Power & antitrust

AT&T’s proposed $85 billion purchase of Time Warner is raising eyebrows – and fundamental questions about the purposes of antitrust law, writes James Stewart in the Times:

Politicians were piling on this week to criticize the deal, including Donald J. Trump; Tim Kaine, the Democratic nominee for vice president; and Senators Bernie Sanders of Vermont and Al Franken of Minnesota….

A younger generation of antitrust scholars who are rethinking the nation’s fundamental approach to antitrust law may prove even more influential.

“Over the last 40 to 50 years, antitrust law has evolved to be almost completely indifferent to vertical mergers,” said Tim Wu, an antitrust and internet expert at Columbia Law School who coined the phrase “net neutrality” …

In vertical mergers, a company buys a supplier; in horizontal mergers, direct competitors combine.

But the new generation harks back to the original trustbusters of the early 20th century, who were most concerned about preventing corporations from gaining too much power.

“The antitrust system as it stands is focused on prices to consumers, innovation and efficiencies,” Mr. Wu said. “That reflects the triumph of the University of Chicago school of economics. But there’s an older tradition, embodied by Supreme Court Justice Louis Brandeis, that says a concentration of too much power in too few hands is bad for democracy and bad for consumers.”

Read more here. For more on corporate pursuit of power, see this piece by Econ4’s James Boyce.

This is not a typo

When I first saw this, I thought it must be a typo. Incredibly, it’s not.

[T]he Defense Department’s inspector general found more than $6.5 trillion “wrongful adjustments to accounting entries” in the Army’s general fund in 2015 alone. It’s a number that’s difficult to wrap your head around. First of all, it’s much larger than the entire annual federal budget. But that sum represents not only current spending, but a lot of money from previous years that can’t be accounted for either. The sheer scope of the malfeasance is so staggering that the question that comes to mind isn’t “Why?” but “How?”

Read more here. And here. And here.

You can download the Inspector General’s report that uncovered the mess here.

The Trumpbeat of inequality

Nobel laureate Joe Stiglitz writes:

Where the trade agreements failed, it was not because the US was outsmarted by its trading partners; it was because the US trade agenda was shaped by corporate interests….

We need to rewrite the rules of the economy once again, this time to ensure that ordinary citizens benefit. Politicians in the US and elsewhere who ignore this lesson will be held accountable. Change entails risk. But the Trump phenomenon – and more than a few similar political developments in Europe – has revealed the far greater risks entailed by failing to heed this message: societies divided, democracies undermined, and economies weakened.

Read more here.

The deserving rich?

Nancy Folbre takes issue with Harvard professor Gregory Mankiw’s defense of the one percent:

The rich are not like you and me. They contribute far more to society than everybody else, so argues Harvard University economist Gregory Mankiw in his essay “Defending the One Percent.” Mankiw’s praise for talented superstars such as Steven Jobs, J.K. Rowling, and Steven Spielberg quickly blooms into a more general argument that competitive labor markets pay workers what they deserve. This is music to the ears of high earners, and it sings to a very human desire to believe that the world is fair….

Some of us contribute more than members of the top one percent to the economy, and some of us contribute less. None of us gets exactly what we deserve. One difference between the rich and us is that they have more money. They also enjoy—both as cause and effect—a lot more power.

Read her blog here; read her working paper on “just desserts” here.

Offshore shell games

A new report details how companies duck paying their taxes – and free-ride on those of us who do:

Fortune 500 companies are holding nearly $2.5 trillion in accumulated profits offshore for tax purposes.

Read the report here.

See press coverage here and here.

Plutocracy vs. democracy

Bill Moyers on the need for a level playing field and real democracy:

In May, President Obama and I both spoke at the Rutgers University commencement ceremony.  He was at his inspirational best as 50,000 people leaned into every word.  He lifted the hearts of those young men and women heading out into our troubled world, but I cringed when he said, “Contrary to what we hear sometimes from both the left as well as the right, the system isn’t as rigged as you think…”

Wrong, Mr. President, just plain wrong. The people are way ahead of you on this.  In a recent poll, 71% of Americans across lines of ethnicity, class, age, and gender said they believe the U.S. economy is rigged.  People reported that they are working harder for financial security.  One quarter of the respondents had not taken a vacation in more than five years.  Seventy-one percent said that they are afraid of unexpected medical bills; 53% feared not being able to make a mortgage payment; and, among renters, 60% worried that they might not make the monthly rent.

Millions of Americans, in other words, are living on the edge.  Yet the country has not confronted the question of how we will continue to prosper without a workforce that can pay for its goods and services….

The religion of inequality — of money and power — has failed us; its gods are false gods.  There is something more essential — more profound — in the American experience than the hyena’s appetite.  Once we recognize and nurture this, once we honor it, we can reboot democracy and get on with the work of liberating the country we carry in our hearts.

Read his powerful essay, “We, the Plutocrats vs. We, the People,” here.

Selling the free market

A “Grassroots Leadership Academy” bankrolled by the Koch brothers seeks to spread the free-market gospel:

One of the sessions, called the “Moral Case for Fossil Fuels,” teaches attendees to argue that “a turn away from fossil fuel use would ultimately be disastrous to humanity — especially the poorest of the poor.”

Read more here.

Wasted: The high cost of laissez-screw finance

What has the flawed financial system cost the U.S. economy? Here’s your receipt:

Read the accounting by Econ4’s Jerry Epstein together with Juan Montecino here. Excerpt follows:

A healthy financial system is one that channels finance to productive investment, helps families save for and finance big expenses such as higher education and retirement, provides products such as insurance to help reduce risk, creates sufficient amounts of useful liquidity, runs an efficient payments mechanism, and generates financial innovations to do all these useful things more cheaply and effectively. All of these functions are crucial to a stable and productive market economy. But after decades of deregulation, the current U.S. financial system has evolved into a highly speculative system that has failed rather spectacularly at performing these critical tasks.

What has this flawed financial system cost the U.S. economy? How much have American families, taxpayers, and businesses been “overcharged” as a result of these questionable financial activities? In this report, we estimate these costs by analyzing three components: (1) rents, or excess profits; (2) misallocation costs, or the price of diverting resources away from non-financial activities; and (3) crisis costs, meaning the cost of the 2008 financial crisis.

Labor markets: why “flexibility” is not all it’s cracked up to be

For years lamestream economics has touted “labor market flexibility” – a euphemism for making it easier for employers to dismiss workers – as the best recipe for job creation. Guess what? It turns out that countries whose policies make labor markets more supportive for workers – including better wages, better benefits and better job security – are doing better at job creation. The evidence prompts a New York Times reporter to ask:

What if the very thing that is often viewed as one of the United States’ sources of dynamism — flexible labor markets — is the driving force behind the economy’s greatest weakness: millions of people who are neither working nor looking for a job?

Read more here.

Economic orthodoxy: where vision goes to die

Econ4’s Gerald Friedman laments the blindness of orthodox economics:

When I conducted an assessment of Senator Bernie Sanders’ economic proposals and found that they could produce robust growth, the negative reaction among powerful liberal economists was swift and vehement. How much, I wondered, did this reflect personal disappointment being rationalized into a political economy of despair? Professional economists tend to embrace an economic theory that government can do little more than fuss around the edges. From that stance, what do they have to offer ordinary people for whom the economy is not working? Not a whole lot.

Read Friedman’s full piece here.

PS: The debate on the Sanders proposals between Friedman and his critics is recapped here and here.