The Great Reversal: How America Gave Up On Free Markets by Thomas Philippon

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Why do Americans pay more than Europeans or Asians for cellphone service that isn’t even as good as theirs? That’s a question Thomas Philippon, a professor of finance at New York University and an adviser to the Federal Reserve Bank of New York, asked himself one day. He attempts to answer the question in this book. His answers aren’t encouraging.

Philippon says he will offer three main arguments:

One: Competition has declined in most sectors of the US economy. Measuring competition is easier said than done, for we can find only imperfect proxies. We will look at prices, profit rates, and market shares. None is perfect, but together they can form a convincing picture.

Two: The lack of competition is explained largely by policy choices, influenced by lobbying and campaign fiance contributions. We will look at the dollars spent by every US corporation over the past twenty years to lobby their regulators, their senators, their congressmen, and members of key committees, as well as to finance federal and state elections. We will show how these efforts distort free markets: … corporate lobbying and campaign finance contributions lead to barriers to entry and regulations that protect large incumbents, weaker antitrust enforcement, and weaker growth of small and medium-sized firms.

Three: The consequences of a lack of competition are lower wages, lower investment, lower productivity, lower growth, and more inequality. We will examine how the decline in competition across industries has effects that reach into the wallets and bank accounts of everyday Americans. We will also demonstrate why lower competition leads to less of the sort of thing that we traditionally associate with growing economies: investment, technological advancement, and rising wages [9].

The author explains that economists look at three main variables “to assess the degree of competition in an industry”:

…the degree of concentration (that is, whether there are lots of small firms or whether the industry is dominated by a few large firms); the profits that these firms are making, and the prices that customers pay….The bad kind [of concentration] occurs when incumbents in an industry are allowed to block the entry of competitors, to collude, or to merge for the primary purpose of increasing their power over market-wide pricing…[25].

In most US industries, market shares have become more concentrated and more persistent. Industry leaders are less likely to be challenged and replaced than they were twenty years ago. At the same tine, their profit margins have increased [60].

The Great Reversal is filled with data and references to journal articles, but the material is presented in digestible form (the more technical explanations are marked off from the main text). One result of all the data and all the related concepts is that the book is a kind of introduction to economics. I came away with a much better understanding of the work economists do when they look for patterns in all the buying and selling a society does.

I also came away convinced that things will only get worse — there will be less competition and more inequality — unless we reform our political culture. I already knew that American political campaigns are incredibly expensive compared to campaigns in Europe. But on average 50 times as expensive? I didn’t realize that the European Union now does a better job insuring competition than we do. As Sen. Elizabeth Warren emphasizes, we need big, structural change if we’re going to increase competition, reduce inequality and deal with the major challenge of global warming.

The book’s title, The Great Reversal, refers to the fact that the US economy used to work better for society as a whole. The data shows that it was mainly in the last twenty years that competition seriously declined. Can the reversal be reversed in the next twenty?

However, after spending “hundreds of hours researching and writing this book”, the author was surprised to realize “how fragile free markets really are”:

We take them for granted, but history demonstrates that they are more the exception than the rule. Free markets are supposed to discipline private companies, but today, many private companies have grown so dominant that the can get away with bad service, high prices, and deficient privacy safeguards. Only two decades ago, the United States was effectively the land of free markets and a leader in … antitrust policy. If America wants to lead once more in this realm, it must remember its own history and relearn the lessons it successfully taught the rest of the world [287-288].

The House Begins To Present Its Case

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This afternoon, members of the House of Representatives submitted a Trial Memorandum “in re [the] impeachment of President D—– J. T—–“. It summarizes the case for the prosecution in the president’s Senate trial. (The president’s lawyers are supposed to submit their response before noon on Monday.)

In theory, all 100 senators will read the prosecution’s memorandum before the trial starts next week. You can read it, even if they don’t (all 111 pages).

There is an eight-page introduction. Here’s how it begins:

President D—– J. T—– used his official powers to pressure a foreign government to interfere in a United States election for his personal political gain, and then attempted to cover up his scheme by obstructing Congress’s investigation into his misconduct. The Constitution provides a remedy when the President commits such serious abuses of his office: impeachment and removal. The Senate must use that remedy now to safeguard the 2020 U.S. election, protect our constitutional form of government, and eliminate the threat that the President poses to America’s national security.

The House adopted two Articles of Impeachment against President T—–: the first for abuse of power, and the second for obstruction of Congress. The evidence overwhelmingly establishes that he is guilty of both. The only remaining question is whether the members of the Senate will accept and carry out the responsibility placed on them by the Framers of our Constitution and their constitutional Oaths.

There follows a section describing the president’s abuse of power (the first article of impeachment), when he illegally delayed military aid to Ukraine in order to get the Ukrainian government to publicize (not necessarily to carry out) a criminal investigation into Joe Biden, one of the Democrats’ leading candidates for president, and Biden’s son:

President T—–’s solicitation of foreign interference in our elections to secure his own political success is precisely why the Framers of our Constitution provided Congress with the power to impeach a corrupt President and remove him from office. One of the Founding generation’s principal fears was that foreign governments would seek to manipulate American elections…. Thomas Jefferson and John Adams warned of “foreign Interference, Intrigue, Influence” and predicted that, “as often as Elections happen, the danger of foreign Influence recurs.”

The Framers therefore would have considered a President’s attempt to corrupt America’s democratic processes by demanding political favors from foreign powers to be a singularly pernicious act. They designed impeachment as the remedy for such misconduct because a President who manipulates U.S. elections to his advantage can avoid being held accountable by the voters through those same elections. And they would have viewed a President’s efforts to encourage foreign election interference as all the more dangerous where, as here, those efforts are part of an ongoing pattern of misconduct for which the President is unrepentant.

Then there is a section concerning the president’s obstruction of Congress (the second article of impeachment), his interference in the House’s investigation of the president’s apparent abuse of power:

President T—– obstructed Congress by undertaking an unprecedented campaign to prevent House Committees from investigating his misconduct. The Constitution entrusts the House with the “sole Power of Impeachment.” The Framers thus ensured what common sense requires—that the House, and not the President, determines the existence, scope, and procedures of an impeachment investigation into the President’s conduct. The House cannot conduct such an investigation effectively if it cannot obtain information from the President or the Executive Branch about the Presidential misconduct it is investigating.

Under our constitutional system of divided powers, a President cannot be permitted to hide his offenses from view by refusing to comply with a Congressional impeachment inquiry and ordering Executive Branch agencies to do the same. That conclusion is particularly important given the Department of Justice’s position that the President cannot be indicted. If the President could both avoid accountability under the criminal laws and preclude an effective impeachment investigation, he would truly be above the law.

But that is what President T—– has attempted to do, and why President T—–’s conduct is the Framers’ worst nightmare. He directed his Administration to defy every subpoena issued in the House’s impeachment investigation. At his direction, the White House, Department of State, Department of Defense, Department of Energy, and Office of Management and Budget (OMB) refused to produce a single document in response to those subpoenas. Several witnesses also followed President T—–’s orders, defying requests for voluntary appearances and lawful subpoenas, and refusing to testify. And President T—–’s interference in the House’s impeachment inquiry was not an isolated incident—it was consistent with his past efforts to obstruct the Special Counsel’s investigation into Russian interference in the 2016 election.

The Introduction ends with a brief summary:

…. The impeachment power is an essential check on the authority of the President, and Congress must exercise this power when the President places his personal and political interests above those of the Nation. President T—– has done exactly that. His misconduct challenges the fundamental principle that Americans should decide American elections, and that a divided system of government, in which no single branch operates without the check and balance of the others, preserves the liberty we all hold dear.

The country is watching to see how the Senate responds. History will judge each Senator’s willingness to rise above partisan differences, view the facts honestly, and defend the Constitution. The outcome of these proceedings will determine whether generations to come will enjoy a safe and secure democracy in which the President is not a king, and in which no one, particularly the President, is above the law.

The House memorandum then goes into greater detail concerning the rationale for impeaching and removing the president. It concludes with 61 pages of “material facts”, i.e. the evidence for his removal.

If D—– J. T—– were simply a mob boss or a corrupt businessman (him? are you kidding?) on trial for bribery or obstruction of justice, and members of the Senate were serving on the jury, each one of them would convict the defendant, D—– J. T—–, without a second thought. That especially holds for the Republicans, who still fancy themselves Congress’s strongest proponents of “law and order”. The prosecution’s case is overwhelming. And the verdict in this trial doesn’t even have to be unanimous! Sixty-seven out of 100 senators can throw the bum out.

But here it’s as if most of the jurors are the defendant’s underlings, fearful of his power and willing to protect him no matter what. The men who wrote the Constitution imagined a corrupt president, but they couldn’t have imagined most of the Senate being corrupt too. They assumed most senators, if not all, would take their oaths to uphold the Constitution quite seriously.

Soon we’ll know if Jefferson and Adams, Hamilton, Franklin and Washington, got the future very, very wrong.

Children of Time by Adrian Tchaikovsky

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This is a remarkable science fiction novel. It’s quite a story, quite a work of imagination.

What happens is that human beings have been screwing up the Earth to the point that it’s becoming uninhabitable. One response has been to try to create Earth-like conditions on planets in distant solar systems. It’s hoped that these planets will eventually become new homes for humanity.

The terraforming work on one such planet is sabotaged at the last moment. This leads to an enormous unintended consequence: some of the planet’s spiders rapidly evolve, becoming bigger, smarter and much more sociable than the spiders back on Earth.

Before the Earth becomes uninhabitable, giant spaceships are launched with thousands of people aboard. Most of the passengers are stored away as “cargo”, hibernating in an unconscious state, waiting to be resuscitated when their ships finally reach inhabitable worlds, many years in the future.

Throughout the book, the author switches back and forth between what’s happening to the spiders on their planet and what’s happening to the people in one of the spaceships. I felt closer to the people, but the author does a wonderful job explaining things from the perspective of the spiders. As you’d expect, the two species eventually meet.

Somebody is supposedly trying to turn Children of Time into a movie. It really deserves a TV series, possibly with multiple seasons. The author has also published a sequel, Children of Ruin. It’s probably remarkable too.

This Is Bad. Let’s Fix It.

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The president had a senior Iranian official killed on the basis of a non-existent “imminent” threat. He tried to have at least one other official killed but the guy survived. This charade led to almost 200 people being accidentally killed (“collateral damage”). Now he’s made up a story about four of our embassies being attacked (the Secretary of Defense said it wasn’t true but since the president may have believed it, everything’s fine). Individual-1 also announced that Saudi Arabia deposited a billion dollars in a bank account to pay for American troops (aka “mercenaries”), although nobody seems to know which bank account (one of his?). House Democrats have asked the Secretary of State to come over and explain the situation. He says he doesn’t plan to appear.

Nancy Pelosi seems to be ready to send at least one article of impeachment to the Senate, even though there’s no evidence the Republicans will allow a fair trial. They say the trial shouldn’t allow new evidence, because Clinton’s impeachment trial didn’t, even though (1) there was no need to allow new evidence in Clinton’s trial, since everybody involved gave evidence before the House impeached President Clinton and (2) this president (the bastard being impeached) told everyone with direct knowledge of his behavior not to give evidence to the House! “I didn’t allow my senior advisers to testify before the House, so it’s too late for them to testify before the Senate.” That’s some “catch”, that Catch-23.

How about some good news?

There was an online seminar (yes, a “webinar”) run by a progressive religious group this weekend. The topic was volunteering in the next election. Usually,  200, maybe 300, people sign in. There were 500 this time. Perhaps we should be more optimistic about November.

On that subject, there are reasons to think that Elizabeth Warren may be the best candidate to unify the Democrats. That’s what former presidential candidate Julian Castro said when he endorsed Warren this week. A new poll in Iowa says she has the highest favorability rating of anyone in the race:

Warren’s improved standing overall in the Iowa poll comes on the heels of a stronger showing in recent national polls and is bolstered by an increasing positive favorability rating (75% have a favorable view, the best in the field, and she is one of only four candidates who have improved their net favorability since the June CNN/DMR poll), as well as a growing percentage of likely caucusgoers who say she is either their first choice, second choice or someone they are actively considering. All told, 71% are at least considering Warren’s candidacy, ahead of the next best candidate on that score by 11 points (Biden at 60%).

Finally, a columnist for The Philadelphia Inquirer, Will Bunch, who voted for Bernie Sanders in the 2016 Pennsylvania primary, is now supporting Warren:

If the stakes were high in 2016 — when I naively and foolishly believed that [Individual-1’s] campaign was the last throes of a doomed white supremacy, and that America was ready then for a political revolution — then they are off the charts in 2020….Saving the American Experiment requires a new president who will stop the downward spiral of authoritarianism….

I plan to vote for Warren [in the primary] for two reasons. One is simple, the other a bit more abstract. For starters, the two-term Massachusetts senator has run the best campaign, pure and simple. Her accidental rallying cry was handed to her by Senate Majority Leader Mitch McConnell, who blocked Warren’s principled stand against the nomination of unqualified attorney general Jeff Sessions on the Senate floor and added, “Nevertheless, she persisted”.

Since announcing her candidacy last year, persistence has been the hallmark of Warren’s campaign. She’s stuck to her plan and remained true to herself even as the Beltway crowd wrote her off again and again, and in doing so she’s remained a top contender in spite of those naysayers. Her decision to shun big donors for small contributions and play up personal voter contact …was ridiculed even as her money and support grew. Rather than ignore her biggest stumble — the Native American heritage missteps — she’s owned it through unprecedented outreach to indigenous voters.

Yes, Sanders’ half-century-plus of consistency as a democratic socialist is remarkable, but the story of Warren’s political conversion from somewhat conservative Republican to fiery progressive after she saw firsthand the unfairness of America’s bankruptcy laws is just as compelling and relatable, arguably even more so. Yet Warren and her team know that — with the nation in crisis — personal fortitude, an appealing campaign style and a good personal story aren’t enough.

Warren’s diagnosis of what ails the United States — massive political corruption and a rigged economic playing field against the middle and more struggling classes — is right on the money, pun intended. It’s why she was the first Democratic candidate to see the need for impeaching Trump, and why she’s had a forceful reaction to the president’s reckless actions toward Iran. But it’s also why her detailed plans — for a wealth tax on America’s kleptocracy to help fund universal health care and higher education and eliminate crippling college debt — are her centerpiece and biggest selling point.

The TV talking heads seem to take special pleasure in nitpicking the details of Warren’s plans, in a manner that’s not applied to any of the other candidates. But here’s the thing: her supporters know … to take her plans seriously but not literally. Whatever is typed in a report in 2019-20 won’t be what emerges from the sausage grinder of Capitol Hill. What matters is that President Elizabeth Warren will fight for those sweeping goals with persistence … and passion.

In addition, … I think a Warren nomination would ensure the most passion from the activists — primarily women — who led the Women’s March and the airport resistance to [the Muslim] travel ban in 2017 and knocked on millions of doors to get us a Democratic House in 2018. Although Warren isn’t yet winning among young voters or nonwhites, I believe she has a potential for growth that simply is not there for youth with Joe Biden or for both groups with Pete Buttigieg. Her stance as an ultra-liberal, reform-minded capitalist is arguably a better place to be in November 2020 than Bernie’s lifetime socialism.

So why isn’t Warren the clear front-runner? I blame two things that are deeply intertwined: fear and misogyny. In politics, the second most dismaying thing so far about 2020 — after [the president’s] growing instability — has been the fear bordering on a paralyzing panic that has overcome the Democratic electorate that I’ve just joined. This weekend, that much anticipated Des Moines Register/CNN poll, while showing Sanders and Warren at the top, also showed that — at what should be a time for choosing — “not sure” more than doubled from 5 to 11 percent.

Democrats seem to be focused not on the strength of their field but on making long mental lists of each candidate’s supposed weaknesses against Trump in the fall. No one has suffered from this exercise more than Elizabeth Warren. Her experience is written off as old age (despite boundless energy and mental acuity), her policy chops downgraded as schoolmarm-ish wonkery, and her enthusiasm for the campaign sometimes described as dorky. A lot of this can be boiled down to one word, or maybe two. Sexism. Or, misogyny.

Just because Gandhi didn’t actually say, “Be the change you want to see in the world” doesn’t mean that it’s not great advice. When I said earlier that I and my perceptions of America’s problems have changed since 2016, nothing has changed more than my awareness of the pervasive and highly toxic effect of the prejudice and often thinly disguised hatred of women that permeates far too much of society.

You see it at [the Toddler’s] Nuremberg-style hate rallies, which are animated by angry chants of “Lock her up!” toward Hillary Clinton long after any political threat from Clinton had dissipated. Or in the current trial of disgraced movie mogul Harvey Weinstein, the poster child for a litany of men in media, politics, entertainment and high tech who got away with unhindered sexism and sexual abuse for decades. And you see it in the way that Warren’s chances of winning in 2020 are dismissed, by voters who agree with her ideas but are certain she’ll be “Hillary-ed” if she gets the nomination.

This infuriates me, and if you care about women’s place in American society it should infuriate you as well. In the current wave of fear gripping Democrats, too many voters are throwing up their hands and saying, in essence, misogynists will tip this election … so how can we get a few more white dudes onboard. I find that morally appalling….

America will not be saved by fear. It will be saved by courage. We’ve seen courage from scores of women who’ve come forward to accuse … powerful men. Now, given the nattering nabobs of negativism who’ve weighed in on a Warren presidency, it will also take a type of courage just to vote for her.

In 2020, electing the best and most qualified candidate would also mean electing the first woman president in American history — 100 years after women’s suffrage and, morally, ridiculously overdue. What a powerful statement! Instead of cowering in fear, Democrats should be counting their blessings in having two revolutionary candidates for president, and a dozen others who’d be 100 times better than the current occupant. But among that strong field, it’s Warren — and what she stands for — that offers the fierce urgency of now. Simply put, voting for her on April 28 is the change I want to see in the world.

The American Pragmatists by Cheryl Misak

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At least the internet doesn’t forget. I finished this book and had a question about the exact title. Right there on the first page of the search results appeared an entry from this very blog. It turns out I read this book in 2018. Who knew?

Let’s see if I agree with myself. (I see I left out a word. Now corrected.)

Well, I was concerned about trying to summarize this book today. I must have felt the same two years ago, since that earlier summary includes a lot of quotation. But I stand by every word (including the one I just added)!

I’ll simply add one thing.

Part of the author’s purpose was to counter the popular understanding among philosophers that pragmatism as a philosophical movement faded away in the 20th century under intense criticism, especially after the death of John Dewey in 1952. Misak shows it’s more accurate to say pragmatism was absorbed rather than replaced. Many of the leading philosophers in the last half of the 20th century (including former members of the Vienna Circle, as well as W. V. Quine, Wilfrid Sellars, Nelson Goodman, Hilary Putnam and Donald Davidson) argued for positions quite compatible with the early pragmatists, especially the views of Charles Sanders Pierce, even though these later philosophers rarely called themselves “pragmatists”. The same holds true for philosophers in this century. It’s the label that has mostly disappeared.

The American Pragmatists is worth reading, but repetitious at times. There are only so many points you can make about a concept like “truth”. But I want to learn more about two philosophers Misak thinks highly of: Clarence Irving Lewis and Hilary Putnam. I’ve got some of their books. I should open them — that’s what a pragmatist would do.