Editors’ Briefing: This Week in Political Economy (May 12-May 19)

Wells Fargo is in hot water again; President Trump reportedly pushed the US Postmaster General to double the rate that Amazon pays to ship packages. Why are Google and Facebook investing half a billion dollars in journalism? And can the Senate bring back net neutrality?

 

 

Photo by Ron Cogswell [CC BY 2.0], via Flickr

 

 

  • Wells Fargo is in hot water again, after a Wall Street Journal report revealed that employees of the bank’s wholesale unit, which handles business banking, have been altering information on forms related to corporate clients without their knowledge. The alterations reportedly took place in 2017 and early 2018, “as Wells Fargo was trying to meet a deadline to comply with a regulatory consent order related to the bank’s anti-money-laundering controls.” Bloomberg columnist Joe Nocera outlines Wells Fargo’s long list of public scandals and wonders about the bank’s stated “values.” “At Wells Fargo, when you are under pressure to meet a tough goal, you do whatever you need to do, even if it’s fraudulent. That appears to be Wells Fargo’s real core value,” he writes.

 

  • The Senate approved a resolution that would reverse the Federal Communications Commission’s repeal of the Obama-era net neutrality rules. In Esquire, Charles P. Pierce hails the bipartisan resolution as a “victory for common sense,” but acknowledges that there’s a slim chance that the House of Representatives (which is set to discuss the measure) won’t uphold the repeal.

 

  • President Trump “personally pushed” Postmaster General Megan Brennan to double the rate that the US Postal Service charges Amazon to ship packages, reports the Washington Post.

 

  • In the Columbia Journalism Review, Mathew Ingram explores how it came to be that Google and Facebook became two of the world’s biggest funders of journalism. Taken together, Facebook and Google have committed more than half a billion dollars to various journalistic programs and media partnerships over the past three years, he writes, as the two tech giants “are desperate for some good PR and maybe even a few friends in a journalistic community that—especially now—can seem openly antagonistic.” However, he warns, “no matter how altruistic they seem, the reality is that all of this funding is just another way in which both Facebook and Google integrate themselves even more tightly into the fabric of media and journalism, not just in the US but worldwide.”

 

  • On the 20th anniversary of the US antitrust case against Microsoft, The Ringer’s pended Silicon Valley.” In the New York Times, Senator Richard Blumenthal (D-Connecticut) and Columbia law professor Tim Wu write about what the antitrust case against Microsoft can teach us about how to handle the growing power of digital platforms. “Imagine a world in which Microsoft had been allowed to monopolize the browser business. Holding a triple monopoly (operating system, major applications and the browser), Microsoft would have controlled the future of the web,” they write. “If the Microsoft case showed us anything, it is that we should not trust any one company to decide our future.”

 

  • Also in the New York Times, Kevin Roose argues that the money-losing movie ticket subscription service MoviePass serves as a perfect illustration of the current US economy, filled as it is with unprofitable companies investing huge sums of money in growth hoping to become the next Amazon or Google. “Over all, 76 percent of the companies that went public last year were unprofitable on a per-share basis in the year leading up to their initial offerings…the largest number since the peak of the dot-com boom in 2000.”

 

  • Newly sworn-in Federal Trade Commissioner Rohit Chopra called for his agency to be an “aggressive and effective enforcer against repeat offenders like Facebook and Google. Meanwhile, Andrew Smith, an industry lawyer who previously represented Facebook, Uber and Equifax, will head the Federal Trade Commission’s Bureau of Consumer Protection.

 

  • About a dozen Google employees have resigned in protest over the company’s decision to partner with the Pentagon in developing artificial intelligence to improve the ability of drones to identify humans. The program, known as Project Maven, has inspired outrage among Google employees in recent months. In April, over 3,000 Google employees sent an open letter to CEO Sundar Pichai, calling on him to cancel the project immediately and contending that Google “shouldn’t be in the business of war.”

 

  • Facebook reportedly deleted 583 million fake accounts in the first three months of 2018. The company has drawn new criticism this week due to its new policy on political ads, which could exclude undocumented immigrants. Meanwhile, Mark Zuckerberg’s net worth is up $13 billion since the height of the Cambridge Analytica scandal, according to Forbes.

 

  • John Hawkins of the National Review makes “the conservative case” for breaking up tech monopolies like Google and Facebook. On Medium, Congressional candidate Suraj Patel outlines his views on antimonopoly: ”While paid-off politicians stand idly by, virtually every major sector of the American economy has been consolidated and monopolized by a few major players.”

 

  • From Andrew Schwartz and Ethan Gurwitz of the Center for American Progress: “Big Business rules American agriculture—and Congress doesn’t seem to care.” The recent mergers of Dow and Dupont, Sygenta and ChemChina, and Bayer and Monsanto “will leave just three entities with 80 percent of the US corn seed market and 70 percent of the international pesticide market.” The market share of the four largest soybean-purchasing companies increased from 54 to 79 percent between 1977 and 2011. During the same period, the four largest beef processors increased their market share from 36 percent to 85 percent. American farms have become concentrated as well: “In 1991, farms with a minimum of $1 million in sales were responsible for 31 percent of US farm production value. As of 2015, that number has jumped up to 51 percent.”

 

  • President Trump’s decisions to pull out of the Iran nuclear deal and move the US embassy in Israel to Jerusalem dominated headlines around the world for the past two weeks. According to McClatchy DC, Republican megadonor Sheldon Adelson played a crucial part in both decisions. The day after the announcement about the Iran deal, “Adelson quietly slipped into the White House for a private meeting with Trump and three top administration officials: Vice President Mike Pence, Treasury Secretary Steve Mnuchin and an Adelson favorite, National Security Adviser John Bolton,” according to the report. 

 

  • From The Intercept’s Sharon Lerner: internal emails show Scott Pruitt’s policy director at the EPA met with hundreds of industry representatives.

 

 

  • In the New Republic, David Dayen writes about the aftermath of the Live Nation and Ticketmaster merger, citing a Government Accountability Office (GAO) report that shows “the biggest fears about the merger…have come true.”

 

  • In Grist, Eric Holthaus writes about a pioneering new study into Bitcoin’s energy footprint, which has more than doubled in the past six months and is expected to double again by the end of the year. “By late next year, bitcoin could be consuming more electricity than all the world’s solar panels currently produce—about 1.8 percent of global electricity, according to a simple extrapolation of the study’s predictions,” he writes.

 

  • From The Intercept: a bill aimed at saving community banks is already killing them.

 

  • Neuen Zürcher Zeitung covers a corruption trial in Milan against oil giants Royal Dutch Shell and Eni. The report cites Stigler Center Director Luigi Zingales (a former director of Eni), who argues that the Milan trial could prove to be a turning point for the oil industry.

 

Chatter from the Ivory Tower

 

  • Soumaya Keynes this week rounded off a three-interview BBC4 radio series on the domination of economics by men, featuring interviews with Claudia Goldin, Stephen Machin, and Beatrice Cherrier. Particularly compelling are the segments on the epistemic distortions that plague theory in the absence of diversity and Cherrier’s history of how female economists have wielded theories of labor market discrimination in their fight to improve representation in the discipline.

 

  • In The New Republic, John Benjamin examines what he calls “the bankrupt ideology of business schools”: “In their current forms as managerial training camps, [business schools] lock students in a double bind. We can’t ignore shareholder capitalism’s obvious ethical lapses, but we also don’t entertain anything like systemic analyses of it.”

 

In case you missed it, check out ProMarket’s interview on this subject with author of The Golden Passport, Duff McDonald.

 

Stigler Center Goings-On

 

  • As ad revenue continues to decline, more and more news organizations are turning to paid and sponsored content. In the latest episode of the Capitalisn’t podcast,“Opinions for Sale,” Luigi Zingales and Kate Waldock revisit the decades-old music payola scandal and debate how to ensure proper disclosure in the digital age.

 

  • Sign up now for next week’s Stigler Center two-day mini-course with UT Austin’s Brian Richter on Corporate Political Influence in the United States.

 

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.