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Archive for August 9th, 2020

Warren Buffett: America’s Folksiest Predator

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Matt Stoller writes in BIG:

One of the more important figures in American capitalism over the last forty years is Warren Buffett, the legendary investor who is now the fourth richest man in the world. Buffett is an icon, the ‘Oracle of Omaha,’ who lives a simple lifestyle based on folksy wisdom, eating Dairy Queen ice cream, and drinking Coca Cola. Or so goes the myth. In this issue, I’m going to do an interview with an author who presents a very different side of Buffett, the side that is key to his wealth and power. Specifically, the monopolist side, and how Buffett’s way of investing has been a multiplier force for dominant corporations.

Also in this issue:

  • The timing of the Google antitrust case and changing Senate politics
  • The growing business rebellion against monopoly power
  • A merger of 7-Eleven
  • The Intuit-Credit Karma merger
  • Another weird monopoly

Some housekeeping. First, I was on a lovely Irish podcast called The Stand with Eamon Dunphy. Second, a lot of readers of the last BIG issue, which was on Chinese apps, seemed interested in exactly how Facebook’s market power led to the rise of TikTok. National security expert Lucas Kunce wrote that up for the University of Chicago’s Stigler Center ProMarket magazine.

And now…

America’s Folksiest Predator

Journalists have always served an important function in addressing corporate power. The great anti-monopolists of the 1880s were journalists such as Henry Demarest Lloyd, muckrakers whose words gave voice to a movement seeking to reign in corporate power.

Journalist Dave Dayen is an heir to this tradition. He’s the executive editor of one of the most important political magazines today, the American Prospect. He did groundbreaking (and lonely) journalism on foreclosures and financial corruption throughout the Obama years, and his 2016 article on antitrust in The New Republic laid the groundwork for Elizabeth Warren’s key speeches on the issue that rocketed the importance of monopoly into the political stratosphere.

For today’s post, I’m going to do an interview with Dayen on his new book, Monopolized: Life in the Age of Corporate PowerMonopolized is a mix between a business book and a travelogue, a set of stories about people living under the control of various powerful corporate entities, from Wall Street to Amazon to prison and the military. There’s also a roadmap for how to fight back, and Dayen profiles Israeli anti-monopolists who successfully did just that. One interesting aspect of Monopolized is that Warren Buffett is a silent presence throughout, profiting quietly in the background from virtually every monopoly Dayen describes. We don’t often hear of Buffett as a great monopolist, but that’s what he actually is. So in this interview, that’s who we focused on.

If you’re interested in a sweeping but detailed take on the modern landscape of corporate power, you should buy a copy of Dayen’s Monopolized; it’s enormously well-researched, and you will know more about corporate power after you are done. I learned a lot, even though studying monopoly is what I do.


Thanks for writing this excellent book. I want to get into Warren Buffett, but first I want to ask a basic question that I hear a lot in policymaking circles, which is that the problem of monopoly is just too complex for voters to really get. You wrote this book by traveling around the country and reporting stories of people dealing with corporate power. Did you get the sense that the public at large understands the problem of monopoly and concentrated finance?

People know that something is terribly wrong. They might not be able to articulate it using technocratic antitrust jargon, like no one mentioned the Herfindahl–Hirschman Index in terms of market share, but they understand the system is rigged. When I talked to a woman who is renting a home and she got an alert for her own home being put on the market without her knowledge because the house is owned by a private equity giant, well, she knows that something is terribly wrong. She’s a big Trump supporter, but now hates the private equity firm Blackstone, which she also knows is full of Trump donors.

Another woman I interviewed, she lives in Tennessee and classifies herself as a libertarian, she knows something is wrong. Her husband has diabetes, and she’s tracking his blood sugar on this wearable device. If she gets an alert on her phone, when he has low blood sugar, she goes and gives him a little piece of chocolate. Turns out there was a gap in her wifi conductivity, because she lives out in this rural area and they are literally forbidden from getting broadband by a law that the telecom industry got passed. She tells me she saw a 15-minute gap in her tracking, and found her husband slumped over his chair because that’s the moment in which he crashed. She calls herself a libertarian, but she knows something is terribly wrong with the governing structures of the economy and the power of these corporations that have insinuated themselves to American life.

People might not be able to call it monopoly power, but they know something isn’t working.

Your book is about monopolies. One character who keeps popping up in the book, surprisingly, is Warren Buffett. He’s a genial kindly old man in the media. But who is Warren Buffett in this book?

Buffett is the avatar of monopoly. This is a guy whose investments philosophy is literally that of a monopolist. I mean, he invented this sort of term, the economic “moat,” that if you build a moat around your business, then it’s going to be successful. I mean, this is the language of building monopoly power. He not only looks for monopolies in the businesses he invests in, but he takes it to heart in the business that he’s created, Berkshire Hathaway. Berkshire Hathaway owns something like 70 or 80 or 90 companies and they have large market shares in all sorts of areas of the economy.

It’s kind of like an old school conglomerate from the sixties and seventies, but there are certain facets of it, where he’s clearly trying to corner a market. Buffett’s initial businesses that he actually outright purchased were newspapers. It started with the Buffalo News in Buffalo, New York. And he used anti-competitive practices to put the competition, his rival newspaper, out of business. That was literally his MO there.

What are some of the surprising businesses or sectors he’s involved in? We don’t typically hear Warren Buffett and opioids in the same sentence. And yet…

Teva Pharmaceuticals is one of the companies in which Buffett has had a huge investment. And Teva is one of the manufacturers of generic opioid based products. Buffett knows well that there’s no better way to put a moat around your business than to sell an addictive product.

We don’t usually typically think of Buffett as sort of a drug dealer, but he certainly sells a lot of opioids or makes money from those who do sell it by owning the stock. It just seems to me like his real job is to put a happy genial face on abusive power. You know, everybody in the investment world loves Buffett. But the Sherman Act is a criminal statute because traditionally monopolization was understood as a crime. . .

Continue reading. There’s much more.

Written by Leisureguy

9 August 2020 at 8:17 pm

The Unraveling of America

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Wade Davis, an anthropologist who holds the Leadership Chair in Cultures and Ecosystems at Risk at the University of British Columbia and author of award-winning books including Into the Silence and The Wayfinders and his new book, Magdalena: River of Dreams, writes in Rolling Stone:

Never in our lives have we experienced such a global phenomenon. For the first time in the history of the world, all of humanity, informed by the unprecedented reach of digital technology, has come together, focused on the same existential threat, consumed by the same fears and uncertainties, eagerly anticipating the same, as yet unrealized, promises of medical science.

In a single season, civilization has been brought low by a microscopic parasite 10,000 times smaller than a grain of salt. COVID-19 attacks our physical bodies, but also the cultural foundations of our lives, the toolbox of community and connectivity that is for the human what claws and teeth represent to the tiger.

Our interventions to date have largely focused on mitigating the rate of spread, flattening the curve of morbidity. There is no treatment at hand, and no certainty of a vaccine on the near horizon. The fastest vaccine ever developed was for mumps. It took four years. COVID-19 killed 100,000 Americans in four months. There is some evidence that natural infection may not imply immunity, leaving some to question how effective a vaccine will be, even assuming one can be found. And it must be safe. If the global population is to be immunized, lethal complications in just one person in a thousand would imply the death of millions.

Pandemics and plagues have a way of shifting the course of history, and not always in a manner immediately evident to the survivors. In the 14th Century, the Black Death killed close to half of Europe’s population. A scarcity of labor led to increased wages. Rising expectations culminated in the Peasants Revolt of 1381, an inflection point that marked the beginning of the end of the feudal order that had dominated medieval Europe for a thousand years.

The COVID pandemic will be remembered as such a moment in history, a seminal event whose significance will unfold only in the wake of the crisis. It will mark this era much as the 1914 assassination of Archduke Ferdinand, the stock market crash of 1929, and the 1933 ascent of Adolf Hitler became fundamental benchmarks of the last century, all harbingers of greater and more consequential outcomes.

COVID’s historic significance lies not in what it implies for our daily lives. Change, after all, is the one constant when it comes to culture. All peoples in all places at all times are always dancing with new possibilities for life. As companies eliminate or downsize central offices, employees work from home, restaurants close, shopping malls shutter, streaming brings entertainment and sporting events into the home, and airline travel becomes ever more problematic and miserable, people will adapt, as we’ve always done. Fluidity of memory and a capacity to forget is perhaps the most haunting trait of our species. As history confirms, it allows us to come to terms with any degree of social, moral, or environmental degradation.

To be sure, financial uncertainty will cast a long shadow. Hovering over the global economy for some time will be the sober realization that all the money in the hands of all the nations on Earth will never be enough to offset the losses sustained when an entire world ceases to function, with workers and businesses everywhere facing a choice between economic and biological survival.

Unsettling as these transitions and circumstances will be, short of a complete economic collapse, none stands out as a turning point in history. But what surely does is the absolutely devastating impact that the pandemic has had on the reputation and international standing of the United States of America.

In a dark season of pestilence, COVID has reduced to tatters the illusion of American exceptionalism. At the height of the crisis, with more than 2,000 dying each day, Americans found themselves members of a failed state, ruled by a dysfunctional and incompetent government largely responsible for death rates that added a tragic coda to America’s claim to supremacy in the world.

For the first time, the international community felt compelled to send disaster relief to Washington. For more than two centuries, reported the Irish Times, “the United States has stirred a very wide range of feelings in the rest of the world: love and hatred, fear and hope, envy and contempt, awe and anger. But there is one emotion that has never been directed towards the U.S. until now: pity.” As American doctors and nurses eagerly awaited emergency airlifts of basic supplies from China, the hinge of history opened to the Asian century.

No empire long endures, even if few anticipate their demise. Every kingdom is born to die. The 15th century belonged to the Portuguese, the 16th to Spain, 17th to the Dutch. France dominated the 18th and Britain the 19th. Bled white and left bankrupt by the Great War, the British maintained a pretense of domination as late as 1935, when the empire reached its greatest geographical extent. By then, of course, the torch had long passed into the hands of America.

In 1940, with Europe already ablaze, the United States had a smaller army than either Portugal or Bulgaria. Within four years, 18 million men and women would serve in uniform, with millions more working double shifts in mines and factories that made America, as President Roosevelt promised, the arsenal of democracy.

When the Japanese within six weeks of Pearl Harbor took control of 90 percent of the world’s rubber supply, the U.S. dropped the speed limit to 35 mph to protect tires, and then, in three years, invented from scratch a synthetic-rubber industry that allowed Allied armies to roll over the Nazis. At its peak, Henry Ford’s Willow Run Plant produced a B-24 Liberator every two hours, around the clock. Shipyards in Long Beach and Sausalito spat out Liberty ships at a rate of two a day for four years; the record was a ship built in four days, 15 hours and 29 minutes. A single American factory, Chrysler’s Detroit Arsenal, built more tanks than the whole of the Third Reich.

In the wake of the war, with Europe and Japan in ashes, the United States with but 6 percent of the world’s population accounted for half of the global economy, including the production of 93 percent of all automobiles. Such economic dominance birthed a vibrant middle class, a trade union movement that allowed a single breadwinner with limited education to own a home and a car, support a family, and send his kids to good schools. It was not by any means a perfect world but affluence allowed for a truce between capital and labor, a reciprocity of opportunity in a time of rapid growth and declining income inequality, marked by high tax rates for the wealthy, who were by no means the only beneficiaries of a golden age of American capitalism.

But freedom and affluence came with a price. The United States, virtually a demilitarized nation on the eve of the Second World War, never stood down in the wake of victory. To this day, American troops are deployed in 150 countries. Since the 1970s, China has not once gone to war; the U.S. has not spent a day at peace. President Jimmy Carter recently noted that in its 242-year history, America has enjoyed only 16 years of peace, making it, as he wrote, “the most warlike nation in the history of the world.” Since 2001, the U.S. has spent over $6 trillion on military operations and war, money that might have been invested in the infrastructure of home. China, meanwhile, built its nation, pouring more cement every three years than America did in the entire 20th century.

As America policed the world, the violence came home. On D-Day, June 6th, 1944, the Allied death toll was 4,414; in 2019, domestic gun violence had killed that many American men and women by the end of April. By June of that year, guns in the hands of ordinary Americans had caused more casualties than the Allies suffered in Normandy in the first month of a campaign that consumed the military strength of five nations.

More than any other country, the United States in the post-war era lionized the individual at the expense of community and family. It was the sociological equivalent of splitting the atom. What was gained in terms of mobility and personal freedom came at the expense of common purpose. In wide swaths of America, the family as an institution lost its grounding. By the 1960s, 40 percent of marriages were ending in divorce. Only six percent of American homes had grandparents living beneath the same roof as grandchildren; elders were abandoned to retirement homes.

With slogans like “24/7” celebrating complete dedication to the workplace, men and women exhausted themselves in jobs that only reinforced their isolation from their families. The average American father spends less than 20 minutes a day in direct communication with his child. By the time a youth reaches 18, he or she will have spent fully two years watching television or staring at a laptop screen, contributing to an obesity epidemic that the Joint Chiefs have called a national security crisis.

Only half of Americans report having meaningful, face-to-face social interactions on a daily basis. The nation consumes two-thirds of the world’s production of antidepressant drugs. The collapse of the working-class family has been responsible in part for an opioid crisis that has displaced car accidents as the leading cause of death for Americans under 50.

At the root of this transformation and decline lies an ever-widening chasm between Americans who have and those who have little or nothing. Economic disparities exist in all nations, creating a tension that can be as disruptive as the inequities are unjust. In any number of settings, however, the negative forces tearing apart a society are mitigated or even muted if there are other elements that reinforce social solidarity — religious faith, the strength and comfort of family, the pride of tradition, fidelity to the land, a spirit of place.

But when all the old certainties are shown to be lies, when the promise of a good life for a working family is shattered as factories close and corporate leaders, growing wealthier by the day, ship jobs abroad, the social contract is irrevocably broken. For two generations, America has celebrated globalization with iconic intensity, when, as any working man or woman can see, it’s nothing more than capital on the prowl in search of ever cheaper sources of labor.

For many years, those on the conservative right in the United States have invoked a nostalgia for the 1950s, and an America that never was, but has to be presumed to have existed to rationalize their sense of loss and abandonment, their fear of change, their bitter resentments and lingering contempt for the social movements of the 1960s, a time of new aspirations for women, gays, and people of color. In truth, at least in economic terms, the country of the 1950s resembled Denmark as much as the America of today. Marginal tax rates for the wealthy were 90 percent. The salaries of CEOs were, on average, just 20 times that of their mid-management employees.

Today, the base pay of those at the top is commonly 400 times that of their salaried staff, with many earning orders of magnitude more in stock options and perks. The elite one percent of Americans control $30 trillion of assets, while the bottom half have more debt than assets.  . .

Continue reading. There’s much more.

Later in the article:

Finns live longer and are less likely to die in childhood or in giving birth than Americans. Danes earn roughly the same after-tax income as Americans, while working 20 percent less. They pay in taxes an extra 19 cents for every dollar earned. But in return they get free health care, free education from pre-school through university, and the opportunity to prosper in a thriving free-market economy with dramatically lower levels of poverty, homelessness, crime, and inequality. The average worker is paid better, treated more respectfully, and rewarded with life insurance, pension plans, maternity leave, and six weeks of paid vacation a year. All of these benefits only inspire Danes to work harder, with fully 80 percent of men and women aged 16 to 64 engaged in the labor force, a figure far higher than that of the United States.

Written by Leisureguy

9 August 2020 at 11:36 am

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