A comment on the latest presidential debate by Jonathan Lipow, Oberlin College, in a press release from Economists for McCain:
As for healthcare, Sen. Obama ceaselessly attacks Sen. McCain for advocating the elimination of tax breaks for employer-provided health insurance. It is difficult to square this position with that of Obama’s chief economic advisor, Jason Furman, who recently published a paper that argues that this tax break is a scam that benefits the rich while actually making it more difficult for lower income people to obtain insurance. Once again, it is difficult to understand why Obama is ignoring the views of his own advisors. The overall impression one gets is that the Senator doesn’t really care about the positions he takes, as long as he gets to be President.
(If you google “economists for mccain” the top result is a link to a page on the Obama campaign’s web site. The real link to Economists for McCain is found only several links down the Google search results page. I don’t know if this happens because the Obama people are more search-engine savvy or because Google is biased in favor of Obama, but with Google politically-sensitive search results seem always to be either neutral or to break in favor of the Left. I’ll be interested to see if Google does some kind of celebratory logo change on the day after an Obama victory. No doubt Google would receive little anti-trust or other regulatory scrutiny under an Obama administration.)
14 thoughts on ““The overall impression one gets is that the Senator doesn’t really care about the positions he takes, as long as he gets to be President.””
Google is actually far more likely to receive antitrust scrutiny under an Obama administration, not because Obama is Obama, but because Obama does not appear to be captive to business interests.
We’ve had 8 years of antitrust neglect under Bush, chiefly because of ideological Republican control of Justice and the FTC. Scalia’s opinion in the 2004 case of Verizon v. Trinko, presuming against Sherman Act violations in the absence of an explicit Congressional command, has further limited enforcement efforts.
I think Google’s dominance of the search space is well deserved – their search works better – but they shouldn’t be allowed to leverage this dominance at the expense of innovative smaller companies in other areas of the market. Also, Trinko is a bad decision, judicial activism through and through, and I look forward to its future reversal.
Just to be clear, I don’t think Google merits anti-trust scrutiny. I think anti-trust is mostly a tool used against successful businesses by their less successful competitors, and a means by which pols can shake down successful companies. And I agree that Google’s search technology is currently superior — much superior — to that of its rivals.
However, Obama is an anti-business liberal Democrat and if elected will have the support of an anti-business liberal-Democratic Congress. I assume that under such political circumstances the Justice Dept. will be more inclined to pursue anti-trust cases than it is currently. The question then becomes, who gets targeted. Microsoft famously refused to play the political game, and for its stubbornness and principle was labeled “arrogant” in the press and became the target of extremely costly anti-trust proceedings in multiple countries. Google is not likely to make the same mistake, and indeed, under the adult management of Eric Schmidt, has been contributing to Democratic causes for some time.
Note also that Obama, as a liberal Democrat, a lawyer, and a former political-activist litigator, is the favored candidate of trial lawyers and other interest groups that benefit from litigation.
Google is actually far more likely to receive antitrust scrutiny under an Obama administration, not because Obama is Obama, but because Obama does not appear to be captive to business interests.
So which interest is he a captive of?
If you think that “business interest” systematically oppose anti-trust action by the government, you need to read the history of anti-trust. Almost always, from Standard Oil to Microsoft, the primary drivers of anti-trust litigation are large competing business interest. For example, Oracle drove much of the Microsoft case in the states and SAP drove it in Europe.
Anti-trust works just like any other government regulation. Powerful special interest end up hijacking the violent power of the State for their own ends. Since Obama is violently hostile to the free-market, the only question remains which of economic competitors of anti-trust targets he will serve.
Given the tendency of former democrats to serve on the boards of powerful corporation e.g. Freddie Mac, I would look their to those institutions to see who will be holding Obama’s reigns.
And of course, since Obama has proven track record of attempting to use the mechanisms of state power to suppress speech critical of him, I think it highly likely that he will use anti-trust actions to punish those like Google who allow people access to anti-Obama information.
In regard to parent, I think that Obama is of the post-modernist mold which holds that in the end ideas do not matter but only people of the correct ideology. This is one of those cryto-communist ideas that wormed its way into American academia in the 1960’s and from their into general leftist thought over the last 40 years.
Given the academics that Obama references, I think we can clearly say that he really doesn’t care how he gets power as long as he gets it. He believes so strongly in the infallibility and rectitude of himself and people like him that long term benefits of his rule will outweigh any dishonesty he might have to employ to reach office.
You are correct, insofar that the primary driver of anti-trust litigation is competitor complaints. However, that is a *feature*, not a bug. Congress explicitly allowed for triple damages for private suits to encourage competitors to sue, and for an excellent reason.
It’s both expensive and inefficient, not a good use of tax revenues, for gov’t to shoulder the burden of antitrust investigation and prosecution. On the other hand, competitors are in the best position to know when another company is breaking the law. However, because of the cost and uncertainty of litigation, it may not be economically rational for them to sue. So triple damages is the incentive Congress intentionally offered to get competitors to sue. Litigation is something desirable by everyone here (except the lawbreaking company).
>>Anti-trust works just like any other government regulation. Powerful special interest end up hijacking >>the violent power of the State for their own ends.
I (mildly) agree with you here, but from the opposite direction. Institutional capture is a real problem here – the EPA and the CDC under Bush II are a good examples, along with the DoJ. The problem, is my view, is underenforcement of the existing law, not overenforcement. Regardless of ideology, government should uphold the law. If you don’t like the law (e.g. antitrust), work to change it. Don’t just ignore it, as Bush II did – that hurts the system by promoting contempt for the rule of law.
>>Since Obama is violently hostile to the free-market, the only question remains which of economic >>competitors of anti-trust targets he will serve.
This is a normative statement, not a positive one – I can’t dispute your point of view. He doesn’t appear to be virulently hostile to me but I suppose this assessment depends on the end of the political spectrum one is looking at him from. In pretty much any other major democracy I can think of, Obama’s economic policies would be center-right, or at best centrist.
…The problem, is my view, is underenforcement of the existing law, not overenforcement. Regardless of ideology, government should uphold the law. If you don’t like the law (e.g. antitrust), work to change it…
I take it you don’t know anyone who’s been victimized by ambitious, amoral prosecutors or bureaucrats. Should the Fugitive Slave Act have been enforced zealously until it was repealed? Should individuals be destroyed because some asshole prosecutor has a “theory” that rationalizes application of RICO in a context that the people who wrote the law never intended? Some laws, indeed many laws, are poorly conceived and/or poorly written. Often the people who inadvertently run afoul of such laws have no way to get them repealed. You can’t “work to change” a law when you’re accused of felonies for which you could be sentenced to hundreds of years in prison and the government freezes your bank accounts. You can’t avoid anti-trust prosecution if you are running a successful company: the rules are vague, logically inconsistent and subject to arbitrary interpretation. Have some humility about this stuff. The last thing any of us should favor is encouraging government officials to enforce vague laws against activities that many serious people don’t think should be considered crimes.
You are correct, insofar that the primary driver of anti-trust litigation is competitor complaints. However, that is a *feature*, not a bug…Institutional capture is a real problem here – the EPA and the CDC under Bush II are a good examples, along with the DoJ.
Who exactly captured Bush and why them and not others? If your idea corporations using anti-trust as an competition tool is valid why would Bush favor once big corporation over others? For example, take the case of Microsoft, yes MS is a giant corporation but then so are its competitors and, more importantly, its customers. IT is a major cost for corporations such as, say big oil. Why would Bush side with MS against the interest of big oil and every other corporation that uses computers?
More likely, the lack of anti-trust prosecutions in the Bush administration arises from an ideological dislike of government interference in the marketplace regardless of who it helps or hurts. It only looks like capture if you look at specific companies in isolation and ignore their large numbers of equally influential competitors and customers.
It also looks like capture if you argue from a crypto-marxist perspective in which the interest of any corporation always conflict with the interest of all other people not immediately involved in the profitability of corporation. In this view, refusing to alter the free-market with government violence is deemed to mean that one automatically sides with the corporate interest.
Regardless of ideology, government should uphold the law.
Good in theory but in reality there isn’t actually any firm definitions for what constitutes illegal monopoly behavior. For example, MS was busted for bundling applications with its operating system, yet computer companies had been doing that since the early 80’s. No legislatures sat down and passed a law forbidding the practice. Instead, DOJ lawyers simply argued that, in their opinion, it had an unacceptable anti-completive effect only when MS did it. Likewise, there are many practices considered legal if a small company does them but illegal with a big company does them. When a company crosses the line from
In short, there really are no predetermined standards by which a company can know before hand that they are breaking the law. A corporate officer cannot look at numbers on a spreadsheet and say, “wow, we’re close to breaking anti-trust law”. Instead, government will decide post facto if it did. Enforcing the “law” becomes simply a matter of opinion, opinion shaped largely by ideology.
It is precisely this arbitrary nature of anti-trust law that creates such a potential of political abuse.
In pretty much any other major democracy I can think of, Obama’s economic policies would be center-right, or at best centrist.
Yes, well, the French Communist party still hold 21 of 331 seats in the French Senate. So, if you want to peg Communist as the far left of “mainstream” then yes Obama is only somewhat left of the world center. If you measure him against American standards, he is in 10% most far left (based on his voting record).
France, and Europe in general, is an excellent example of capture run large. In America, of the 30 largest corporations today, 20 did not even exist in 1970 and the remaining 10 where not in the top 30 of 1970. In France, the top 30 corporations in 1970 are still the top 30 corporations today and even their relative rankings have not shifted significantly. These big corporations thrive because, although the government regulates them heavily, they also vigorously protect them from internal and external competition.
Even if Obama doesn’t abuse his prosecutorial discretion to punish those who disagree with him, he will seek to create a condition of economic stasis in which a small number of powerful state backed corporations will dominate the economy from an unassailable position.
Shannon Love is correct. Can’t you just get a mental picture of Boeing rushing to the arms of an Obama Administration and subjecting itself to a myriad of regulations in turn for protection from Airbus?
Jonathan: if my post wasn’t clear, I apologize – I think you may have misunderstood it. Some quick explanations:
(1) there is a lot of difference between misuse of prosecutorial discretion and agency enforcement practices leading to criminal and civil prosecutions. Prosecutors can bring suit for virtually any violation, no matter how minimal. Agencies, on the other hand, are much more constrained because they HAVE to follow their agency enforcement guidelines. Antitrust enforcement is agency enforcement.
(2) antitrust violators by definition are large and sophisticated firms well aware of what they are doing – but gambling that the expected value of the outcome, taking into account the chance they will not be caught, is net positive. Individuals and small businesses *cannot* be subject to antitrust regulation because of the prerequisite of market power. So, freezing of bank accounts, worry about felony convictions for Mr. Average Joe etc. is not applicable.
(3) an antitrust violation results in Company X being able to illegally and coercively extract monopoly profits from consumer wallets. the net result is similar to theft – of say, perhaps, a few cents on an individual purchase maybe, but theft nonetheless. One can argue, as people do, that the market will “self-correct” that kind of behavior but few people consider the behavior itself, when engaged in with impunity e.g. ologopolistic pricing, not a problem. One would have to ignore elementary economics to do so. It’s a classic market imperfection.
I agree with your point about the lack of clear-cut definition being a problem for AT enforcement; it does result in the administration in power having more leeway than they should. But there are legal tests in place; also, firms can check with the DoJ/FTC (as they often do, for mergers) as to whether an intended course of action is legal.
With respect to the MS case: I disagree with your facts. Specifically, (a) MS was on actual notice
and (b) there is no ex post facto issue, tie-ins have been illegal since the Sherman Act. The recent Times-Picayune (1953), Northern Pacific Railway (1958), U.S. Steel Corp. (1977), and Jefferson Parish (1984) and Eastman Kodak (1992) line of cases is pretty clear.
Finally, we should all be thankful to Justice for going after MS. We’ve had an explosion of new technology – some of which may not have been possible had the gov’t not constrained MS and allowed startups to flourish. There hasn’t been, for example, any similar innovation in OS/office productivity software where MS has market power (Windows & Office).
You don’t appear to be unaware that words that you’re using to define anti-trust issues, “small”, “large”, “sophisticated” possess no legally concrete meaning. It is impossible for any firm to know, before they act, whether they will be consider an illegal monopoly before the fact. There is no mathematical formula that combines factors like market share and prices and spits out a number telling a company whether they’ve crossed a line.
It’s all well and good to use such loose definitions in a college dorm bull session but using them to confiscate peoples wealth or send them prison is another thing. For a law to be just, it must first and foremost draw a bright line on ground. The vast majority of anti-trust “law” just says, “if you go to close to the line, well hurt you, but we’ll only tell you if you’re two close by hurting you. Oh, and different people can get closer to the line than others without being hurt.
Agencies, on the other hand, are much more constrained because they HAVE to follow their agency enforcement guidelines. Antitrust enforcement is agency enforcement.
No, there are no rules, just opinion. If the agency enforcement is professional and automatic, how did Bush subvert it as you claim.
an antitrust violation results in Company X being able to illegally and coercively extract monopoly profits from consumer wallets. the net result is similar to theft
No. Theft means taking something from someone without their consent and leaving them worse off than they were before you acted. In a trust situation, people voluntarily interact with a corporation because they are, in their own judgement, better off after they do so. The “crime” so to speak, is that, in the opinion of a 3rd party, the people could be even better off if the government holds a gun to corporations head. Of course, this is often true, you can get a better deal, short term, by threatening to hurt someone.
Corporations always leave people better off for having bought their products. They have to. Unlike government from dog catcher on up, they can’t force individuals to do anything against their will.
Antitrust law (and the DoJ/FTC) do use mathematical formulae to calculate violations. For example, both agencies use the Herfindahl-Hirschman Index (HHI) to evaluate the legality of a potential merger.
See, e.g., http://www.usdoj.gov/atr/public/testimony/hhi.htm
Actually, you know, I’d prefer to have a dialog but that isn’t possible if we assume different facts and background knowledge. I disagree with your post on (a) the facts that words in antitrust have well-defined legal meanings, (b) the necessity (heaven forbid) of having only bright-line rules in the law, (c) the fact that agencies enforce the law only through their “opinions”, (d) the coercive impact of antitrust violations and (e) the empirical fact of whether corporations can exert coercive effects on individual behavior.
Most competent lawyers and economists, even the most right-wing ones I can think of, would not support your positions. Rather than argue, I’ll give you a non-partisan reference: Antitrust, Herbert Hovenkamp, 4th ed. (Thomson West) (Black Letter Outline). It’s a text written for law students with background coursework in economics but is well written so that no special training is required to understand it.
But there are legal tests in place; also, firms can check with the DoJ/FTC (as they often do, for mergers) as to whether an intended course of action is legal.
Firms can check with Doj/FTC to see if, in the opinion of the regulators, an action is legal. Such opinions vary according to the ideology. There is no certain way to know before one acts whether any particular action will be considered illegal.
…there is no ex post facto issue, tie-ins have been illegal since the Sherman Act.
So, it is illegal for Apple to bundle iTunes and Safari with every copy of MacOS X? Virtually all for cost Linux distros come with dozens of included applications. Is that illegal? The truth is that its illegal when the regulators and courts say it is. You can never know before hand if the government will drop the hammer on you, especially, if you’re selling a new product.
We’ve had an explosion of new technology – some of which may not have been possible had the gov’t not constrained MS and allowed startups to flourish
Even if I concede that point for the sake of argument, it doesn’t obscure the fact that the decision against MS was wholly arbitrary. There are no objective standards by which MS could have predicted whether the government would choose to take them to court or not.
As you pointed out above, it depends wholly on the ideology of those holding power in the executive.
Again, we agree that the ideology of those holding power currently appears to be determining enforcement.
Where we disagree:
(1) I dislike this state of affairs because there are objective legal standards available that the Bush administration has chosen to ignore – much like it has in other areas of law. Ideology (of any stripe) *should not* determine enforcement to the extent it has, that is bad government period.
(2) I believe that legal standards and formulae are available. Microsoft was well aware it was breaking the law. They just didn’t care. No one is complaining about linux distros: antitrust law only applies when there is a large firm with market power (defined from a mathematical calculation) that is using that power to coerce consumer behavior and restrain competitors and innovation.
One final point – you used “loose definitions” and “late nigh bull sessions”, I think, to disparagingly allude to those on the hippy-dippy left who have the distressing tendency to mistake wishful thinking for logic and reason.
Such people exist – I’ve met a few – but on the margins, not at the center. In contrast, much of the current base of the Republican party appears to commonly engage in such thinking – witness the promotion of creationism in schools, global warming denial, tax cuts as the all-purpose government fix, and the apparently common belief that Obama is a part-Arab, muslim, black nationalist terrorist.
This is a substitution of ideology for reality. The effect? David Brooks has a fascinating piece in the NYT about how the Republicans have alienated entire professional classes.
http://www.nytimes.com/2008/10/10/opinion/10brooks.html?_r=1&oref=login (free signup)
Anyone with in-depth knowledge about, for example, antitrust law or public health policy who has been paying attention understands how good government practices have been shredded over the last 8 years on the altar of Bush’s conservative ideology. “No thought required, we’re Republican” is not a winning campaign slogan long-term.
If the Republican party wants to retain the professional classes and prevent their thinkers (Brooks, Christopher Buckley, Ross Douthat) heading for the exits, some major rework is required.
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