Editors’ Briefing: This Week in Political Economy (October 20-27)

Corporate executives warm up to Brazil’s far-right presidential candidate Jair Bolsonaro; the US is developing into a “plutocracy,” says former Fed chairman; Tim Cook blasts Silicon Valley’s “data-industrial complex”; and what is McKinsey’s relationship with Saudi Arabia?

 

 

Jair Bolsonaro. Photo by Antonio Cruz/Agência Brasil [CC BY 3.0], via Wikimedia Commons

 

  • Jair Bolsonaro is widely expected to win Brazil’s presidential election on Sunday, with the latest polls giving him a 12 point lead over his rival, the Workers’ Party (PT) candidate Fernando Haddad. Bolsonaro, a far-right extremist who loathes democracy and regularly expresses nostalgia for Brazil’s previous military dictatorship, currently enjoys the support of Brazil’s business community, the Wall Street Journal editorial board—and, it appears, some American business executives as well. In recent days, write Zaid Jilani and Lee Fang in The Intercept, commentators and corporate executives described Bolsonaro’s rise as a “bullish opportunity” and praised his choice of pro-business economist Paulo Guedes as his chief economic adviser. On a related note, Quinn Slobodian’s NYT piece on the far-right’s “alter-globalization” is well worth a read.

 

Also, don’t miss this week’s episode of Capitalisn’t, in which Glenn Greenwald (who lives in Brazil) tells Kate Waldock and Luigi Zingales how rampant corruption, violent crime and a struggling economy have given rise to Bolsonaro and Brazil’s radical right.

 

  • The United States is “developing into a plutocracy,” former Fed chairman Paul Volcker tells the New York TimesAndrew Ross Sorkin ahead of the publication of his new memoir. “We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes,” adds Volcker. In the latest issue of Scientific American, Joseph Stiglitz concurs with this assessment, arguing that “the American economy is rigged.”

 

  • In response to the rising popularity of social democratic policy proposals like “Medicare for All,” President Trump’s Council of Economic Advisers released a 72-page treatise this week on “the opportunity costs of socialism.” The document, which equates present day Democrats with murderous authoritarians like Mao and Lenin, was met with criticism and ridicule: “The document departs from the council’s long tradition of delivering sober, albeit partisan, studies on current questions confronting economic policymakers,” wrote the TimesBinyamin Appelbaum and Jim Tankersley. “Even by the somewhat compromised standards of any CEA, the report is particularly sophomoric,” argued Brendan Greeley in the Financial Times. Tyler Cowen, meanwhile, believes the CEA report “makes a strong case, especially when it comes to health care.”

 

  • “This beggars belief. Facebook UK earns this in 3.5 hours… The #techlash is going to get ugly,” tweeted British MP Liam Byrne after Britain’s Information Commissioner’s Office (ICO) leveled a £500,000 fine (roughly $640,000) against Facebook for its role in the Cambridge Analytica scandal. His fellow Labour MP Ian Lucas, meanwhile, notes in the New Statesman that British lawmakers “still don’t know” who is behind an obscure website that spent over £250,000 on pro-Brexist Facebook ads in the last year. That not even Parliament knows who is behind the site, who funds it and whether it’s based in the UK or overseas, he writes, “exposes the inadequacy of the social network’s promises to clean up its act.” Earlier this week, Facebook announced the removal of 82 more pages, accounts and groups tied to a foreign attempt to influence voters in the US and UK, this time by Iran. In other Facebook news, Instagram removed a post by far-right provocateur Milo Yiannopoulos praising the pipe bombs sent to prominent Democrats and journalists this week, after initially refusing to take the post down.

 

  • “The global tech backlash is just beginning,” writes Christopher Mims in the Wall Street Journal. “The biggest tech companies have tremendous power over the hearts and minds of people—as much as many of the governments in countries where they operate. All over the world, citizens, bureaucrats and politicians are now pushing back against that power,” he adds.

 

  • Apple CEO Tim Cook became an unlikely critic of big tech platforms this week, lambasting Silicon Valley’s “data-industrial complex” during a keynote speech at a privacy conference in Brussels. Cook didn’t mention any company by name, but did say that personal data is being “weaponized against us with military efficiency.” He added: ”We shouldn’t sugarcoat the consequences. This is surveillance. And these stockpiles of personal data serve only to enrich the companies that collect them… This should make us very uncomfortable. It should unsettle us.”

 

  • Google gave Andy Rubin, the creator of Android, $90 million and a “hero’s farewell” when he left the company in October 2014, all the while keeping silent about an accusation of sexual misconduct made against him by another employee, reports the New York Times. Rubin was one of three senior executives Google protected from accusations of sexual misconduct over the past decade, according to the report by Daisuke Wakabayashi and Katie Benner.

 

  • Google’s revenues were up 21 percent in the third quarter, thanks to the rapid growth of its ad business. Meanwhile, Amazon’s advertising revenues also continued to skyrocket over the last quarter, with its ad division’s profit margin estimated to be as large as 75 percent.

 

  • In other Google news: following two years of fierce resistance by local residents, the company has abandoned its plan to build a giant campus in the Kreuzberg neighborhood.

 

  • New York’s attorney general, Barbara Underwood, is suing Exxon Mobil for misleading investors about the risks involved with climate change. The lawsuit, the result of a three-year investigation, claims the company “defrauded shareholders by downplaying the expected risks of climate change to its business,” and that this fraud “reached the highest levels of the company,” including former Exxon CEO and former Secretary of State Rex Tillerson.

 

  • From The Guardian: documents reveal that private equity giant Blackstone has been funding its campaign against California’s recent rent control initiative “with money taken from real estate investments funded by California public employees and the state university system.”

 

  • Saudi Arabia’s Future Investment Initiative conference (“Davos in the desert”) may have lost a lot of its luster in the past two weeks, but that didn’t stop the kingdom from signing $56 billion worth of deals during the conference, according to Reuters. Saudi Arabia’s relationship with McKinsey is also in the spotlight, following revelations that a McKinsey report may have played a role in Saudi Arabia’s recent crackdown on its online critics. Sen. Elizabeth Warren (D-MA) urged McKinsey to be transparent about its consulting relationship with Saudi Arabia, saying she’s “concerned that McKinsey’s report on public perception may have been weaponized by the Saudi government to crush criticism of the kingdom’s policies.”

 

  • “To date, governments have been too focused on the harms to customers from increasing industrial concentration. A consideration of the impact on workers is overdue,” argues The Economist in an article covering recent studies on labor market concentration, as well as Marshall Steinbaum and Maurice Stucke’s recent proposal to replace the consumer welfare standard in antitrust with an “effective competition” standard.

 

  • The Heritage Foundation made headlines last week when it decided to suspend a prestigious training program for judicial clerks that swore attendees to secrecy and required fealty to donors. In The Intercept, David Dayen writes about a similar training program for judges that took place in the 1970s and had “a quantifiable effect on future rulings.”

 

  • Since 2002, the EPA has allowed 112 new toxic PFAS chemicals to be manufactured or imported “in very large quantities,” while at the same time “trumpeting its efforts to find and clean up” PFAS contaminations, reports Sharon Lerner in The Intercept.

 

  • From Bloomberg: several German banks are considering a merger that would create Germany’s second-biggest bank by assets.

 

Stigler Center Goings-On

 

“Ride-sharing is often touted as improving traffic safety by removing potential drunk drivers from the road. But new research suggests that these services are actually increasing accident rates, and costing a rough estimate of $10 billion in economic losses from deaths each year,” writes ForbesLiane Yvkoff in her coverage of the Stigler Center’s working paper on ride-sharing and traffic fatalities. The MIT Technology Review covers the study as well. And if you missed Luigi Zingales’ ProMarket piece about the same paper, read it here.

 

Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy