower oil prices could actually hurt the U.S. economy?” asks Vipin Arora, an economist with the U.S. Energy Information Administration. “I think the answer could be yes.”

Arora’s findings are based on his own research, so this isn’t the government’s official word on the matter. But his research suggests that cheap gas might be bad for America.

Of course drivers like cheap gas. But people “sitting on the oil rig in Texas” don’t like cheap gas — nor do the truck drivers and businesses supplying the oilfields and hotels and restaurants that have set up shop to serve oil workers.

An oil pumpjack works at dawn Jan. 20 in the oil town of Andrews, Texas.

An oil pumpjack works at dawn Jan. 20 in the oil town of Andrews, Texas. Spencer Platt/Getty Images hide caption

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Arora analyzed government data, and found that what’s changed is that the oil and gas industry as a share of GDP has about doubled in the past decade. Now it has grown so large that it’s changed the basic equation of whether cheap gas is a good thing overall.

“The benefits to consumers could be around $140 billion from gasoline savings,” Arora says. “But the losses on the other side due to lower production, less investment, less build-out of infrastructure could be around that amount. So we’re kind of at a wash.”

This might help to explain why the economy still isn’t exactly charging forward even with the stimulus of cheap energy. But Arora himself notes that the question needs more study.

Meanwhile, analysis by the research firm Moody’s Analytics finds that cheap oil and gas are still a net positive. And plenty of experts remain in that camp.

“The bottom line is the United States economy is much better off with low-price energy than it would be with high-price energy,” says Philip Verleger, an economist and consultant who tracks energy markets.

The government says the average household saved $700 last year on cheaper gas. But the Commerce Department also says 2015 had the weakest retail sales growth in six years.

So why hasn’t there been more of a boost from that extra spending money?

“I think the mistake everybody makes when they say that there’s been no impact from the low price of energy is to fail to understand that the economy would be much worse off right now had we not had this decline in the price of oil,” Verleger says.

And then there’s the question of what caused the drop in oil prices.

Jim Bianco, president of Bianco Research in Chicago, evokes an old adage: “The day that the price of oil falls, you might not like the reason.”

He says a slowdown in China and elsewhere around the world is driving down the price of oil along with other commodities such as copper, aluminum and zinc.

So at least part of the reason oil prices have crashed, Bianco says, goes beyond the oil market itself and the boom in production of oil in the U.S. It’s part of a larger global slowdown. And some investors are worried that slowdown will hurt the U.S., too.

“The fear is it’s part of a larger whole,” Bianco says. “You cannot look at it in a vacuum.”

So far, there isn’t a lot of evidence that the U.S. is getting dragged down by all the trouble abroad. Job growth remains pretty solid. The economic recovery is continuing. And some analysts think we might see a bigger boost from cheaper energy later this year.

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Episode 679: You Asked For It

Who pays to keep up cemeteries?
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Who pays to keep up cemeteries? Patty M./Flickr hide caption

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We ponder the origins of money, the economics of Santa, and the business of cemeteries. Why? Because you asked.

Today on the show, we answer listeners’ questions.

Music: Matt Heaton’s “Happy You Made It.” Send us questions : Twitter/ Facebook.

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As Sanctions On Iran Are Lifted, Many U.S. Business Restrictions Remain

The Iranian private airline Mahan Air uses Airbus planes, like the one pictured here at Yemen's Sanaa airport in 2015. Tehran is in talks with Airbus to buy more than 100 additional passenger planes.
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The Iranian private airline Mahan Air uses Airbus planes, like the one pictured here at Yemen’s Sanaa airport in 2015. Tehran is in talks with Airbus to buy more than 100 additional passenger planes. Hani Mohammed/AP hide caption

toggle caption Hani Mohammed/AP

Iranian President Hassan Rouhani is on a goodwill tour through Italy and France this week, trying to drum up investment for his country’s sanctions-battered economy.

But Iran still faces challenges that make it hard for companies to do business with Tehran.

In a move that was loudly celebrated in Iran, the United States and other countries earlier this month agreed to lift an economic embargo that had been imposed in 2012 in an effort to curb Iran’s nuclear program.

The move means that companies in Europe, Asia and elsewhere are free to invest in and trade with Iran. And many seem interested in doing so.

“What we know is that there are many firms in Europe that are eager to enter into Iranian markets,” says Nader Habibi, a professor of Middle East economics at Brandeis University. “There is no shortage of those. Many of them have already made initial trips to prepare the ground for partnership or investment in Iran.”

But doing business in Iran presents special challenges, and the reasons have to do with U.S. policy.

While the U.S. government has agreed to lift the nuclear sanctions against Iran, it continues to impose other sanctions over Iran’s human rights policies and support for terrorism. These sanctions bar American citizens and companies from most forms of investment or trade with the country.

In theory, those sanctions should affect only U.S. companies — but in reality, the law’s reach goes well beyond U.S. borders, Habibi says.

The U.S. financial sanctions “can still cause some problems and make some of the European businesses and banks subject to U.S. economic punishment,” he says.

The Treasury Department’s Office of Financial Assets Control “has made it very clear that no payments linked to Iran may be processed through the U.S. financial system,” says Julia Pfeil, senior associate at the Baker & McKenzie law firm in Frankfurt, Germany.

“So if you receive money from Iran as a bank or a company,” she says, “you must make sure that this money does not then go to the U.S. or to a U.S. bank or to your U.S. subsidiary.”

That means foreign financial institutions doing business in the United States — and almost any bank of any consequence has substantial U.S. operations — must somehow segregate any Iranian money they hold from their U.S. assets. That’s difficult to do, Pfeil says. There’s no easy way to isolate Iranian money from the rest of the bank’s holdings.

“In a bank, you don’t have separate financial streams,” she says. “You have the money that goes more or less into a big pool. Of course, it is possible to find out which payment has gone where. But ultimately controlling so that, say, 20 euros that have come from Iran do not end up in the U.S. — that is a very big problem for banks.”

Beyond this, says Jimmy Gurule, a former Treasury Department official who now teaches at Notre Dame Law School, “Foreign financial institutions need to be very careful [because], while they may not be running afoul of the nuclear sanctions because they’ve been lifted, doing business with Iran in a particular set of transactions may run afoul of the counterterrorism sanctions.”

Foreign banks are especially nervous about violating U.S. sanctions laws because they have sometimes been hit with hefty fines for doing so. In 2014, France’s largest bank, BNP Paribas, agreed to pay a $9 billion penalty for helping clients in Sudan, Cuba and Iran evade sanctions.

“So what we are hearing from Europe is that although European sanctions are lifted, the banks, especially major banks which transact with the United States, are very cautious,” Habibi says.

Companies that want to do business in Iran have to first find banks that will work with them, Pfeil says. That means using small banks with no significant operations in the U.S. or even Iranian banks.

Still, Gurule believes the Iranian market will ultimately prove irresistible to some businesses.

“I think the economic incentive may just be too great an allure for the counterterrorism sanctions to have a chilling effect and prohibit them from doing business with Iran altogether,” he says.

But these companies will first have to decide whether the allure of Iran is worth the risks they’ll face when they do business there.

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Outlook For Wages Brightens, But Not So For Wall Street

If you are getting spooked by plunging stock prices, you may be trying to figure out where the economy is heading.

Here’s one new sign that better days are coming:

In the latest survey of business economists, most — 58 percent — say their companies plan to raise workers’ wages this winter. That’s the most upbeat wage outlook since mid-2014, according to the quarterly survey done by the National Association for Business Economics.

Combine those coming raises with Americans’ savings from cheap gasoline and lower home heating bills and you must have a formula for a brighter U.S. economy.

Or so you would think.

Unfortunately, Monday also brought another big drop on Wall Street, leaving stock prices on track for their worst January since 2009.

On Monday, the Dow Jones industrial average fell 208 points, or 1.3 percent, to 15,885. The S&P 500 and the Nasdaq Composite each fell 1.6 percent.

Most analysts are tying the stock market’s swan dive to oil prices, which have been running at about $30 a barrel, roughly a quarter of what they were as recently as June 2014.

The huge decline in oil has led to energy stocks getting crushed, oil field workers being laid off and inflation estimates getting thrown out of windows. All of that has been troubling Wall Street.

And now there’s a hint of rising pessimism in the broader economy, as reflected in the business economists’ survey, released Monday. Just 47 percent of the economists reported rising sales at their companies during the fourth quarter of 2015, down from 51 percent who had seen improving sales in the October 2015 survey.

For the first time in three years, more than a quarter of those surveyed expect real gross domestic product to rise by only 2 percent or less in the coming year.

So yes, the survey found more gloom among a minority of economists. But most economists continue to point to the upside of cheap energy.

The share of NABE respondents who say their companies enjoyed cost declines bounced up to 28 percent this month, compared with 22 percent in October. That means those companies can better afford to give out raises and continue hiring.

Let’s boil it down. Here’s the optimists’ take: Workers are getting raises at a time of robust hiring and bargains at the gas station. Meanwhile, most companies are benefiting from lower costs, which will allow them to upgrade their workforces.

“If your input costs are going down, you can afford to pay up to either keep people or attract more talented ones,” said Jim Smith, chief economist at Parsec Financial in Asheville, N.C., and one of the economists on a NABE teleconference Monday.

And here’s the pessimists’ view:

More oil comes from U.S. producers. In the past, cheaper oil hit harder at producers in the Middle East and elsewhere. Now that the United States is such a huge producer of oil, lower prices hurt U.S. oil field workers and investments.

The stock market turmoil reflects “the fact that the United States is a net producer in oil now versus a net consumer,” James Stanley, currency analyst at DailyFX, said.

Another problem is that supercheap energy is making inflation so low that it’s throwing off predictions about what the Federal Reserve will be doing next. Last month, the Fed took steps to nudge up short-term interest rates to tamp down inflation.

But not much inflation is materializing, and interest rates on many securities are staying low. For example, on Monday, yields on 10-year Treasury notes fell three basis points to 2.02 percent. That’s adding to a sense of uncertainty at a time when China is experiencing slowing growth and currency turmoil.

Later this week, economists and investors may get a better sense of who’s placing smarter bets, the optimists or the pessimists. This week brings the government’s first estimate of fourth-quarter U.S. growth as well as scores of earnings reports from companies in the S&P. And the Fed’s policymakers start their two-day meeting on Tuesday.

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When A Chicken Farm Moves Next Door, Odor May Not Be The Only Problem

A chicken house in Seagrove, N.C. North Carolina is one of the country's largest poultry producers. As farms move closer to residential areas, neighbors are complaining that the waste generated is a potential health hazard.
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A chicken house in Seagrove, N.C. North Carolina is one of the country’s largest poultry producers. As farms move closer to residential areas, neighbors are complaining that the waste generated is a potential health hazard. Kelly Bennett/MCT via Getty Images hide caption

toggle caption Kelly Bennett/MCT via Getty Images

North Carolina is one of the country’s largest poultry producers — and getting bigger. Large-scale chicken farms are spreading across the state. Government regulations have allowed these farms to get much closer to where people live. That’s not just a nuisance. Neighbors say it’s also a potential health hazard.

Craig Watts is an industrial chicken farmer in Fairmont, N.C. He contracts with Perdue and has raised birds for more than 20 years. Still, he says sometimes it’s a struggle to meet the demands of the industry.

“They don’t have to spend 24/7 with that chicken and have to deal with its waste. I deal with it and that kind of stuff. It’s a good situation for them,” Watts says.

His birds produce 700 tons of poultry waste each year, and he’s responsible for it. It’s spread in nearby fields and sold to farmers for fertilizer. Watts’ operation is one of thousands of confined animal feeding operations in the state.

These large-scale chicken farms are popping up near residential areas in western North Carolina, especially in Surry County. That worries residents Terry and Mary Marshall. “Your throat starts to hurt — you know you are in it,” Terry says. “It smells like a lot of ammonia, and sometimes, just dead rotting meat.”

Surry County residents from left, Terry Marshall, Dr. Katherine Kellam, Donna Bryant, Mary Marshall and Jesse Hardy lend support to each other during a meeting at Bryant's home in the Shoals community. Mary Marshall says the odor and pollution from nearby chicken farms can make it hard to breathe.

Surry County residents from left, Terry Marshall, Dr. Katherine Kellam, Donna Bryant, Mary Marshall and Jesse Hardy lend support to each other during a meeting at Bryant’s home in the Shoals community. Mary Marshall says the odor and pollution from nearby chicken farms can make it hard to breathe. Keri Brown/WFDD hide caption

toggle caption Keri Brown/WFDD

The waste is a combination of manure, feed and carcasses — which can cause harmful gas emissions. Mary says there are dust particles in the air and it can be hard to breathe. “We had some friends over to the house,” she says, “several people one night, and it was so bad, they had flashlights out in the front yard and you could see” the particles.

Environmental groups are concerned, too. Will Scott with the Yadkin Riverkeeper says chicken farms aren’t under the same scrutiny as other industries. These dry-litter poultry operations are exempt from state odor ordinances, and federal regulators don’t monitor their air emissions.

“I think what you are seeing here is the influence of a very powerful industry over state legislatures and over the federal government,” Scott says. “To the point where even the Environmental Protection Agency has not stepped up to regulate these facilities, despite the fact that we know they are polluting waterways across the country.”

The Environmental Protection Agency doesn’t see it that way. Allison Wiedeman of the EPA’s Water Permits Division says water quality regulations have been in place for years, and states can enforce additional requirements on poultry producers.

“We see that it’s working,” she says. “We know that these facilities have to have permits if they discharge, and so all I can tell you right now is that the process is working.”

Just how much waste is produced is unknown. The North Carolina Department of Environmental Quality says it doesn’t have a system to track these dry litter systems.

Bob Ford with the North Carolina Poultry Federation says more regulation would hurt the industry, which is worth $34 billion to the state economy. He adds odor and other issues are the farmer’s responsibility, but he acknowledges companies could be more involved. “There’s always room for improvement on anything what we do out here,” Ford says. “Maybe we can try to use more buffer zones or tree planting to reduce the impact.”

Tyson and Perdue, two major companies that contract with independent farmers, both declined interviews for this story. They did release statements that said their farmers are required to follow the law. But the laws don’t offer any protections for Terry and Mary Marshall.

Mary says it’s already too late for her neighborhood. “I have to hold myself together all of the time,” she says. “I knew it was going to be bad, but I had no idea it was going to be this bad.”

Mary is lobbying state lawmakers and says she wants future chicken farms away from residential areas, and something to control the odor and pollution, which she says will get worse in the hot North Carolina summers.


Keri Brown reports for member station WFDD in Winston-Salem, N.C.

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Billionaire Former N.Y. Mayor Bloomberg Eyeing Possible White House Bid

Sources tell NPR that former New York City Michael Bloomberg is seriously considering launching an independent bid for the White House.

Sources tell NPR that former New York City Michael Bloomberg is seriously considering launching an independent bid for the White House. Thibault Camus/AP hide caption

toggle caption Thibault Camus/AP

A divorced New York businessman billionaire with a mixed political history and knack for controversy and grabbing the spotlight might run for president. Another one.

Former New York City Mayor Michael Bloomberg is again weighing a possible independent bid for the White House after seeing an opening in a chaotic and unpredictable 2016 race.

The Democrat-turned-Republican-turned-independent is actively exploring a run, hiring consultants and commissioning a poll last month aimed at seeing whether there is an appetite for a third party candidate, a source familiar with Bloomberg’s plans told NPR.

Bloomberg plans to survey the race after next month’s New Hampshire primary and is willing to spend up to $1 billion of his own money on such an effort. He has proved he’s willing to spend money to win elections. He’s spent more than $300 million between his three mayoral runs and his post-mayoral political projects. The $250 million he spent on his mayor races is the most anyone’s ever spent on their own elections in U.S. history.

He can afford it — Bloomberg is the 14th-richest man in America and estimated to be worth some $36 billion, according to Forbes’ 2015 list of billionaires. To put that in context, Donald Trump claims to be worth almost $10 billion. (His wealth has been estimated at lower than that, somewhere between $2 billion and $5 billion, according to various counts.)

Because of deadlines to get on a general-election ballot, he will make a decision one way or another by March, sources close to the former New York mayor told NPR and WNYC.

This isn’t the first time the former mayor and media mogul has flirted with a presidential bid, but the unique dynamics of the 2016 race make it more likely than ever he could actually pull the trigger this time.

According to the New York Times, which first reported Bloomberg’s interest, he is more likely to run if Trump or Texas Sen. Ted Cruz wins the GOP nomination and if Vermont Sen. Bernie Sanders topples former Secretary of State Hillary Clinton in the Democratic race.

“If Hillary wins the nomination, Hillary is mainstream enough that Mike would have no chance, and Mike’s not going to go on a suicide mission,” former Pennsylvania Gov. Ed Rendell, a Clinton ally and friend to Bloomberg, told the Times.

The problem that timeline presents for Bloomberg is that neither primary contest is likely to be decided in March.

The 73 year-old Bloomberg has remained active in politics since leaving office in 2013, most notably advocating for stricter gun-control measures across the country through his “Everytown for Gun Safety” group, which spent nearly $400,000 on elections in 2014 with mixed results.

Even though Bloomberg first won office in 2001 as a Republican, he holds some very liberal positions. He’s outspoken on climate change, is pro-abortion rights and supports same-sex marriage, and his crackdown on trans-fats and other healthy eating requirements in New York City drew backlash from many conservatives.

But his cozy relationship with Wall Street and anti-public-sector union efforts in New York City could similarly alienate liberals who might agree with him on social policy.

There’s no telling how exactly Bloomberg could affect a general election featuring Trump and Sanders, but the race would feature two New York billionaires against an avowed socialist whose core message has been anti-Wall Street and the wealthy class.

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IKEA Executive On Why The West Has Hit 'Peak Stuff'

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IKEA’s Chief Sustainability Officer Steve Howard tells NPR’s Ari Shapiro how his company plans to keep expanding even while he says many in the Western world have lost their appetite for more stuff.

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Is Netflix Chill? Kenyan Authorities Threaten To Ban The Streaming Site

Netflix
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When Netflix announced its expansion to 130 countries, including Kenya, Nairobi-based IT specialist Mark Irungu says he was thrilled.

He had never failed to find ways to stream Netflix, even when it was blocked in Kenya.

But, he says, touching his heart, “that morning, when I saw that Netflix is global? I can’t compare it to anything else.”

And then he delivers one of the sweetest analogies about media access I have ever heard: “Think of it as a child who tries to get sugar from the sugar bowl. And they’re doing it illegally when Mom’s not looking. And one day Mom says, ‘Hey, you can have all the sugar you want.’ “

His sugar? It’s the Netflix drama Narcos, which follows the rise and fall of Pablo Escobar and his Colombian drug cartel. Irungu finished watching Season 1 in a day.

His joy that day wasn’t just about the convenience of being able to stream legally or the superior quality that his legitimate subscription bestowed. It was about feeling invited, included in the global community.

And then Kenya’s film ratings agency threatened to take that sugar away.

The chairman of Kenya’s Film Classification Board Jackson Kosgei threatened to block Netflix for inappropriate content. Netflix countered that parental controls are part of the site.

The board, which regulates what films and TV shows can be shown on Kenyan media, also said that Netflix had failed to seek a license to broadcast its content in Kenya.

But it’s not even clear the Kenyan agency has the legal authority to ban the streaming site. It depends on whether Netflix is classified as a traditional broadcaster or an online platform like YouTube.

Legal issues aside, the film board’s threats sparked national debate.

Newspaper columnists are debating the pros and cons of binge watching. Pro: It’s incentive for your kids stay home at night, a good thing in a dangerous city like Nairobi. Cons: They’re binge-watching.

And then there’s concern about the future of Kenya’s nascent film industry, which has often struggled to compete for a local audience against foreign films.

On the set of the TV show Pendo (Love), the cast and crew were on break because the power was out. Again.

The show’s director Gilbert Lukalia is working with a tiny budget and can’t afford a good generator. And he says can’t compete with the high-quality productions on Netflix.

“We can compete on one small element and that’s a story — we have good stories,” say Lukalia.

Still, Lukalia is himself is a Netflix fan. He’s opposed to a ban on Netflix and says the film board should spend more time promoting Kenyan talent.

And maybe, as his country beings to produce bigger and better shows, a platform like Netflix could help bring binge-worthy Kenyan stories to the rest of the world.

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Business Travelers Often Skip The Rental Car, Use Uber Instead

Uber driver Karim Amrani sits in his car parked near the San Francisco International Airport in July.

Uber driver Karim Amrani sits in his car parked near the San Francisco International Airport in July. Jeff Chiu/AP hide caption

toggle caption Jeff Chiu/AP

Business travelers increasingly are relying on Uber and other ride-hailing services, often more than car rentals or taxis, according to new data.

Say you landed at Chicago O’Hare International Airport. You’ve got a work meeting 20 minutes away. You might head to the rental desk to pick up a car. Or, you might call an Uber instead.

“More transactions coming through our system are in Uber than there well in all the rental car transactions,” says Bob Neveu, CEO of Certify, a company that businesses use to book travel and track receipts.

Certify analyzed millions of client transactions, and in the last quarter of 2015 Uber represented 41 percent of total rides, rental cars 39 percent, and taxis 20 percent. (The analysis does not include Lyft rides, which grew more than 700 percent over the last year but is still a fairly small portion, according to Certify data.)

“So if you think about it as a simple popularity contest, Uber is much more popular than using rental cars or taxis,” Neveu says.

While ride hailing has put some cabs completely out of business, Neveu doesn’t think rental cars face the same fate. “There’s always going to be a need for that marketplace when you have to drive longer distances, further away,” he says.

Technology analyst Alexandra Samuel says the car rental industry needs to catch up: People don’t want to be locked into a reservation days in advance; they want convenience (an app that knows your credit card number, not a form that makes you type it); they want to write emails in the car.

Samuel says incumbent companies — take Hertz, for example — should consider offering rentals that come with drivers. And she asks, “Why do I have to go to a Hertz parking lot and pre-book and make sure there’s a car there? Why can’t I just use a Hertz app and find a Hertz car anywhere in the city?”

Automakers are moving in that direction. Today General Motors announces it’s rolling out a new car rental service (called Maven), starting in Ann Arbor, Mich., where customers can use smartphones to reserve nearby cars and get in without keys.

And earlier this month, Lyft announced a new partnership with General Motors that includes a new service for Lyft drivers to rent vehicles, instead of using their own.

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Gun Stocks Up, But Activists Move To Expand Anti-Investment Push

Anti-gun groups and state officials joined New Yorkers Against Gun Violence to mark the sixth month anniversary of the Newtown massacre on the steps of New York City Hall in 2013.
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Anti-gun groups and state officials joined New Yorkers Against Gun Violence to mark the sixth month anniversary of the Newtown massacre on the steps of New York City Hall in 2013. Bebeto Matthews/AP hide caption

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After years of trying and failing to push new laws through Congress, gun control advocates are targeting American firearms makers from a different angle.

“The only thing they really understand is money,” says Leah Gunn Barrett, executive director of the nonprofit New Yorkers Against Gun Violence. She’s also part of a coalition called the Campaign to Unload, which encourages investors large and small to divest from owning stock in companies that make guns and ammunition.

“You may not even know that your 401(k) has gun stocks in it,” Barrett says. “So asking the question is very, very important. Not only for individuals, but for public pension funds…it’s really raising the issue and making gun stocks toxic.”

Gun control advocates have been pushing for years to get investors to divest from companies that make firearms and ammunition. Now officials in New York City want to widen that push to include retailers. But not everyone thinks their divestment campaign will succeed.

“If it’s made to be punitive, it’s not going to work,” says Andrea James, a firearms industry analyst with Dougherty & Company. She says gun stocks have performed well because gun sales have been brisk.

“When the divestment happens,” James says, “I don’t think it really affects the underlying business, meaning the number of firearms they sell.”

The divestment camp has claimed some victories after mass shootings in Connecticut and California. Big institutional investors like the California State Teachers’ Retirement System (CalSTRS) and pension funds in New York and Philadelphia have dropped their holdings in gun companies.

But the stock price of those gun companies has not gone down. In fact, since the Sandy Hook shootings in 2012, the stock prices of Sturm, Ruger & Co. and Smith & Wesson have mostly gone up, even as big institutional investors have moved to sell.

“In a free and open market, other shareholders will come and take their place,” James says.

Members of New Yorkers Against Gun Violence and the National Action Network march against gun violence on the streets of New York in 2012.

Members of New Yorkers Against Gun Violence and the National Action Network march against gun violence on the streets of New York in 2012. Kathy Willens/AP hide caption

toggle caption Kathy Willens/AP

This includes some investors who want to hold gun stocks as an expression of support for the Second Amendment.

Still, divestment supporters say this latest push is different because it’s aiming beyond just the gun companies themselves. New York Public Advocate Letitia James is pushing the city’s largest pension fund to divest from national retailers that sell firearms, including Wal-Mart, Dick’s Sporting Goods and Cabela’s.

“It really sends a strong moral message that public dollars should not be used to prop up an industry that has caused so much carnage on the streets of New York City and other urban centers across this nation,” Letitia James says.

Letitia James and other divestment supporters point to the success of past campaigns against the tobacco and coal industries — especially the push to end the apartheid in South Africa. But even in that famous campaign, some economists question whether divestment had the kind of impact its supporters claim.

“Well, unfortunately, it does not have an effect,” says Paul Wazzan, an economist at the Berkeley Research Group in California. He has studied the divestment campaigns against companies that did business in South Africa in the 1980s and 1990s. Wazzan says there was no measurable effect on their stock prices.

“But it does generate a lot of press and interest,” Wazzan says. “And the political pressure starts to build and that did ultimately have an effect. It’s not what our paper was about, but I think the political pressure ultimately did have an effect on these companies.”

That kind of pressure is harder to measure than a stock price. But divestment supporters say it’s still worth a try.

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