The reality of monopoly power in the USA

Yesterday I commented on Thomas Frank’s interview with Barry Lynn, author of Cornered, an important new book about business monopoly in the USA.   I intend to read the book and review it on this web log, but, in the meantime, here are some highlights of the interview, touching on the surprising (to me) extent of monopoly power.

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Amazon now essentially governs business within the book industry.  Amazon has so much power that it virtually gets to tell really big companies like Hachette, the French publisher, what to do.

You’re gonna sell this book at this price. You’re gonna sell that book at that price. That means Amazon pretty much has the power to determine how many copies of a book a publisher might sell.

That’s not citizens trading with one another in an open market setting those prices, that’s a giant corporation setting those prices.  Which means what we are witnessing in the U.S. book industry, I think, is a form of top-down government.

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Some years back a company named Tyco decided to take over the business of making plastic clothes hangers. It went out and bought at least four companies, and that gave it the power to jack up prices to clothing retailers. That’s the pattern in pretty much every industrial activity in America.

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The Supreme Court [in the mid-1960s] forced Pabst to unwind a merger with Blatz because their combined market share [of beer sales] would have been 4.49 percent.  … …

Well, now there’s two foreign companies, Anheuser-Busch InBev, which is controlled out of Brazil, and MillerCoors, which is controlled out of London.   And those companies control about 80% of the US market.  And until recently they controlled about 90% of the market.

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It’s not all that hard to manufacture eyeglasses. But there’s a single company, Luxottica, an Italian company, that controls most of the business in America. You go shopping for eyeglasses.

You go to a place called Lenscrafters. You go to a place called Sunglass Hut. You go to a place called Pearle Vision.  You go to Target Optical.  You go to Sears Optical. You go to Macy’s Optical.

You’re comparing quality, comparing prices, imagining you live in an open and competitive market.  And yet all of these stores and most of the product in them are controlled by Luxottica.

The passing scene: Links & comments 6/30/14

What If Banks, Not Abortion Clinics, Needed Buffer Zones? by Barbara O’Brien for Open Salon.

What if people doing business with the “too big to fail” banks had to run a gantlet of yelling protestors just to enter the bank.  Suppose the banks were vandalized, and their employees subject to harassing and threatening telephone calls.  Suppose bankers had actually been murdered.  Is there any doubt that the bank protestors would be classified as terrorists?  Yet all these things have happened with abortion clinics, and it is accepted as normal.

The Unkindest Cut by Elias Vlanton for The Washington Monthly.

Joshua Steckel, a high school guidance counselor, worked hard with students from poor families to convince them it was both possible and worthwhile to qualify for college by studying hard.   But at the end of the road, his students found that college was unaffordable.   Financial aid packages only covered part of the cost of college, and what was left was more than poor families can pay.

Antibiotic scientist must push discovery to market by Kelly Crowe for CBC News.

The emergence of antibiotic-resistant bacteria is a big threat to public health.  Yet few if any drug companies are interested in developing new antibiotics.  Profits on new antibiotics are small and risky because developing new antibiotics is difficult and expensive, regulatory approvals take time and money and antibiotics soon become obsolete as bacteria develop new resistance.

Peru now has a ‘license to kill’ environmental protestors by David Hill for The Guardian.

Under a new law, Peruvian police can escape criminal responsibility for killing civilians while on duty without having to show they are acting according to police regulations.

Big business loves desperate, overqualified, underpaid workers by David Atkins for The Washington Monthly.

Today’s South is boldly moving backwards by labor historian Nelson Lichtenstein for Reuters.

Historically Southern business leaders have sought to compete with the North by means of cheap labor.  This is still true.

Obama Admin’s TPP Trade Officials Received Hefty Bonuses From Big Banks by Lee Fang for Republic Report.

 

The real problem is monopoly

Monopoly power is the real enemy of both free enterprise and economic justice in the USA today.

In industry after industry, a single company or handful of companies dominates the market, and they act like little miniature governments, determining who can participate and how much they are paid.

Barry C. Lynn, a senior fellow at the New America Foundation, and author of Cornered, a new book about monopoly, wrote that the cause is simple.

Starting with the Reagan administration in the 1980s, the government decided to stop enforcing the anti-trust laws when it was argued that monopoly offered greater economic efficiency.

The solution also is simple (although, Lynn admitted, extremely difficult politically to do).

Resume interpreting the anti-trust laws as they were understood prior to 1980.

LINKS

Free markets killed capitalism: Ayn Rand, Ronald Reagan, Wal-Mart, Amazon and the 1 percent’s sick triumph over us all, an interview of Barry C. Lynn, author of Cornered: The New Monopoly Capitalism and the Economics of Destruction. Strongly recommended.

Printing controversy:  Amazon’s latest plan to harm publishers and consumers under the guise of customer satisfaction by Nathaniel Mott for PandoDaily.

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The argument for monopoly is the same as the argument for state socialism, which is that it offers greater economic efficiency and less duplication than a competitive free enterprise system.

It is true that Amazon, like Wal-Mart, achieved its domination of its markets through a superior business model in which costs were passed on to the consumer.  Once dominance was achieved, however, Amazon, like Wal-Mart, was in a position to use its position to drive down wages, drive down prices of suppliers and deny customers any alternative by squeezing out competition.

Under business monopoly, the only competition is between individuals and localities as to how much they are willing to give up.

 

Passage of the hours in Baja California

There’s something about great time lapse photography that gives me a feeling of awe and a feeling of peace.

Source: Mike Flores on Vimeo.   Hat tip to Notes to Ponder.

The lighter side: Some visual puns

Indonesian candidate involved in mass killings

General Prabowo, who was responsible for mass killings under the 31-year dictatorship of President Suharto, is a leading candidate for President of Indonesia in the July 9 elections.

Suharto’s murderous regime killed hundreds of thousands of people, including Chinese, Communists, Christians, citizens of East Timor, dissidents of all kinds and villagers who happened to be in the wrong place at the wrong time.

Retired from the military since Suharto was forced out in 1998, Prabowo is attempting a political comeback under Indonesia’s new democracy.

“Do I have the guts, am I ready to be called a fascist dictator?” he asked journalist Alan Nairn in a 2001 interview, which Nairn recently made public.  A journalist who has reported on Indonesia for decades, Nairn currently is being threatened by the Indonesian military for his reporting on Prabowo.   Nairn told Juan Gonzales on Democracy Now! that he doesn’t think he is in danger, but he would be if he were an ordinary Indonesian.

In a recent interview, Prabowo noted the importance of world public opinion.  “You don’t massacre civilians in front of the world press,” he said.  “Maybe commanders do it in villages were no one will ever know, but not in the provincial capital.”

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I thank Mike Connelly for calling my attention to Nairn’s interview on Democracy Now!

“The pitchforks are coming … for us plutocrats”

[Video added 6/28/14.  The TED organization refused to distribute this TED talk because it was “too controversial” ]

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Nick Hanauer, a billionaire who lives in Seattle, said he got rich mainly by foreseeing 30 years ago how important the Internet was going to become.  What does he foresee now?  Pitchforks—that is, revolution against people in his income class unless income and wealth are more widely distributed.   He wrote in the current issue of Politico:

The fundamental law of capitalism must be: If workers have more money, businesses have more customers.

Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.  … …

During the past three decades, compensation for CEOs grew 127 times faster than it did for workers. Since 1950, the CEO-to-worker pay ratio has increased 1,000 percent, and that is not a typo.  CEOs used to earn 30 times the median wage; now they rake in 500 times.

Yet no company I know of has eliminated its senior managers, or outsourced them to China or automated their jobs. Instead, we now have more CEOs and senior executives than ever before.  So, too, for financial services workers and technology workers.  These folks earn multiples of the median wage, yet we somehow have more and more of them.

The thing about us businesspeople is that we love our customers rich and our employees poor. … …

The most insidious thing about trickle-down economics isn’t believing that if the rich get richer, it’s good for the economy.  It’s believing that if the poor get richer, it’s bad for the economy. … …

Hanauer believes that Seattle’s new $15 an hour minimum wage will be good for the local economy.

Capitalism, when well managed, is the greatest social technology ever invented to create prosperity in human societies.  But capitalism left unchecked tends toward concentration and collapse. 

It can be managed either to benefit the few in the near term or the many in the long term.  The work of democracies is to bend it to the latter.

That is why investments in the middle class work.   And tax breaks for rich people like us don’t.  

Balancing the power of workers and billionaires by raising the minimum wage isn’t bad for capitalism.  It’s an indispensable tool.

via Nick Hanauer – POLITICO Magazine.

I thank my friend David Damico for the link.

How did U.S. courts get to rule on Argentina?

A financial speculator won a decision in U.S. courts against the government of Argentina which could mean years of unemployment, high taxes, cutbacks in public services in that court.

I am mystified about a number of things in this case, including why the U.S. courts have jurisdiction over Argentina, a sovereign country, and how this decision is to be enforced.

Double click to enlarge.

The background is that Argentina defaulted on its government bonds back in 2001.  Between 2005 and 2010, it worked out a deal with bondholders for them to write off about two-thirds of the debt in return for payment of the rest.

This was a good decision from the standpoint of the people of Argentina and, for the bondholders, better than nothing.

But the U.S. courts have negated that deal by ruling that a speculator who bought some of the original bonds for 20 cents on the dollar is entitled to be paid in full.

Default is a serious matter for nations, just as bankruptcy is a serious matter for individuals and corporations, but sometimes it is necessary.

For a head of state or a head of family, it is better to refuse to pay your creditors than to let people who depend on you go hungry.

Government defaults should, like individual bankruptcy, destroy or greatly harm the credit rating of the defaulter or bankrupt.   In practice, this rarely happens as often as it perhaps should.   Banks have so much more money than good ideas for investing it that they soon start lending again to defaulters and bankrupts.

Source: New York Times.  Click to enlarge

But how is it that U.S. courts have jurisdiction over a dispute between sovereign country and its creditors, who are based in many countries?  Is it because the payments go through the Bank of New York Mellon, which is in New York City?

How do U.S. courts propose to enforce their decision on a sovereign country.   Does their jurisdiction over New York City banks give them leverage over the whole world banking system?

It seems to me that this decision is a good reason for Argentina and other countries—including the BRIC group, Brazil, Russia, India and China—to create their own payments system outside U.S. jurisdiction.   Another thing I do not understand is why they have not done this already.  Is it because they fear being locked out of the old system in retaliation, before the new system is in place?

What’s needed is an international bankruptcy court, not under control of any government nor of banks, that could.  Its mission would be to resolve disputes between governments and their creditors when national leaders say they are unable to pay in full, in a way that was fair to the lenders without imposing undue hardships on peoples.

Such a court would have authority to free democratic governments of “odious” debts incurred by previous dictatorships.   Yes, that would make lending to dictatorships risky for banks.  It should be.

LINKS

Supreme Court Dismisses Case Between Argentina and U.S. Vulture Funds by Mark Weisbrot, co-director of the Center for Economic and Policy Research, for US News.  Hat tip for the link to Bill Harvey.

Paul Singer v. Argentina: A Thriller Reaches Its Climax by Ignacio Portes, a Buenos Aires journalist, for Naked Capitalism.

US vulture fund ruling pushes Argentina towards a second bankruptcy by Philip Inman for The Guardian.   [Added 6/28/14]

The world scene: Links & comments 6/27/14

On Robot Soldiers and the Recession by Scott Beauchamp for The Baffler.

The Department of Defense’s long-range policy is to replace troops with robots.   This means the U.S. government will be able wage war with fewer casualties, but it also means that enlistment in the armed forces will no cease to be available as a path out of poverty.   In a well-ordered society, there ought to be ways to provide useful work in ways that don’t involve wearing uniforms and carrying guns.

A glimpse into the Google-Military-Surveillance Complex by Yasha Levine for PandoDaily.

Google’s management has protested government surveillance of private citizens, but the company has been involved for years in that very business.  It has long been a major contractor in improving the surveillance capabilities of the NSA, FBI, CIA, DEA and other military and intelligence agencies in Washington.  Now it is trying to sell surveillance services and technology to local police departments.

Is Russia Replacing US in Iraq? by Juan Cole for Informed Comment.

Has the term ‘US ally’ become worthless? by Gwynne Dyer for Middle East Eye.

The problem with playing geo-political chess is that the chessmen play their own game, which is not the same as yours.  This has been the experience of  American diplomats in trying to use governments and political factions in the Middle East as proxies to achieve their aims.   Iraq is a prime example of this.

Ukraine signs trade agreement with EU, draws Russian threat by Reuters.

Ukraine Signs Trade, Economic Pact With European Union by the Associated Press.

Ukraine, Georgia and Moldova have signed association agreements with the European Union, which means they will not be part of Vladimir Putin’s proposed Eurasian Union.   It will be interesting to see how this plays out.  Putin has economic and covert military means to disrupt this deal.  And the European Union will have more three more extremely poor nations to integrate into the Europe-wide common market.

How Russia-Austria pipeline deal buffers Moscow against sanctions by Fred Weir for Christian Science Monitor.

Putin plays his cards skillfully.  Various European countries are signing on to a Russian plan to build a new gas pipeline that will serve southern Europe and bypass Ukraine, which indicates they have no interest in boycotting Russian gas.

Syria’s chemcal weapons slated for destruction

Remember Syria’s chemical weapons?  The last of them recently are being over to be destroyed under U.S. supervision.  Reed Richardson noted in The Nation that this represents a huge foreign policy success by the Obama administration in preventing the spread of weapons of mass destruction.

Nine months after entering into joint negotiation with the Russians and Syria’s tyrannical President Bashar al-Assad, the last of that country’s 1,300 tons of declared chemical weapons began a journey to a chemical weapons-eating ship in the Mediterranean for destruction by the US.  This follows the rapid destruction of all of Syria’s chemical munitions last fall.

And while a dozen chemical weapon facilities inside Syria still remain to be destroyed, Ahmet Üzümcü, Director-General of the Organization for the Prohibition of Chemical Weapons (OPCW), was uncharacteristically upbeat about what the US-brokered deal had just accomplished in the middle of the Syrian civil war:

The mission to eliminate Syria’s chemical weapons program has been a major undertaking marked by an extraordinary international cooperation.  Never before has an entire arsenal of a category of weapons of mass destruction been removed from a country experiencing a state of internal armed conflict.  And this has been accomplished within very demanding and tight time frames.

via The Nation.

Remember that the justification for the invasion of Iraq in 2003 was to prevent the spread of weapons of mass destruction—a goal that already had been accomplished by international agreement and international inspections.

The successful removal of all of Syria’s chemical weapons stores and munitions has now eliminated a nightmare scenario where extremist groups like ISIS capture them, either by chance or through a full-on successful coup of Assad.

If that seems unlikely, consider that the former scenario almost happened last week, when ISIS insurgents gained control over one of Saddam Hussein’s old chemical weapons complexes at Muthanna in southern Iraq.

Fortunately, post-Desert Storm inspections carried out by UNSCOM—a kind of prototype for the OPCW—had rendered all of these weapons useless years ago, long before Bush invaded.

via The Nation.

One of the favorite sayings of American statesmen is that “all options are on the table.”   Bombing and invasion are not necessarily the only options, the best options or the first options to consider—although, of course, diplomacy is strengthened if there is potential military force behind it.

Something I cannot understand

I’m not well-traveled, and I speak no language other than English.   The way I try to understand why people in foreign cultures do what they do is to imagine myself in their place.  Usually I conclude that if I were in their situation, and had had their life experiences, I probably would do as they did.

But recently I read news stories about people who wanted to kill close relatives because they were of a different religion.  I cannot understand this.

One report was about “Josef,” a Pakistani man who is in hiding in Afghanistan from his Muslim family who want to kill him because he has converted to Christianity.   The other was about Meriam Ibrahim, a woman who was raised a Christian in Sudan after being deserted by her Muslim father.  She narrowly escaped being sentenced to death after her father’s family accused her of “renouncing” Islam—a religion in which she had never believed.

I believe that people have a right to believe in whatever religion they choose, or, to put it more precisely, I believe that people have a right to state openly that they believe whatever they inwardly feel compelled to believe.   I cannot imagine wanting to kill a relative or loved one because they reject my beliefs and values.

Naziism is the most abhorrent belief that I can think of.  But if a relative become a Nazi, my response would be to make him see the error of his ways, as long as I thought this were possible.   I might give up meeting him on a regular basis if all he did was harangue me.  In an extreme case, if he planned a murder or a dangerous act of violence, I would threaten to report him to the police.  But I can’t imagine killing a loved one or relative just because of what they think, however barbarous.

I don’t think these two news articles justify a general condemnation of all the world’s one billion Muslims, who certainly are not all alike.  But they do justify a feeling of pride and gratitude for the religious freedom of the USA.  I can’t imagine the most intolerant American Christian attempting to kill someone for renouncing Christianity and, if such a person existed, they would be put in trial for their crime.

Despite the harassment and prejudice that Muslims sometimes endure in the United States, I think that they not only enjoy more freedom than do Christians in Pakistan, Afghanistan or Sudan, I think they enjoy more freedom here than do Muslims in Pakistan, Afghanistan or Sudan.

LINKS

A Christian Convert, on the Run in Afghanistan, by Azam Ahmed for the New York Times. Hat tip to Rod Dreher.

Meriam Ibrahim freed again after rearrest at Sudan airport by the Associated Press.

Sudan death penalty case reignites Islam apostasy debate by BBC News.

Non-moral arguments for humane goals

History professor Eric Rauchway pointed out how progressives advocate humane policies based on strictly economic criteria.

Back in the early 1900s, Charles Beard noted that merely to tell Americans that their factories were injuring workers more wantonly than those of any other country would fail to move a nation so fixated on profit.

You had, he said and I’m paraphrasing, because I’m not able to look it up at the moment, to tell the American people that it was inefficient to keep killing workers – that it was a waste of human capital, an unproductive use of resources.

This rhetorical tactic aims at moral ends by appealing to a venal calculus.  Like the commuter who rescued his fellow-citizen from a train track because he didn’t want to be late to work, maybe we will rescue our public goods from disruption – not because it’s the right thing to do, but because we won’t profit if we don’t.

via Crooked Timber.

I hear this kind of rhetoric  liberals today.  They concede the moral high ground to their opponents and then argue that their policies would be a better way of achieving non-liberal goals – for example, that health care reform would be a good way to help balance the federal budget.

One problem is that this type of argument is not always valid.   The larger problem is that when it is, it is not convincing to people committed to the view that the harshest policies are always the most realistic

The passing scene: Links & comments 6/26/14

The World’s Most Important Spectator by David Bromwich for the London Review of Books.  Hat tip to Naked Capitalism.

Obama roots for the good cause but often ends up endorsing the acceptable evil on which the political class or the satisfied classes in society have agreed.  He watches the world as its most important spectator.

This is an excellent account not only of President Obama’s second term, but the current American political scene.  Strongly recommended.

Obama’s ‘drone memo’ is finally public.  Now show us the library of secret law by Jameel Jaffer for The Guardian.  Hat tip to Naked Capitalism.

 The philosopher Hannah Arendt wrote that one of the defining characteristics of a totalitarian government is that it has secret laws.   The Obama administration claims authority to wage war and issue death warrants based on secret legal rulings.

The American Civil Liberties Union and the New York Times forced the administration to release the 41-page legal memo that justified the killing of Anwar al-Alwiki, an anti-American U.S. citizen, in Yemen.   The first 11 pages, listing what al-Alwiki was accused of doing, are blacked out, all the footnotes are blacked out, and many other references throughout the memo also are blacked out.

What this indicates is that there are other secret legal memos claiming who-knows-what powers for the President.   The administration’s lawyers decide what powers President Obama has, and the rest of us are not allowed to know, let alone dispute, what these powers are.

Cross-national intelligence and national democracy by Henry Farrell for Crooked Timber.  Hat tip to Marginal Revolution.

International cooperation between secret intelligence agencies puts them beyond the reach of their national governments.   It may be illegal for the National Security Agency to spy on Americans and General Communications Headquarters to spy on Britons, but there is nothing to prevent the NSA from spying on Britons and the GCHQ from spying on Americans, and passing the information along.

A Secret Plan to Shut Down Social Security Offices and Outsource Its Work by Richard Eskow of Campaign for America’s Future.

Social Security offices, like post offices, are located on prime real estate.   There are big profits to be made by someone if this real estate is sold off at bargain prices.  And also profits to be made in replacing civil servants with contractual on-line services.

I have no way of knowing whether this is what the Social Security administration has in mind, but I do know that shutting down offices will in no way benefit senior citizens.

To the Woman Behind Me in Line at the Grocery Store by Andrea Gardner for The Blog.  Hat tip to Rod Dreher.

Never pass up an opportunity to perform an act of kindness.

A separate and unequal school system

The following is from an interview with Barbara Madeloni, newly-elected president of the Massachusetts Teachers Association.

Madeloni: … … Why are children of the elites having a qualitatively different education than children who are black, brown and poor?   The only answer I can come up with is that we don’t value these children as much as we do the children of elites.  I haven’t heard a better answer.

Barbara Madeloni

EduShyster: The answer I hear floating around a lot these days is that our high-poverty schools have to have a relentless focus on the basics—math and English.  The whole child is out, academic rigor is in.

Presumably students in these schools can access that rich curriculum at some unspecified point down the road, like when they get to college.

Madeloni: That’s not how it works. What works is you start with a rich curriculum. You have lots of resources. You have libraries and arts and music. You have a playground.

And then kids learn how to learn how to read within that context and from teachers who have the time and the resources to build meaningful relationships. That’s how you learn to read. You learn how to read in a relationship with other people.

Our overwhelming focus on raising test scores denies the importance of those human relationships.  It denies the human reality of kids’ lives, of teachers’ lives and of their communities.

After spending seven hours recently at a hearing on turnaround schools, I came up with a name for this particular approach.  I call it bureaucratic cruelty.

Click on Rebel with a Cause | EduShyster to reach the whole interview.

I thank Bill Harvey for the link.

Nice work if you can get it

Keith Alexander

After a career overseeing an agency pushing for security backdoors in technological infrastructure, former NSA chief Keith Alexander is now on Wall Street “pitching his cybersecurity services for as much as $1 million a month,” according to Bloomberg News.

Ostensibly, Alexander is asking to be paid to help secure firms against the backdoors and vulnerabilities his NSA may have helped create.

Nice work if you can get it.

via PandoDaily.

I suppose it is the same idea as hiring convicted computer hackers to be consultants on protection against other hackers.   Why not hire the uber-hacker?

Kurdistan, haven of religious freedom

Not everybody in Iraq is a Sunni Arab or a Shiite Arab.  The country is full of other religious and ethnic groups, including Assyrian Christians who’ve been in Mesopotamia longer than the Arabs, and their hope of survival is the continued semi-independence of Iraqi Kurdistan.

Overall, I think the invasion of Iraq was a disaster, but one good thing to come out of it was freedom for the Kurds, a valiant people who’d been fighting for independence for generations, and without terrorism against civilians.

The Kurds are mostly Sunni Muslims, the same religion as the murderous I.S.I.S. militia, but their attitude toward freedom and tolerance is exactly the opposite.  And the Kurds are willing, able and armed to fight.

Military analyst Gary Brecher, who’s lived in Kurdistan, wrote:

The men and women of the [Kurdish] Pesh Merga—the Middle East’s only truly gender-neutral fighting force—are the only thing saving all the terrified, dwindling minority communities of Northern Iraq from the savagery—yeah, savagery; why lie?—of a new zombie generation of Wahhabized Arab/Sunni jihadis.  [snip]

Let me tell you, for a Sunni Kurd to say, “I have Shia friends, I have Christian friends” is about as brave and radical as it gets, short of suicide, in the Middle East. I never heard any of my Saudi students say anything remotely like it. Well, how could they?  By law, Shi’ism and Christianity are banned in the Kingdom.  So they didn’t have the opportunity, even if they’d had the mindset which they didn’t.

Something wonderful came out of the horrors of 20th century Iraq, among the Kurds of the Northern hills.  They became the only non-sectarian population in Iraq, and perhaps the only such group between Lebanon and India.

All the hill peoples, the few who’d survived Sunni pogroms, were kind to each other. When violence came into the hills, it came from the plains to the South.

All the vulnerable minorities in the Northern hills had been hit by waves of violence from the Sunni majority to the south: the few remaining Assyrian Christians who held out in little mountain towns like Zakho, a pitiful remnant of the genocides perpetrated against them by the Ottomans, and then by Sunni militias in the 1930s; the Turcoman, who are Sunni but Turkish-speaking—in other words, not Arab—and don’t you ever doubt that Arab chauvinism has a HUGE part in what passes for Sunni jihadism.

via The War Nerd:  PandoDaily.

The financial markets on automatic pilot

In a well-ordered economic system, financial markets provide a means for business enterprises to obtain financing and for investors to judge the worth of a business.

Flash Boys, the latest book by Michael Lewis, tells how far the financial markets have gotten away from that purpose.

His subject was high frequency trading, a method of skimming money from other peoples’ financial transactions.  Enormous expense and ingenuity has gone into perfecting high frequency trading.  But from the standpoint of social good, the only question is to what degree it is extremely dangerous, moderately harmful or  merely useless.

High frequency trading is done by computers, because human beings are too slow.  Computer trading accounts for about two-thirds of transactions on U.S. stock exchanges.  There is even a venture capital company that has a computer algorithm on its board of directors.

The science fiction writer Charles Stross wrote about futures in which artificial intelligences incorporate themselves in order to gain legal standing as persons, and in which computers and robots have created a fully functioning society while human beings die out or are sidelined.

I don’t expect this to happen, of course, but it is a good metaphor for what is going on.   Putting such a large part of the financial system on automatic pilot is reckless, especially in an economic recovery that is fragile to begin with.

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Click on Scalpers Inc. for a review of Flash Boys by John Lancaster in the London Review of Books.  Hat tip to Steve Badrich for the link.  I haven’t read the book myself.

Dmitry Orlov on communities that abide

I recently read Communities that Abide, a quirky little book whose editor and lead author, Dimtry Orlov, seeks lessons for human survival in the study of small, resilient communities such as the Roma (gypsies), the Amish and the Hutterites.

Orlov thinks such lessons are needed because industrial civilization is in danger of collapse.  He writes weekly on his blog about this subject.  He sees the key to survival not in stockpiling guns, ammunition, gold coins and canned food, but in human solidarity and mastery of survival skills.

He admires the anarchist thinker, Prince Peter Kropotkin, and says the three communities follow the anarchist principle of mutual aid.  Community work is not based on payment of wages.  Distribution of goods within the community is not based on ownership of property.  Community rules are not enforced by means of violence.   That’s anarchism in a nutshell.

Lack of a formal governmental structure does not, however, mean a high degree of individual freedom.  Norms of behavior within the community, which are largely unwritten, are enforced my means of gossip, ridicule, peer pressure and, in extreme cases, shunning and expulsion from the group.   Such means are much more controlling than a system of formal rewards and punishments, because there is nothing tangible to rebel against.

Orlov said the experience shows that the maximum size of an effective community is about 150 people.   Any group larger than that starts to develop a bureaucracy, he wrote.  The three groups he described are all networks of communities small enough that members can decide things in public meetings where everybody gets a chance to speak.

This fits his own experience working with high-tech start-ups in the Boston area.   Every time a new company got to be larger than 150 employees, he wrote, it ceased to be a team and become a hierarchy.

My own experience is the same.  I belong to a church whose congregation never seems to grow beyond 150 members.  Our denominational leaders and ministers have told us we are wrong in being content not to grow.  But Orlov’s book indicates that maybe growth is better achieved by spinning off new groups.

Solidarity within Roma, Amish and Hutterites is maintained through customs, some of them hidden from the outside public, that separate them from the public.   Orlov said all communities that endure have a story of their founding, which they continually affirm through stories, ceremonies and historical re-enactments.   Jacob Hutter led his community for only three years in the early 1500s before he was martyred for his beliefs, yet so strong was his vision and his commitment that, 500 years later, there are people called Hutterites.

The key activity of these communities, aside from providing members with food, clothing and shelter, is the rearing and home schooling of children.  The greatest threat to group identity is public education, because it teaches the values of the modern world.  That is not to say they all refuse to send their children to school, but they have their own schooling to teach their own values.

What capitalism can dispense with

Capitalism can dispense with democracy more easily than with profits.  A question for the century ahead is how far it will minimize the former in seeking to maximize the latter.

via Benjamin Kunkel · LRB.

Democracy and Churchill

Hat tip to Avedon’s Sideshow for a link to the following:

Democracy is the worst form of government, except for all those other forms that have been tried from time to time.

==Winston Churchill, in a House of Commons speech on Nov. 11, 1947

The timing of this famous remark is significant.  Churchill won the war, but in the election of July 1945, he was defeated.  At the time I thought the public showed gross ingratitude, but I am willing to accept the interpretation that Churchill was not the man to organize the peace.

When the news came out, Churchill was taking a bath.  Was there ever a statesman who spent more time in the bath?   He remarked “They have a perfect right to kick me out.  That is democracy”.  When he was offered the Order of the Garter, he asked “Why should I accept the Order of the Garter, when the British people have just given me the Order of the Boot?”.

He returned to power in 1951.  The remark about democracy was made when he had lost power and had every reason to be bitter.  Fortunately he kept his sense of humor even in the most trying circumstances.

Ronald Hilton – 09.05.03

via Stanford WAIS Forum on Democracy.

The new normal: Links & comments 6/22/14

Thrown Out of Court: How corporations became people you can’t sue by Lina Khan for The Washington Monthly.

Individual Americans are losing their right to sue large corporations by means of “terms of service” contracts that customers and employees are required to sign as a condition of doing business.   By signing these contracts, individuals give up their right to take their complaints to a judge and jury and instead agree to abide by the decision of a corporate-friendly arbitrator.

Corporations have been complaining for years about the burden of litigation, and, back in the day, I fell for this.   But even then, the courts were busier with lawsuits by corporations against each other than they were lawsuits by individuals or by class-action suits.

Owners and managers of corporations already have a privilege denied to ordinary citizens, which is limited liability for their debts and fines.  We are getting far beyond the question of whether corporate entities have the same rights as individuals.  By means of this 21st century version of the “yellow-dog contract,” they are becoming mini-governments.

Hillary Clinton forgets the ’90s: Our latest gilded age and our latest phony populists by Thomas Frank in Salon.

When Bill Clinton ran for President in 1992, he ran as the advocate of working people against the corporate interests who didn’t play by the rules.  What we got was Ronald Reagan with some of the sharp edges filed off.  As Thomas Frank wrote in Salon today, the Clinton Presidency was an era of corporate mergers, financial deregulation, downsizing of government and NAFTA

That’s what we’re likely to get from a Hillary Clinton presidency, too.  She voices the same populist rhetoric and has the same corporate allegiances.

The floor is open by Psychopolitik.

How committed are we Americans to democracy?  A Gallup poll indicates a “no confidence” vote in the institutions of democracy.   The institution in which Americans have the most confidence (74%) is the military and the one in which we have the least confidence is Congress (7%).   A majority lack confidence in the Presidency and the Supreme Court, but they have confidence in the police.

If I didn’t know better, I’d take that for a poll of Italians just prior to Mussolini’s march on Rome.

Every year, we waste Spain by Tim Stuhldreher.  Hat tip for this link to Mike the Mad Biologist.

U.S. Healthcare: Most Expensive and Worst Performing by Olga Khazan for The Atlantic.

If the U.S. spending per person for medical care were the same as a typical industrial nation, our annual health care budget would be more than $1 trillion less.   That’s the equivalent to the gross domestic product of Spain, out of which a nation of 47 million people feed, clothe, shelter, educate and amuse themselves, and, yes, also provide medical care.

Who in the world is hopeful about the future?

Click to enlarge

One of the defining characteristics of Americans used to be that, whatever our circumstances, almost all of us expected that our children and grandchildren would be better off than we are.

This is no longer true.  And a Pew Research survey indicates that people in other supposedly advanced nations are more pessimistic than we are.

While 62 percent of Americans expect the next generation to be financially worse off than their parents, this pessimistic view is held by 64 percent of Canadians, 64 percent of Germans, 74 percent of the British, 76 percent of Japanese and 90 percent of the French.

The most optimistic nations in the world are China, where 82 percent of those surveyed said they expect a better future, and Brazil, where 79 percent are hopeful (see below).  Among European countries, the least pessimistic was Russia.

I think survey results in China or any other dictatorship have to be taken with a certain amount of skepticism, but, even so, I am astonished at the differences among countries.

Andrew Bacevich on the lessons of Iraq

Andrew Bacevich is a retired career Army officer, a combat veteran of Vietnam and a self-identified conservative.  I have great respect for him and for his views on American foreign and military policy and his recent interview by Bill Moyers is well worth watching.

Bacevich has been writing about military and foreign policy since the 1990s, and generally has been proved right by events.   It would be good if he was asked for his opinion by TV interviewers more often.

You can find links to transcripts of Bill Moyers’ interview of Bacevich by clicking on the following.

Full Show: Chaos In Iraq

Extended Interview: Andrew Bacevich

Next are articles on the pros and cons of neoconservative foreign policy.

Superpowers Don’t Get to Retire: what our tired country still owes the world by Robert Kagan in The New Republic.

A Letter to Paul Wolfowitz by Andrew Bacevich in Harper’s.

Iraq, spies, defense: Links & comment 6/21/14

Is Iraq Actually Falling Apart? What Social Science Surveys Show by Mansoor Moaddel for Informed Comment.

Public opinion polls indicate that a majority of Iraqis oppose a breakup of their country, and that they think of themselves as Iraqis first and Sunni and Shia second.   They desire a government that will work for the good of the nation and follow the wishes of the people more than they want a government that follows religious law.  A majority of Iraqi Sunni Arabs, but not of Iraqi Shiite Arabs, believe that religion should be separate from politics.

In other words, most Iraqis want for their country the same things that I want for the USA.  The Iraqis might have a stab at getting it if not for foreign interference.  A majority of Iraqis think of both Americans and Iranians as bad neighbors.

Who has the power to give the Iraqis what they want?  If anyone, it is not Barack Obama.  It is the wise Iraqi leader, the Ayatollah Sistani.   Remember that it was peaceful demonstrations led by Sistani that pressured the American occupation authorities to allow elections in Iraq.

Cross-national intelligence and national democracy on Crooked Timber.

I have written before that multi-national corporations, and the international agencies such as the WTO and IMF, are the closest thing there is to a world government.  But there is another candidate, which is the world’s interlocking intelligence agencies.

My idea of the mission of an intelligence agency is to discover the military secrets of foreign governments.  But in the present day, intelligence agencies co-operate across national borders to spy on their own citizens.  The German BND can’t legally spy on German citizens, but the U.S. NSA can legally do so and share information with the Germans, while the British GCHQ can legally share information about American citizens with the NSA.

The danger of this is that the intelligence agencies have their own political goals, which are not necessarily what the people of their respective countries want, and, so long as they operate behind a veil of absolute secrecy, there is no way of reining them in.

Why Is the Defense Department Buying Weapons With Chinese Parts Instead of US Parts? by Victoria Bruce for TruthOut.

The reason is that many high-tech components depend on “rare earths,” a raw material that China produces and that the United States could produce but doesn’t.  The deeper reason is that the big U.S. military contractors also do business with China, and don’t want to disturb that relationship.

Fukushima’s Ongoing Fallout: an unprecedented radiation disaster by John LaForge for CounterPunch.

A footnote on disruptive innovation

Buzzwords such as disruptive innovation and creative destruction are popular among managers and officials who are neither innovative nor creative, but merely disruptive and destructive.