Opinion | American Companies Are Sick. Here’s How to Cure Them. – By Tim Wu – The New York Times

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Mr. Wu is the author of “The Curse of Bigness: Antitrust in the New Gilded Age.”

Credit…Mary Altaffer/Associated Press

“Many companies in the United States are currently in a particular kind of distress. They have solid business models for normal times, yet as the pandemic lingers they are slowly dying, victims of weak demand or supply problems. These businesses are not broken or fundamentally flawed; their health is jeopardized only by exceptional circumstances. They are not doomed; they’re just sick.

Many of these companies are on the lookout for survival strategies that would avoid a ruinous liquidation of their assets. This means they may be more open than they ordinarily would be to private buyouts and mergers. But a wave of buyouts and mergers, though seemingly better than letting struggling companies die, would only intensify the economic inequality that has become this country’s curse.

That is why we need to rethink what rescuing companies looks like in this moment.

The danger is that the cure will be as bad as the disease. A rescue of struggling businesses fueled by cheap debt will lead to a restructuring of the American economy into fewer and fewer centers of corporate control. That consolidation, in turn, will increase the already excessive power of corporations and widen the already yawning gap between rich and poor.

This is a lesson taught by the previous economic crisis, 12 years ago, which also left many fundamentally sound companies weak or in a state of distress. Part of the government’s implicit and sometimes explicit solution was to encourage buyouts and mergers, by making debt cheap and keeping merger enforcement tepid. Those conditions catalyzed a major concentration of industries during the 2010s, leaving many sectors of the American economy with just three or four “majors,” or with regional monopolies. This was the story for the airlines, cable service, big agriculture, mobile phone carriers, pharmaceuticals, meat processing and many more industries.

That same approach also ushered in what the financial journalist Joe Nocera, a former columnist for The Times, has called the decade of private equity. Taking advantage of cheap debt, the industry spent trillions of dollars (nearly $6 trillion, by one estimate) buying and reorganizing thousands of companies.

The problem was that, by the mid-2010s, many economists (including many at the White House, where I worked at the National Economic Council) started to be concerned that the restructuring of the economy was contributing to inequality of both wealth and income. Ideally, a private buyout makes a company more efficient and poised for growth and hiring. But in practice buying a company in semi-distress with the goal of cutting costs can mean large-scale firings, weakening or destroying unions, and seizing pension funds.”

It’s Friday, and the world is looking better. Frank Bruni just wrote a column titled, Is Donald Trump Toast? “A New York Times/Siena College poll finds that Biden is ahead of the president by 14 points” nationally and by double digits in the six crucial swing states. I want to have a party and cook out in my backyard tomorrow, but it is not part of social distancing. Since I read this piece by Tim Wu last Tuesday, I’ve been thinking about it, and how it dovetails with another I recently posted, called, “The Neoliberal Looting of America,” by Mehrsa Baradaran. These are important thinkers, and income inequality is a many headed hydra, that has survived since cities were created, and elites took power. I don’t care who Biden picks as his VP, as long as he crushes Trump, and then tries to clean up the Augean Stables, mitigate climate change, and elevate the ideas of regulating over-powerful corporations and billionaires, using the ideas of such thinkers as Baradaran, Wu, and Elizabeth Warren.

Opinion | How to Avoid an Economic Recovery that Worsens Inequality – By Tim Wu – The New York Times

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Mr. Wu is the author of “The Curse of Bigness: Antitrust in the New Gilded Age.”

Credit…Michael George Haddad

“Since January, Amazon’s stock price has gone up from about $1,850 to about $2,600. The S.&P. 500 — comprising large corporate stocks dominated by technology companies — has recovered most of its recently lost value. And most highly paid professionals and managers have kept their jobs and experienced minimal changes in wealth.

Yet more than 20 million Americans are unemployed.

These are signs that the economic legacy of the coronavirus pandemic could be an increase in wealth concentration that will shock a nation that thought itself numb to such things. Arguments over whether the recovery will be “V-shaped” or “U-shaped” ignore the fact that different socioeconomic classes have been affected differently and will recover differently. Despite its populist airs, the Trump administration is orchestrating what will be, unless something is done, a rich man’s recovery.

While it may seem as if the federal government is throwing money at everyone, there’s a key difference between the support given to large businesses and the support given to small businesses and individuals. Large businesses have been given the security of long-term assistance, mainly through the actions and promises of the Federal Reserve: to buy corporate bonds (including junk bonds), to provide “liquidity backstops” by serving as a buyer of last resort and to lend money against an array of collateral. Collectively, these actions amount to a program not just of extraordinary assistance but also of extraordinary assurance.

By contrast, the money being spent on small businesses and individual workers is short-term and hard to bank on. Not only are many of the sums relatively small — a $1,200 check that might (or might not) come again some day — but the uncertainty also diminishes the value of the aid, since it’s hard to make plans if you don’t know what you can count on.

the aid, since it’s hard to make plans if you don’t know what you can count on.”

Opinion | Don’t Feel Sorry for the Airlines – By Tim Wu – The New York Times

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Mr. Wu is the author of “The Curse of Bigness: Antitrust in the New Gilded Age.”

Credit…Damon Winter/The New York Times

“For American Airlines, the nation’s largest airline, the mid to late 2010s were what the Bible calls “years of plenty.”

In 2014, having reduced competition through mergers and raised billions of dollars in new baggage-fee revenue, American began reaching stunning levels of financial success. In 2015, it posted a $7.6 billion profit — compared, for example, to profits of about $500 million in 2007 and less than $250 million in 2006. It would continue to earn billions in profit annually for the rest of the decade. “I don’t think we’re ever going to lose money again,” the company’s chief executive, Doug Parker, said in 2017.

There are plenty of things American could have done with all that money. It could have stored up its cash reserves for a future crisis, knowing that airlines regularly cycle through booms and busts. It might have tried to decisively settle its continuing contract disputes with pilots, flight attendants and mechanics. It might have invested heavily in better service quality to try to repair its longstanding reputation as the worst of the major carriers.

Instead, American blew most of its cash on a stock buyback spree. From 2014 to 2020, in an attempt to increase its earnings per share, American spent more than $15 billion buying back its own stock. It managed, despite the risk of the proverbial rainy day, to shrink its cash reserves. At the same time it was blowing cash on buybacks, American also began to borrow heavily to finance the purchase of new planes and the retrofitting of old planes to pack in more seats. As early as 2017 analysts warned of a risk of default should the economy deteriorate, but American kept borrowing. It has now accumulated a debt of nearly $30 billion, nearly five times the company’s current market value.”

Opinion | The Life and Death of the Local Hardware Store – by Tim Wu – The New York Times

“On Ninth Avenue in Manhattan, not far from where I live, there’s a small neighborhood hardware store called Chelsea Convenience Hardware, which is distinguished by its unlikely display of dozens of Russian nesting dolls in the storefront window. Inside, tools and supplies are piled to the ceiling, and when you enter, the owner, Naum Feygin, an immigrant from Boris Yeltsin’s Russia, looks up to ask you what you need.

The “convenience” in the store’s name is no misnomer, for the place is extraordinarily efficient. It is cheaper and faster than ordering from Amazon and offers expert advice that reduces the risk of buying the wrong thing. It is all too easy on Amazon, for example, to buy halogen bulbs that don’t fit your lamp base; Mr. Feygin has spared me many such headaches. And the store’s small size is a virtue: Unlike at Home Depot, you can be in and out in 10 minutes.

Nonetheless, Chelsea Convenience is set to close at the end of November, another casualty of rising commercial rents and competition from e-commerce. The closing is of no great economic significance, other than to Mr. Feygin. But it is a microcosm of the forces reshaping the United States economy, often paradoxically and for the worse. Why is a less efficient, less personalized and more wasteful way of buying screws and plungers — ordering online — displacing the local hardware store?”

Opinion | Facebook Isn’t Just Allowing Lies, It’s Prioritizing Them – By Tim Wu – The New York Times

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Mr. Wu is a law professor at Columbia.

Credit…Eric Thayer for The New York Times

” “First, do no harm,” a doctrine typically associated with the practice of medicine, is the right ethic when it comes to decisions surrounding Silicon Valley’s paid promotion technologies and their effects on elections and democracy. A desire to avoid harm — in particular, the spread of misinformation — is part of what persuaded Twitter’s chief executive, Jack Dorsey, to announce that his company will no longer run political ads. And Twitter is not alone: LinkedIn, Pinterest, Microsoft and Twitch also refuse political ads, while Google accepts them in some states but not others.

Facebook is now the outlier, and it is increasingly hard to understand why it is insisting on accepting not only political advertising, but even deliberate and malicious lies if they are in the form of paid advertisements. Given how much can go wrong — and has gone wrong — the question everyone is asking is: Why does Facebook think it needs to be in this game? Naïveté is at this point the most flattering explanation.

It isn’t, as some think, just about making money, for as a revenue source, the money at stake is minor. But the money does matter, in a different way. Paying for promotion is how, on social media, some speakers gain priority over others. This creates an advantage unrelated to actual popularity. Paired with the freedom to lie, the effect is to give political lies and paid misinformation campaigns a twisted advantage over other forms of election speech (like “the news.”) Even as Facebook’s “integrity” teams try to stamp out other forms of deception, paid promotions gain access to the full power of Facebook’s tools of microtargeting, its machine learning and its unrivaled collection of private information, all to maximize the influence of blatant falsehoods. What could possibly go wrong?

If the idea of prioritizing lies over truth doesn’t sound very appealing, Facebook’s defenses of its policy are almost their own misinformation campaign. Nick Clegg, Facebook’s vice president for global affairs and communications, has suggested that Facebook sees itself as providing the “tennis court” where politicians play the game of politics. But tennis actually has strict rules; Facebook has embraced, instead, the norms of a fighting cage. More important, Mr. Clegg is hiding the more fundamental question: Who ever said Facebook needed be the tennis court in the first place?”

Opinion | How Capitalism Betrayed Privacy – The New York Times

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Tim Wu

By Tim Wu

Mr. Wu is the author of “The Attention Merchants: The Epic Struggle to Get Inside Our Heads.”

CreditCreditErik Carter

For much of human history, what we now call “privacy” was better known as being rich. Privacy, like wealth, was something that most people had little or none of. Farmers, slaves and serfs resided in simple dwellings, usually with other people, sometimes even sharing space with animals. They had no expectation that a meaningful part of their lives would be unwatchable or otherwise off limits to others. That would have required homes with private rooms. And only rich people had those.

The spread of mass privacy, surely one of modern civilization’s more impressive achievements, thus depended on another, even more impressive achievement: the creation of a middle class. Only over the past 300 years or so, as increasingly large numbers of people gained the means to control their physical environment through the acquisition of wealth and private property, did privacy norms and eventually privacy rights come into existence. What is a right to privacy without a room of your own?

The historical link between privacy and the forces of wealth creation helps explain why privacy is under siege today. It reminds us, first, that mass privacy is not a basic feature of human existence but a byproduct of a specific economic arrangement — and therefore a contingent and impermanent state of affairs. And it reminds us, second, that in a capitalist country, our baseline of privacy depends on where the money is. And today that has changed.

The forces of wealth creation no longer favor the expansion of privacy but work to undermine it. We have witnessed the rise of what I call “attention merchants” and what the sociologist Shoshana Zuboff calls “surveillance capitalism” — the commodification of our personal dataClose Xby tech giants like Facebook and Google and their imitators in telecommunications, electronics and other industries. We face a future in which active surveillance is such a routine part of business that for most people it is nearly inescapable. In this respect, we are on the road back to serfdom.

 

via Opinion | How Capitalism Betrayed Privacy – The New York Times

Opinion |  The Democrats’ Complexity Problem – by Tim Wu – The New York Times

“One bright area in these dark days of American politics has been a blossoming of bold and interesting progressive policy ideas, such as wealth taxes, postal banking (offering basic financial services to customers who might not otherwise have access to them) and breaking up the giants of the tech industry. In the spirit of fresh starts, progressives should now confront an even more basic challenge: their complexity problem.

In recent decades progressives have not prioritized making policies and programs easy for most Americans to understand, use and benefit from. Fixing this problem will mean overcoming a streak of perfectionism and a certain intellectual defensiveness, but it must be done if progressives are to make government popular again.

The Affordable Care Act is a good example of the complexity problem. Yes, it was an important policy achievement, and yes, many of its problems can be rightly blamed on industry resistance and Republican efforts to dismantle it.

But the act is also exceptionally hard to understand and discouragingly daunting to make use of. An emphasis on “choice” and “transparency” resulted in a law that only a rational-choice theorist could love. The act made health insurance more complicated, not less, which is one reason that such a high percentage of medical bills go to paying administrative costs, and why the Affordable Care Act is much less popular than it could be.

It used to be said that a conservative is a liberal who has been mugged. Today she’s a liberal who tried to pay a babysitter without breaking the law. It is admirable that Democrats try to tackle society’s thorniest problems with the often unwieldy tools of government, but that is not an excuse for programs that are too complex for their own good.

The truth is that good public policy can actually be elegant and simple to understand, even when the social problem that it’s addressing is complex. Social Security, Medicare, bans on indoor smoking, the “do not call” list (when it worked) and public libraries are examples of government solutions that are easy to understand and to benefit from.

Avoidance of complexity and minimizing choices are hallmarks of good design, as we have learned from the technological revolution in user interfaces. The age of impossible-to-use computers and incomprehensible TV remote controls has given way to the sleek and intuitive interfaces offered by pioneers like Steve Jobs of Apple. What progressives most need now is not more brains, but better policy designers.”

Opinion | The Oppression of the Supermajority – By Tim Wu – The New York Times

By Tim Wu
Mr. Wu is a law professor.

March 5, 2019, 379

“We are told that America is divided and polarized as never before. Yet when it comes to many important areas of policy, that simply isn’t true.

About 75 percent of Americans favor higher taxes for the ultrawealthy. The idea of a federal law that would guarantee paid maternity leave attracts 67 percent support. Eighty-three percent favor strong net neutrality rules for broadband, and more than 60 percent want stronger privacy laws. Seventy-one percent think we should be able to buy drugs imported from Canada, and 92 percent want Medicare to negotiate for lower drug prices. The list goes on.

The defining political fact of our time is not polarization. It’s the inability of even large bipartisan majorities to get what they want on issues like these. Call it the oppression of the supermajority. Ignoring what most of the country wants — as much as demagogy and political divisiveness — is what is making the public so angry.

Some might counter that the thwarting of the popular will is not necessarily worrisome. For Congress to enact a proposal just because it is supported by a large majority, the argument goes, would amount to populism. The public, according to this way of thinking, is generally too ill informed to have its economic policy preferences taken seriously.”

Opinion | China’s Online Censorship Stifles Trade- Too – By Tim Wu – The New York Times

Tim Wu

By Tim Wu

Mr. Wu is a law professor who specializes in technology.

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“As China and the United States engage in high-level negotiations over a possible trade deal, it’s puzzling to see what’s been left off the table: the Chinese internet market. China blocks or hinders nearly every important foreign competitor online, including Google, Facebook, Wikipedia in Chinese, Pinterest, Line (the major Japanese messaging company), Reddit and The New York Times. Even Peppa Pig, a British cartoon character and internet video sensation, has been censored on and off; an editorial in the Communist Party’s official People’s Daily newspaper once warned that she could “destroy children’s youth.”

China has long defended its censorship as a political matter, a legitimate attempt to protect citizens from what the government regards as “harmful information,” including material that “spreads unhealthy lifestyles and pop culture.” But you don’t need to be a trade theorist to realize that the censorship is also an extremely effective barrier to international trade. The global internet economy is worth at least $8 trillion and growing, yet the Trump administration has focused chiefly on manufacturing, technology transfers and agriculture, and does not seem to have pressed for concessions on this issue.

Sheltered from American, Japanese and European competition, Chinese internet businesses have grown enormously over the past decade. Nine of the world’s 20 largest internet firms, by market value, are now Chinese. Some of this growth reflects the skill and innovation of Chinese engineers, a vibrant start-up culture and the success of Chinese business in catering to local tastes. But it’s hard to believe that this has been unaided by censorship.

And the barriers to foreign competition have more than just economic effects. Without any better options, Chinese users are forced to put up with companies like Tencent, which owns the private messaging app WeChat, and the online payment company Ant Financial, whose privacy violations are, amazingly, even more troubling than those of Facebook and Cambridge Analytica. By tolerating Chinese censorship, the United States encourages other countries to do the same.”

Source: Opinion | China’s Online Censorship Stifles Trade, Too – The New York Times

Opinion | Don’t Fall for Facebook’s ‘China Argument’ – by Tim Wu – The New York Times

America’s global dominance in technology requires fierce competition at home, not the coddling of monopolies.

Tim Wu

By Tim Wu

Mr. Wu is a law professor who specializes in antitrust.

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CreditCreditAlex Merto

“Over the last year or so, Mark Zuckerberg of Facebook and other American tech leaders have issued a stark warning to those who want to see more competition in the industry. It goes something like this: “We understand that we’ve made mistakes. But don’t you realize that if you damage us, you’ll just be handing over the future to China? Unlike America, the Chinese government is standing behind its tech firms, because it knows that the competition is global, and it wants to win.”

This — Big Tech’s version of the “too big to fail” argument — has a superficial nationalistic appeal. It’s certainly true that the Chinese technology sector is growing and aggressively competitive, and that many of its companies are embraced and promoted by the Chinese state. By one count, eight of the world’s 20 largest tech firms are Chinese. That would seem to suggest a contest for global dominance, one in which the United States ought not be considering breakups or regulation, but instead be doing everything it can to protect and subsidize the home team.

But to accept this argument would be a mistake, for it betrays and ignores hard-won lessons about the folly of an industrial policy centered on “national champions,” especially in the tech sector. What Facebook is really asking for is to be embraced and protected as America’s very own social media monopolist, bravely doing battle overseas. But both history and basic economics suggest we do much better trusting that fierce competition at home yields stronger industries overall.

That’s the lesson from the history of Japanese-American tech competition. During the 1970s and into the ’80s, it was widely believed that Japan was threatening the United States for supremacy in technology markets. The Japanese giant NEC was a serious challenger to IBM in the mainframe market; Sony was running over consumer electronics, joined by powerful firms like Panasonic and Toshiba. These companies enjoyed the support of the Japanese state, through the Ministry of International Trade and Industry, which pursued a nationalistic industrial policy thought to be infallible.”

Source: Opinion | Don’t Fall for Facebook’s ‘China Argument’ – The New York Times