Editors’ Briefing: This Week in Political Economy (July 27–August 4)

Apple hits the coveted $1 trillion mark—thanks to share buybacks; Senator Mark Warner’s proposals to regulate social media platforms make waves; Google is reportedly planning to launch a censored version of its search engine in China; and what’s behind the public battle between President Trump and the Koch brothers for control of the GOP? 

 

 

Senator Mark Warner. Photo by Mark Warner, via Flickr [CC BY 2.0]

 

  • Apple became the first publicly-traded US company to reach a $1 trillion valuation. This landmark, notes Matt Phillips in the New York Times, is the result of an “extraordinary corporate success story.” But it also “highlights how a group of enormous companies has come to dominate the United States economy.”

 

  • Apple’s road to that coveted $1 trillion market cap may have been paved with popular and groundbreaking products like the iPod and iPhone, but also with a record-breaking number of share buybacks. In the first six months of 2018 alone, the company spent $43.5 billion on buying back its own stock, part of a $100 billion share buyback program it announced in May. “This asterisk,” argues Alex Shephard in The New Republic, “should be something of a scandal. Apple is the poster child of the current spate of stock buybacks, which are starving investment and exacerbating inequality.”

 

  • President Trump’s $1.5 trillion tax cut has put stock buybacks in the spotlight. With share buybacks on track to reach $800 billion in 2018, Vox’s Emily Stewart explains why this is cause for concern. In The Atlantic, Annie Lowrey writes about a new report by Irene Tung of the National Employment Law Project (NELP) and Katy Milani of the Roosevelt Institute that examines the extent of stock buybacks in the US restaurant, retail, and food manufacturing industries between 2015-2017 and argues curbing buybacks is necessary to increase worker pay and reduce inequality.

 

  • Techlash news: an ambitious white paper by Senator Mark Warner (D-VA), first published by Axios, details 20 policy proposals for regulating big tech companies and social media giants. The proposals focus on three specific goals: stopping the spread of disinformation and fake news; protecting user privacy; and promoting competition. They include such proposals as requiring digital platforms to clearly label bot accounts and making them liable for failing to take down “deep fakes” or manipulated audio/video content, “comprehensive GDPR-like data protection legislation,” and handing the Federal Trade Commission (FTC) more power to “police data protection and unfair competition in digital markets.” The paper stops short of calling for a break up of big tech firms, as many have suggested in recent months.

 

  • Facebook said this week that it identified a covert, coordinated campaign to meddle in the 2018 midterms, removing dozens of pages and fake accounts that “had engaged in activity around divisive social issues.” Facebook did not identify who was behind the latest meddling campaign, but said the activity mimicked Russian efforts to influence the 2016 presidential election, with organizers going so far as to try to lure legitimate protest groups and activists. Facebook, reported NBC, “released only some of the pages and content publicly. What it did not reveal was the depth some of the pages went to stoke racial tension and incite division among Americans.”

 

  • In her New York Times debut, Kara Swisher writes about the new revelations, noting that: “Facebook, as well as Twitter and Google’s YouTube, have become the digital arms dealers of the modern age.”

 

  • On a related note, the Senate Intelligence Committee announced that it will hear testimonies from Facebook, Google and Twitter executives on September 5th about the steps tech companies intend to take in order to prevent foreign meddling in the midterm elections.

 

  • A scathing report by Britain’s Digital, Culture, Media and Sport Select committee (DCMS), concluding an 18-month investigation into the spread of fake news and disinformation in social media, accused Facebook of providing “disingenuous answers” avoiding questions “to the point of obstruction.” The report goes on to argue Facebook is “releasing a product that is dangerous to consumers and deeply unethical.” British MP Damian Collins, chair of the select committee, promises in a Guardian piece: “if Silicon Valley won’t stop fake news, we will.”

 

  • Adding to Facebook’s troubles, it now faces two class action lawsuits in the UK related to the Cambridge Analytica scandal. In one of them, lawyers representing dozens of UK residents whose data was harvested by Cambridge Analytica are threatening to sue the company for damages, accusing it of violating British data privacy regulations.

 

For more on Facebook, don’t miss our own special interview with Siva Vaidhyanathan, who explains why Facebook is simply “too big too manage”

 

  • From The Intercept: Google is planning to launch a censored version of its search engine in China that will “blacklist websites and search terms about human rights, democracy, religion, and peaceful protest.” Google has been working on the project since spring of last year, reports Ryan Gallagher, and accelerated following a December 2017 meeting between Google CEO Sundar Pichai and a top Chinese government official.

 

  • This week has also been marked by an intensifying and very public rift between President Trump and the Koch brothers. The Republican megadonors, Trump tweeted this week, are “globalists” for criticizing his trade and immigration policies and “have become a total joke in real Republican circles.” The Republican National Committee has reportedly been warning major GOP donors to stay away from the brothers’ powerful network. In the New Yorker, Jane Mayer—who traced the history of the Koch network in her 2016 book Dark Money—writes about the Trump-Koch feud, arguing that the brothers’ threat to give up on the Republican Party and start backing Democrats “is about as believable as that of a parent threatening to ‘just plain leave’ if a balky toddler doesn’t behave.”

 

  • On a Koch-related note, the Koch-funded Mercatus Center at George Mason University made headlines this week after a new study by the Center found that the Democrats’ proposed “Medicare for All” program could lead to major savings in health care expenditures. John Cochrane of the Hoover Institution, once a staunch opponent of single-payer health care, also now believes that single payer “might not be so bad—it might not be as bad as the current Medicare, Medicaid, Obamacare, VA, etc. mess.”

 

  • Wells Fargo has agreed to pay a fine of $2.09 billion as part of a settlement with the Department of Justice over the sale of toxic mortgage-backed securities before the financial crisis. The settlement, writes Marketwatch’s Steve Goldstein, “reveals just how aggressive the bank was in making shoddy mortgages in [the] run-up to financial crisis.”

 

  • In an unprecedented move, the New York State Public Service Commission decided to kick Charter Communications’ Spectrum cable and internet service out of the state, revoking the approval of Charter’s 2016 merger with Time Warner Cable. Charter, meanwhile, vows to fight the decision.

 

Stigler Center Goings-On

 

In the second part of their special 3-part series on antitrust law, Capitalisn’t hosts Kate Waldock and Luigi Zingales talk with Lina Khan of the Open Markets Institute, author of the article “Amazon’s Antitrust Paradox” and a member of the New Brandeis Movement, which believes that antitrust enforcement should be more broadly applied and not just rely on consumer welfare.

 

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