Editors’ Briefing: This Week in Political Economy (August 18–25)

America’s white-collar prosecution crisis; Elizabeth Warren has a new bill that aims to separate money from politics; Facebook struggles with the daunting task of moderating 2 billion people; and is Google risking press freedom by re-entering the Chinese market?

 

 

Michael Cohen. Photo by IowaPolitics.com [CC BY-SA 2.0]

 

  • While the conviction of Paul Manafort, President Trump’s former campaign chairman, and the guilty plea from his former lawyer Michael Cohen dominate news headlines, ProPublica’s Jesse Eisinger explains why the two thought they’d get away with fraud: white-collar crimes are barely prosecuted in the US anymore. “One can almost sympathize with them: If it wasn’t for their decision to attach themselves to the most unlikely president in modern history, there’s every reason to think they might be still working their frauds today,” he writes. The Robert Mueller investigation, he argues, exposed the US’s white-collar prosecution crisis: “This should be a moment of reflection for white-collar prosecutors. It should not take a special counsel to uncover millions in bank fraud, money laundering and tax evasion. Using proper techniques, prioritizing crimes that can harm millions of people and stiffening their obsequious posture toward corporate executives will go a ways to remedying the situation.”

 

  • In Vox, Matthew Yglesias offers a similar take, arguing that the Mueller investigation shows how badly the US has failed in prosecuting white-collar crime. “While the first-order political upshot of the Cohen and Manafort cases is that Trump seems to associate with an awful lot of criminals, the more disturbing implication is that there are a lot of white-collar criminals out there who aren’t being prosecuted because their lives don’t happen to intersect with a special counsel investigation,” he writes.

 

  • GOP representative Duncan Hunter was also indicted this week, along with his wife, for using campaign funds for personal expenses.

 

  • Meanwhile, CNN lists some other things the Trump administration did this summer. One of those things, a rollback of the EPA’s rules on emissions from coal plants, has been driven by a former industry lawyer who has led the EPA’s clean air office since November, according to a report from The New York Times.

 

  • A week after she unveiled a major bill that could potentially remake US corporate governance, Senator Elizabeth Warren (D-Mass.) introduced a new ambitious proposal that targets corruption and corporate influence on the federal government. Warren’s Anti-Corruption and Public Integrity Act aims to get money out of politics by, among other things, banning “revolving door” lobbying jobs for elected officials and government employees (including presidents and vice presidents, members of Congress, federal judges, Cabinet members and Congressional staffers), banning federal employees from owning individual stocks while in office, prohibiting Americans from taking money from foreign governments or foreign companies to lobby the federal government, and requiring that presidential and vice presidential candidates make eight years’ worth of tax returns public, as well as release their tax returns for each year they’re in office. Warren’s bill also calls for the creation of a new Office of Public Integrity that would supervise all of this and investigate potential violations. “Our government systematically favors the rich over the poor, the donor class over the working class, the well-connected over the disconnected. This is deliberate, and we need to call this what it is—corruption, plain and simple,” Warren said in a speech this week, in which she unveiled her new bill. “Corruption has seeped into the fabric of our government, tilting thousands of decisions away from the public good and toward the desires of those at the top. And, over time, bit by bit, like a cancer eating away at our democracy, corruption has eroded Americans’ faith in our government.”

 

  • From the New York Times: the lobbying emails New York governor Andrew Cuomo “fought hard to keep secret.”

 

  • This year’s annual Federal Reserve policy symposium in Jackson Hole, which kicked off on Thursday, is focused on “Changing Market Structure and Implications for Monetary Policy.” The agenda includes the role that market concentration plays in slowing productivity and wage growth (which Fed chair Jerome Powell called a “bit of a puzzle”), weak capital investment, the rise of tech giants, and competition in the banking industry. 

 

  • From BuzzFeed: Tech companies are gathering in San Francisco for a secret meeting to prepare a 2018 election strategy.

 

  • Facebook said this week that it has identified and taken down more than 650 pages, groups, and accounts associated with Russian and Iranian attempts to manipulate US voters ahead of the US midterm elections. A wide-ranging investigation by Motherboard’s Jason Koebler and Joseph Cox, however, shows just how daunting the task of moderating content created by more than 2 billion people really is. “Facebook’s constant churn of content moderation-related problems come in many different flavors: There are failures of policy, failures of messaging, and failures to predict the darkest impulses of human nature. Compromises are made to accommodate Facebook’s business model. There are technological shortcomings, there are honest mistakes that are endlessly magnified and never forgotten, and there are also bad-faith attacks by sensationalist politicians and partisan media,” they write. The problem, they suggest, is that Facebook is simply too big, making the task of moderating content virtually impossible: “Its two billion users make billions of posts per day in more than a hundred languages, and Facebook’s human content moderators are asked to review more than 10 million potentially rule-breaking posts per week Facebook aims to do this with an error rate of less than one percent, and seeks to review all user-reported content within 24 hours. Facebook is still making tens of thousands of moderation errors per day, based on its own targets.”

 

In a recent interview with ProMarket, media scholar Siva Vaidhyanathan argued that Facebook has become “too big to manage.”

 

  • The New York Times reports on a new study by a pair of Warwick University researchers (and ProMarket contributors) who scrutinized every anti-refugee attack in Germany over a two-year period and found a correlation between the number of attacks and Facebook usage. The study, write Amanda Taub and Max Fisher, claims to prove an argument often made by critics of Facebook and social media platforms: that they make communities more prone to racial violence. “Wherever per-person Facebook use rose to one standard deviation above the national average, attacks on refugees increased by about 50 percent,” the study finds.

 

  • As part of its efforts to fight fake news and disinformation, Facebook has begun to evaluate the “trustworthiness” of individual users by assigning them with a “reputation score” on a scale of zero to one. The idea, according to Facebook, is to root out users who regularly make false claims, and is only one of thousands of “behavioral clues that Facebook now takes into account as it seeks to understand risk.” Nevertheless, notes the Washington Post’s Elizabeth Dwoskin, “it is unclear what other criteria Facebook measures to determine a user’s score, whether all users have a score and in what ways the scores are used.”

 

  • Facebook, reports TechCrunch, has also begun cracking down on opioid dealers on its platform—after “years of neglect” which have “likely contributed to some of the 72,000 drug overdose deaths in America last year.”

 

  • In other Facebook news, the company removed its data-security app Onavo from Apple’s app store after Apple ruled that the service violated its data-collection policies.

 

  • A new report by researchers from Vanderbilt University, published by the lobbying group Digital Content Next, outlines the many ways in which Google collects data on the billions of users who use its search engine and myriad services and argues that “it’s nearly impossible to do anything digitally without Google collecting data on you.”

 

  • The New York TimesFarhad Manjoo writes about Google’s project of developing a censored version of its search engine for China and the controversy surrounding it. If Google does indeed decide to return to China, after it famously shut down its Chinese operations in 2010 over government surveillance, it “will very likely have to agree to an even more restrictive censorship regime than what it tolerated previously,” writes Manjoo. “It is hard to see how going back to China would be anything other than a terrific comedown—the most telling act of a company that, day by day, has come to resemble the utterly conventional corporation it once vowed never to become.” Google’s re-entry into China, argues former Stigler Center Journalist-in-Residence Avi Asher-Schapiro in the Committee to Protect Journalists blog, “underscores a longstanding trend: foreign technology companies are under intense pressure to exchange press freedom principles for access to the Chinese market.” While Google’s re-entry into the Chinese market is not expected to significantly change the censorship regime in China, he writes, “by integrating its services with the Chinese model, Google risks enabling serious violations beyond censorship.”

 

  • In The Intercept, David Dayen writes about the Senate race in Delaware, in which the upcoming Democratic primary pits the bank-friendly incumbent Tom Carper with the challenger Kerri Evelyn Harris, whose campaign focuses on the harms of predatory lending. In The Atlantic, Elaine Godfrey explains “why so many Democratic candidates are dissing corporate PACs.”

 

  • The SEC is worried that it would “take a beating from politicians and in the media” if it doesn’t take action against Tesla and its CEO Elon Musk, reports Bloomberg: “For months, the US Securities and Exchange Commission had been quietly and methodically scrutinizing Tesla Inc. Then Elon Musk tweeted, forcing the SEC to change its approach in an investigation that’s now putting intense pressure on the regulator.” The Week’s Ryan Cooper opines that Musk’s recent troubles are “a good window into the spectacular hubris of today’s Big Tech barons.” Meanwhile, Musk announced on Friday that Tesla would remain public. 

 

  • From The Intercept’s Susan Antilla: Will shareholders lose the right to sue over corporate fraud?

 

  • From The Nation: New York City has a “once-in-a-lifetime opportunity” to create an Internet for all.

 

  • Two interesting stories this week about corporate influence over science: Liz Szabo in the New York Times explores the story of the Boston University endocrinologist who became a Vitamin D guru and helped push sales of the supplement nine-fold to $936 million—while also receiving hundreds of thousands of dollars from companies that benefited from his recommendations. In Vox, Julia Belluz explores how dark chocolate came to be considered a health food—after “the Mars company has sponsored hundreds of scientific studies to show cocoa is good for you.”

 

  • From HuffPost: Les Moonves, the most powerful CEO to be accused of sexual misconduct as part of the #MeToo movement, is winning. So far.

 

Stigler Center Goings-On

 

In the third and final part of their special 3-part series on antitrust law, Capitalisn’t hosts Kate Waldock and Luigi Zingales explore the differences between the EU and the US approaches to antitrust enforcement and hear about double-sided markets from Nobel-winning economist Jean Tirole.

 

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.