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Friday, September 2, 2011

Anti-Trust Enforcement and Corporate Campaign Contributions

On August 31, 2011, “the [U.S.] Justice Department sued to block AT&T’s $39 billion takeover of T-Mobile USA, a merger that would create the nation’s largest mobile carrier. “We believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower-quality products for their mobile wireless services,” said James M. Cole, the deputy attorney general.” The New York Times goes on to claim that it is “arguably the most forceful antitrust move” by the Obama administration. To be sure, there were “few blockbuster mergers with the potential to reshape entire industries and affect large swaths of consumers.” However, one could cite the UAL merger with Continental and Comcast’s acquisition of NBC as evincing such combinations. It is more likely that the housing-induced recession made the administration reluctant to risk a major company looking for buyer going bankrupt. I would not be surprised if the vested interests of major mergers and acquisitions “played the bankruptcy card” as leverage with the Justice Department. Moreover, the political power of mega-corporations in the U.S. can be expected to have come into play.

To be sure, the U.S. Department of Justice is capable of flexing its political muscle. Nasdaq withdrew its $11 billion bid for NYSE Euronext, the parent company of the Big Board after government lawyers warned of legal action. However, conditioning Comcast’s purchase of NBC to the latter giving up control of Hulu, an on-line movie/television conduit, evinced a strange indifference to a much larger distribution company (Comcast) having a vested financial interest in some of the content (i.e., NBC programming).

The Justice Department looked the other way on a rather obvious conflict of interest potentially operating at the expense of the consumer (assuming people want to watch more than NBC programming on cable). Of course, cable is not the only distribution channel for television programming. Customers dissatisfied with Comcast’s vaunting of NBC programming (and even possibly restricting other content) could go to DirecTV, for example. However, conflating distribution and content seems a bit like the repeal of the Glass-Steagall law, which had prohibited the combination of commercial and investment banking (and brokerage) from 1933-1999. The law reflected the belief that structural or institutional conflicts of interest can and should be obviated even though it can be expected that not every instance of a commercial-investment firewall would succumb to the immediacy of the profit motive.

In short, the Obama administration could have gone further in its antitrust actions. While admittedly not as pro-business as the preceding administration, the Obama administration’s tacit acceptance of mega-corporations may translate into an insufficient defense of competition. It should not be forgotten that Goldman Sachs contributed $1 million to Obama’s election campaign in 2008. For the president to actively promote competitive markets would require him to bite the hands that have been feeding him. In other words, there is a conflict of interest involved in allowing corporations to make political contributions while the government officials are tasked with replacing oligarchies with competitive marketplaces.

Ben Protess and Michael J. De La Merced, “The Antitrust Battle Ahead,” New York Times, August 31, 2011. http://dealbook.nytimes.com/2011/08/31/the-justice-department-versus-deal-makers/?hp

Wednesday, August 31, 2011

Nietzsche on Bank of America

The positive correlation between incompetence and unethical conduct at companies is striking, for, theoretically at least, a person can be talented or smart and of questionable character. Of course, it could be that cutting corners is a survival strategy of people who are not competent. However, shirking seems to reflect a sordid character, which, like personality, is relatively constant throughout one’s life—though character flaws could manifest more when times are tough (as in when incompetence has eventuated in a dire balance sheet). One might investigate, moreover, whether a firm’s culture can become more tolerant of unethical conduct when the finances are going south—or do unethical cultures tend to be like fixtures in organizations irrespective of financial condition?

The full essay has been incorporated into (or swallowed up by) On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available in print and as an ebook at Amazon.

Tuesday, August 30, 2011

Angela Merkel: Leading Germany in the E.U.

In the E.U. state of Germany, Angela Merkel had her work cut out for her in getting her coalition to carry the German House, or Bundestag. In vesting the debt bailout fund with powers had been at the state level. The Wall Street Journal reported that conservatives feared the deal would “open to the door to relinquishing more sovereignty to the European Union.” Also, the legislators in her Free/Christian Democrat coalition were having trouble justifying the increased cost to their constituents of the expanded fund even though it is geared to keeping the E.U. debt-loads at the state level from spinning out of control—meaning at the expense of the German economy. Economically, it can be argued that expanding the E.U.’s bailout fun is in the economic interest of the state of Germany and its residents.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Monday, August 29, 2011

Perry on Federal Power: Only the Important Stuff

It is much easier to point out the sliver in the other guy’s eye than to detect the plank in one’s own. In terms of the political consolidation of the U.S. at the expense of federalism, wherein both the state governments and the general government can check the other, it is easier to point to what the other guy is piling on the U.S. Government rather than what one is adding to it oneself. As a result, the process of consolidation into a one size fits all on the scale of empire goes on without scarce a recognized reason why.

For example, Texas’s chief executive and head of state, Rick Perry, wrote in his book, Fed Up!, “From marriage to prayer, from zoning laws to tax policy, from our school systems to health care, and everything in between, it is essential to our liberty that we be allowed to live as we see fit through the democratic process at the local and state level.” If it is essential to our liberty that these policy domains be kept within a state, then any backtracking on any of these areas would be an indication of insincerity on the claim. Moreover, the assertion would be compromised practically speaking. That is to say, the flood-gates would be opened and we would be back to consolidation.

So the following report from the New York Times is notable. “In one of his more well-publicized shifts, Mr. Perry proclaimed that gay marriage was an issue for individual states to decide, but backtracked in [August 2011 and said] he supports a federal amendment banning gay marriage. He . . . also signaled support for various federal actions to restrict abortion rather than leaving the issue to states.” More generally, if Republican office holders want to federalize “social issues” while Democratic officials insist on federalizing criminal and labor law, for example, then what we have is unintended political consolidation: one size stretching across a continent, up to Alaska and out to Hawaii at the expense of the inherent diversity therein. Any given representative could claim that his or her desired federalization would not break the camel’s back, so we are all left wondering why the camel’s back broke. Don’t look at me.

If an office-holder will not keep to even his or her own list of domains reserved to the states, then how credible is that official’s claim to safeguarding the viability of the federal system of public governance? The truth may well be that no elected official is truly interested in any governance system; the motivation may actually be a function of what is politically expedient at the time. At best, each politician may authentically believe that his or her top issues should be made to apply to all Americans—in every member state. The result is that everything is federalized. As each official is busy imposing what is most important to him or her on as many people as possible, the question needing to be asked may therefore be, who, exactly, is minding the store?

A critique of Perry's book is at "American and European Federalism."


Manny Fernandez and Emily Ramshaw, “As a States’ Rights Stalwart, Perry Draws Doubts,” New York Times, August 29, 2011. http://www.nytimes.com/2011/08/29/us/politics/29perry.html

Eye of the 24/7 News-Cycle: Profits & Attention

For about a week toward the end of August 2011, the news networks in the U.S. seemed utterly captivated, or obsessed, with Hurricane “Irene” running up the east coast from North Carolina to New England. The prognosis was given as a fait accompli even when the storm was just leaving the Bahamas. A rough convergence of the models was taken for certainty, and that the hurricane would be strong was generally assumed. Furthermore, in spite of the fact that the storm was moving at around 15 mph, “non-stop” coverage was deemed necessary.

If this sounds familiar, it may be because on virtually any major story, the 24-hour news networks tend to push away any others even when the story itself is insufficient to drive the continuous news cycle. Strangely, the network bosses choose filler pertaining to the story rather than risk diverting viewers’ attention by breaking away, even briefly, to cover another story. Beyond the obvious driver of making money off a headline story—essentially milking it for all it has (and then some)—a psychological element of obsession seems to be involved. The news editors might claim that in “demanding” more coverage, their viewers are the obsessed parties. However, it could also be that the viewers have been whipped up into a frenzy by the constant coverage and hyperbole. If everyone having a microphone is saying that the sky is about to fall, it is only natural to step inside and take care of business before the impending catastrophe. That it is in the speakers’ self-interest financially and in terms of attention to exaggerate the dramatic is generally not recognized. Furthermore, the stories are not recalibrated to take account of the bias.

So when the hurricane named Irene failed to strengthen after the Bahamas, little was made of it; reporters did not point out that the storm’s eyewall, which had collapsed, did not re-form out of a contracting outer wall. Instead, the media obsessed on where the storm would make landfall. According to James Franklin of the National Hurricane Center, “There were a lot of rain bands competing for the same energy. So when the eyewall collapsed, there were winds over a large area.” Spread over a larger area, the winds were less intense. So what was predicted to be a Category 2 or possibly Category 3 storm at landfall in North Carolina was in fact a Category 1 storm. After North Carolina, the storm weakened even more rather than strengthening over the water east of Maryland and Delaware. The water was slightly cooler and the winds and drier area of another weather system kept the storm from strengthening. Even so, the media was reporting that the hurricane would reach New York City as a hurricane. No mention was made of the fact that the storm was downgraded to a tropical storm prior to reaching New York City. Instead, the media kept up the storyline of lower Manhattan being set to go underwater. Eventualities based on an assumed worst-case-scenario were played out ad nausea even after the storm had been downgraded from hurricane status! Not surprisingly, New Yorkers were underwhelmed and most of the rest of us might have wondered whether the five or six day marathon had been worthwhile.

To be sure, there was damage in the billions of dollars--particularly from flooding far from the coast. The storm was a Category 1 hurricane when it arrived in North Carolina and a large and very wet tropical storm when it headed from New Jersey to New York and into interior New England. Also, the hurricane had the potential early-on to be devastating to the major cities on the eastern seaboard. So getting the warning out, particularly to folks on North Carolina’s outer banks, was important. However, the overkill had its own costs, including the opportunity cost of foregone, neglected news. Other things were happening during that week in August 2011. At the very least, the American broadcast media suffered from tunnel vision, was slow in reacting to the diminished destructiveness of the storm and was partial in reporting the updated storm information as it came in.  The partiality was in line with perpetuating the rather dramatic worst-case-scenario. I contend that this did not happen by accident.

As if to vindicate all the attention devoted to the story and the catastrophic portant, at least one network showed water going over a reporter’s feet when the tropical storm was at New York City. After the storm, as the nonstop coverage astonishingly continued, one reporter was interviewed because at one point on a boardwalk she could see foam below the boards. So much for catastrophic. Along with the omission of data indicating the storm was weakening, the refusal to budge from the storyline of utter destructiveness points to something being up (i.e., even beyond acting on behalf of public officials in sounding the alarm).

It is as though the media was bound and determined to run through the storyline come hell or high water—even if there was neither. Better to keep on message than change course because the latter would imply that the original storyline had been wrong. In obsessing on the projected path of the storm, the media ignored data on the diminished strength. “(I)t was not surprising that the strength forecasts were off,” according to the New York Times. “The accuracy of such forecasts has hardly improved over the past several decades.” In the wake of hurricane Irene, readers might have been thinking, now you tell us. However, it is not just overreliance on predictions; the media had an interest in ignoring the inherent inaccuracy.

The staff at the news networks might want to take the limits of human knowledge to heart the next time a storm pops up in the Caribbean, and the rest of us might want to remember that it is in the self-interest of the media companies and their personalities to exaggerate the dramatic scenario and then pretend that they have done no such thing when things turn out differently. In other words, there is not apt to be a learning curve on this circulation of profits and attention around an eye of ego—this is one spin that can be predicted. The game is up, journalists, but whether anything can be done about your little scam is another story—one that no doubt will also be preempted by some pressing disaster that demands a monopoly of attention across the continent of North America and beyond.


Henry Fountain, “Hurricane Lost Steam as Experts Misjudged Structure and Next Move,” New York Times, August 28, 2011. http://www.nytimes.com/2011/08/29/us/29forecast.html