Editors’ Briefing: This Week in Political Economy (October 14-20)

Facebook’s WhatsApp finds itself at the center of Brazil’s political upheaval; the EU is pushing ahead with its planned tax on tech platforms; Trump’s replacement for NAFTA entrenches tech monopolies; and why does Uber love economists? 

 

 

Nick Clegg. Photo by Chatham House [CC BY 2.0], via Flickr

 

  • Facebook has hired Nick Clegg, the former UK deputy prime minister, as its head of global policy and communications. “I’m joining Facebook to build bridges between politics and tech,” is how Clegg—once upon a time Britain’s second most-powerful political figure—announced his latest career move in a column published by The Guardian. Clegg, who is also a former member of the European Parliament, is joining Facebook at a time when it faces intense scrutiny from British and European authorities. His ability to turn the tide for Facebook in Europe has been met with skepticism, given his precarious political career, but as one Tory MP told Politico Europe, at the very least Clegg can “help Facebook realize that Europe is a very different place to the US with different attitudes towards social media and a different interpretation of what freedom of expression means.”

 

  • An exposé by the Brazilian newspaper Folha de São Paulo claims that firms and business groups linked to Jair Bolsonaro, the far-right Brazilian presidential frontrunner, are behind a massive multimillion-dollar fake news campaign involving millions of WhatsApp messages containing misinformation about Bolsonaro’s rival, former São Paulo mayor Fernando Haddad. Following the report, Haddad called for Bolsonaro’s disqualification, Bolsonaro’s son has been banned from WhatsApp, and Bolsonaro himself angrily denied the accusations that he had encouraged the fake news campaign. Facebook, for its part, acted quickly, but “despite [its] stronger and more organized coordination of its effort to improve election-related content, Latin America’s largest country was still overrun with misinformation, much of it distributed via Facebook services,” report Bloomberg‘s Sarah Frier and David Biller

 

  • In another story that highlighted Facebook’s negative political impact, the New York Times reported earlier this week on the weaponization of the social network by Myanmar’s military, which used it as a “tool for ethnic cleansing.” The systematic propaganda campaign aimed at Rohingya Muslims—“among the first examples of an authoritarian government’s using the social network against its own people”—stretched back half a decade and included “hundreds of military personnel who created troll accounts and news and celebrity pages on Facebook and then flooded them with incendiary comments and posts timed for peak viewership.” The scope of the effort, reports the Times’ Paul Mozur, went largely undetected by the company.

 

  • In other Facebook news: some prominent Facebook shareholders want Zuckerberg removed from his role as chairman of the board. The Verge’s Casey Newton takes a tour of the company’s election meddling “war room.” And a lawsuit by angered advertisers alleges that Facebook massively and knowingly overstated the success of video content posted to its platforms—a move that had enormous implications, not just for advertisers but also for publishers, many of whom believed the company’s declarations that video is the future of online content and laid off reporters and editors by the thousands in disastrous attempts to “pivot to video.” Also, as expected, Facebook will be able to use data collected from its new Portal video device to target you with ads.

 

  • Meanwhile, the EU is pushing ahead with its planned 3 percent tax on tech platforms’ revenues. The European commissioner for economic and financial affairs, Pierre Moscovici, said last week that the tax could be leveled as early as Christmas. Two prominent GOP senators, Orrin Hatch (R-UT) and Ron Wyden (R-Ore.), appealed to European leaders this week and urged them to abandon the proposed tax, arguing that it discriminates against American companies. In an interview with Slate, Sen. Mark Warner (D-VA) says that America’s “failure to take the lead” on antitrust and privacy regulations “is going to come back and bite us.”

 

  • For the past few weeks, the Federal Trade Commission has been holding public hearings on market concentration, technology and the future of American antitrust enforcement. These hearings feature many antitrust lawyers, experts and scholars “who have taken money, directly or indirectly, from giant corporations,” write Matt Stoller and Austin Frerick.

 

  • From Quartz: why Trump’s replacement for NAFTA entrenches tech monopolies like Facebook and Google.

 

  • In the New Yorker, Sheelah Kolhatkar explores the rapid growth of Sinclair’s conservative media empire. With 192 stations in 89 markets, Sinclair is the largest owner of TV stations in the US, with the ability to reach 39 percent of American viewers. And its employees “say that the company orders them to air biased political segments produced by the corporate news division…and that it feeds interviewers questions intended to favor Republicans,” she writes.

 

  • A far-reaching ProPublica/WNYC investigation by Heather Vogell, Andrea Bernstein, Meg Cramer and Peter Elkind into President Trump’s business dealings finds “patterns of deceptive practices” in a dozen Trump deals across the world. In these troubled business deals, the report alleges, the Trump family “helped mislead investors and buyers—and they profited handsomely from it.”

 

  • Sears became the latest former retail giant to file for bankruptcy this week, following years of internal turbulence and major losses. The New York Times and The American Prospect both highlight the role played by hedge fund manager Edward S. Lampert, Sears’ controlling shareholder, in the demise of what once was among the most powerful retail brands in America. “The company that pioneered the 20th-century version of e-commerce—the catalog—did not succumb to 21st-century innovations like Amazon and Walmart. Rather, it was dismantled piece by piece by Eddie Lampert,” argues David Dayen. “Lampert and his hedge fund engaged in relentless financial engineering to suck out all the value from Sears and leave a desiccated husk, which now could face possible liquidation in bankruptcy.” In Vice, Matt Taylor interviews the Roosevelt Institute’s Marshall Steinbaum on the connection between Sears’ corporate governance issues and the rise of Amazon.

 

  • From The Intercept: Sen. Ted Cruz’s (R-TX) pressure on the EPA helped create a huge windfall for Valero Energy, his biggest corporate campaign donor.

 

  • The Heritage Foundation has suspended a prestigious training program for judicial clerks after a New York Times report raised concerns about its curious requirements. According to the report, applicants to the program—recent law school grads who secured lucrative clerkships with federal judges—were told that “generous donors” had made “a significant financial investment in each and every attendee” and that in exchange for their participation, they would have to promise to keep the program’s teaching materials secret and pledge not to use what they learned “for any purpose contrary to the mission or interest of the Heritage Foundation.”

 

  • In Quartz, Alison Griswold writes about Uber’s special relationship with academic economists: in addition to its many collaborations with prominent economists, writes Griswold, the company also employs more than a dozen economics PhDs from top programs at its San Francisco headquarters who act “as an in-house think tank for Uber, gathering facts from quants and data scientists and synthesizing them to arm the lobbyists and policy folks who fight some of Uber’s biggest battles.” Internally, she writes, Uber’s venture into the economics discipline is known as “Ubernomics.” Its mission? “To prove, with cool and unemotional logic, that the rest of the world should love Uber as much as economists already do.”

 

In case you missed it, read Luigi Zingales’s latest piece on the real costs of ride-sharing.

 

  • From The Atlantic: Mark Zuckerberg, George Soros and hedge fund billionaire Tom Steyer have all poured millions of dollars into statewide ballot measures. Also from The Atlantic: How Steyer built, within a year, an enormous political machine “with more reach than the NRA.”

 

  • With the brutal murder of Saudi journalist and Washington Post columnist Jamal Khashoggi dominating news headlines, high-profile Western corporations, policymakers and CEOs pulled out of Saudi Arabia’s once-prestigious Future Investment Initiative (also knows as “Davos in the Desert”), which previously served as an advertisement for the “new” Saudi Arabia and a showcase for it cosy ties with the world’s corporate and financial elites.

 

  • “The NHS is being impeded by greedy drug companies,” argues Mariana Mazzucato in The Times. “Our health innovation system is not serving the people that fund it; instead it provides monopoly profits for large pharmaceutical companies.”

 

  • From ReCode: Inequality in Silicon Valley is getting worse. New report finds that nine in 10 workers in Silicon Valley make less than they did in 1997, after adjusting for inflation.

 

  • In a highly unusual move, Apple CEO Tim Cook called Bloomberg to retract a story that alleged Chinese spies compromised nearly 30 US companies, among them Apple and also Amazon, through malicious chops implanted into servers that had been manufactured in China. “I feel they should retract their story. There is no truth in their story about Apple,” Cook said in an interview with BuzzFeed.

 

  • Bloomberg: New York State considers blocking parts of the CVS-Aetna merger.

 

  • Opioid crisis news: Opioid manufacturer Purdue Pharma is requesting that counties suing it for its role in America’s opioid epidemic (more than 1,500 lawsuits against Purdue and other opioid manufacturer are currently pending) provide specific examples of overdose deaths or excessive prescriptions to back up their claims. Also, Marketwatch reports on findings from a new report by the Senate Homeland Security and Governmental Affairs Committee’s minority staff that focuses on the tactics utilized by drug manufacturer Insys Therapeutics to sell opioids. (The company was also at the center a New York Times investigation into kickbacks to doctors back in March). 

 

  • “Most likely, a full and fair examination of the record will find that the New York Fed, Geithner and all his colleagues in Washington (at the Board of Governors and the Treasury Department) were simply asleep at the wheel before 2008—metaphorically drugged by the illusion that unfettered markets would necessarily produce sensible outcomes,” writes Simon Johnson in a review of Adam Tooze’s Crashed.

 

Also, don’t miss our own special interview with Tooze right here.

 

  • In a new series, The Economist looks at how different countries—America, Mexico, Britain, China and Japan—tackle market power, concentration and monopoly.

 

  • Globalization, taxes & inequality: a presentation by Gabriel Zucman.

 

  • From the Christian Science Monitor: Unless capitalism starts to provide what it promised, it could be the next institution US millennials get rid of.

Stigler Center Goings-On

 

In the third and final episode of the Capitalisn’t series on the 2008 financial crisis, Kate Waldock and Luigi Zingales look at recent volatility in the markets and try to predict the cause of the next financial crash with help from prominent economists Robert Shiller and Lawrence Summers.

 

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