Comment Of The Day, Rebuttal #1: “Morning Ethics Warm-Up, 4/4/2018:…A Presidential High Crime…”

Is Teddy looking down from Rough Rider Heaven and smiling at Trump’s Big Tweet?

Of course, I knew suggesting that President Trump’s deliberate attacks on Amazon via Twitter was an impeachable offense would set heads a-blowing. The resulting debate has been fascinating, with interesting historical parallels being proposed. This comment, by Chris Marschner, is the first of two erudite and well argued rebuttals.

Not to hold you in unnecessary suspense, I am not convinced or dissuaded. I do not see Teddy Roosevelt’s  policy-oriented attacks on the era’s monopolies, correctly leading a movement to reform an area of widespread capitalist abuses that eventually were agreed to be criminal, with Trump’s tweeting crudely phrased animus to the public. Nor do I find Obama’s general criticism of big money lobbying efforts by energy interests in general and the Kochs in particular at the same level of abuse of power as Trump taking aim at the owner of the Washington Post,

I am a lifetime fan of Teddy, but he crossed many lines, and could have been legitimately impeached himself. As I have stated before in multiple posts, the power of the Presidency is too great to be abused with casual wielding against individuals and named businesses. As always, there are exceptions.  I’ll concede that taking on the robber barons and the monopolists in the early 20th Century can be fairly designated as one.  Chris seems to feel that there is a close parallel in Amazon’s growing power, but that’s not the case the President chose to make, instead focusing on a deal Amazon forged with the Postal Service, as much to keep the latter in business as to benefit Amazon.

Basic lessons in POTUS leadership: if you are going to cross lines of appropriate uses of  power, 1) You better be right and 2) Be Presidential about it.

Other examples, like Obama designating Massey Energy as responsible for the Upper Big Branch mining disaster before the investigation was complete, can not be so easily excused, but can be fairly labelled a mistake. (Obama made many, too many, such mistakes.) Trump’s attack on Amazon is neither as limited as Obama’s mistake, not as carefully considered and justifiable as Roosevelt’s trust-busting. I would like to see future Presidents restrained from abusing power in this way, even if it takes a trail before the Senate to do it. If we don’t restrain it, we will be sorry.

But the other side has some good arguments: by all means, read them.

Here is Chris Marschner’s Comment of the Day on the #2 in “Morning Ethics Warm-Up, 4/4/2018: Baseball Lies, A Presidential High Crime, And A Judge Makes A Panty Raid”:

I would like to point you to this in 2015:

https://www.usatoday.com/story/news/politics/2015/08/26/war-words-obama-v-koch-brothers/32423959/

“When you start seeing massive lobbying efforts backed by fossil fuel interests, or conservative think tanks, or the Koch brothers pushing for new laws to roll back renewable energy standards or prevent new clean energy businesses from succeeding, that’s a problem,” Obama said at the summit. “That’s not the American way.”

“Josh Earnest said the exchange illustrates the kind of president Obama set out to be.”

“This is exactly why the president ran for office, it’s why he ran for this office, is that for too long, we saw the oil and gas industry exert significant pressure on politicians in Washington, D.C.,” he said. And when Obama fights that influence, “the special interests, including the millionaires and billionaires that have benefited from that paralysis, start to squeal. And I guess in this case, at least one billionaire special interest benefactor chose to squeal to a Politico reporter.”

This type of rhetoric does not include Obama officials publicly stating (incorrectly and improperly) that one of the Koch brothers paid no income taxes. (http://freebeacon.com/politics/hazy-memories/)

Is it only an abuse of power when referencing specific individuals? Does it matter if you say the 1% don’t pay their fair share or is it an abuse of power only if you identify them by name?

I will concur with the Koch brothers that it is beneath the dignity of the president to go after a specific individual, but to suggest that it amounts to even a misdemeanor abuse of power is a stretch. If calling out a specific firm is an impeachable offense then why was there no call to impeach Obama when he routinely criticized and mocked Koch Industries, Fox News and others that did not line up with full throated support of his agenda.

But , Obama was not the first to chastise “punch down” on a business person. Who can forget the trust buster himself Teddy Roosevelt. JP Morgan was singled out for bad behavior.

“This was the core of Theodore Roosevelt’s leadership. He boiled everything down to a case of right versus wrong and good versus bad. If a trust controlled an entire industry but provided good service at reasonable rates, it was a “good” trust to be left alone. Only the “bad” trusts that jacked up rates and exploited consumers would come under attack. Who would decide the difference between right and wrong? The occupant of the White House trusted only himself to make this decision in the interests of the people.” (http://www.ushistory.org/us/43b.asp)

I do not know for sure if the $1.50 per package subsidy is correct but I do know that it is possible that our postal system may be investing in improved parcel handling capabilities for the benefit of Amazon whose full costs are not totally by the users- be they Amazon or UPS. If in fact postal facilities are operating on the ascending slope of the long-run Average Total Cost function with too large facilities simply to benefit a few firms we are operating inefficiently and subsidizing those businesses. Such inefficiency is made worse if the negotiated rate with the large firm does not absorb the total costs of production and the unfunded costs are shifted to taxpayers or other smaller customers.

I also know that in our pursuit of promoting job creation, government favors giving subsidies to the large and powerful singular firm over providing small much needed advantages to many small firms that by virtue of their size cannot employ monopsony power in the labor market later on. All large firms manipulate government officials to achieve their own ends.

As you know many states including Maryland engaged in a bidding war for Amazon HQ East. I believe MD put together a $4B package of tax abatements to secure a promise from Amazon to locate in MD. If we assume the new HQ would employ 3,000 workers – which is projected- that amounts to $1.33M per employee. Someone other than Amazon will have to make that up. Economic development officials offer these subsidies using the rationalization that if we don’t another location will and because “elephant hunting” yields significantly greater press coverage than many ribbon cuttings of much smaller firms. This is often politically motivated and stands in stark contrast to the diversity we demand in our own investment portfolios to mitigate risk. History is replete with ample evidence that when the subsidies end the firms seek new locales and new subsides. This does not happen when our focus is on helping many smaller firms go from 10 to 50 to 100 to 200 employees.

We should be concerned not that Amazon is lowering prices through efficiency or even subsidies. We should be very concerned about what Amazon could do once it is so sufficiently embedded in our economic activities that new entrants have virtually no chance at surviving and that current policy is ignoring or is unable to effectively understand and predict future decision making by an all powerful firm. We still cling to archaic views of measuring market power. Even as early as 1955 economists could show the limitations of the same indices of monopoly power or attempts to monopolize we use today. See: http://www.nber.org/chapters/c0957.pdf .

I am concerned about Amazon’s growing clout in our modern economy. Its reach extends far beyond simple retail. It is a leading player in distribution of media, SAS, and cloud storage. We scoff at the notion that some firm become so integrated in our daily lives that it alone has the power to dictate how we will live, what we can read, what we can eat, what products we can buy, or even when we have outlived our usefulness. We also scoffed at the idea that every home needed a computer.

5 Comments

Filed under Business & Commercial, Character, Ethics Alarms Award Nominee, Ethics Train Wrecks, Government & Politics, History, Leadership

5 responses to “Comment Of The Day, Rebuttal #1: “Morning Ethics Warm-Up, 4/4/2018:…A Presidential High Crime…”

  1. adimagejim

    Your assessment of Trump’s impeachability is right on. He is attacking a private firm in an ad hominem fashion. If he thinks we’ve got an Anti-Trust case against them, bring it. Otherwise, Mr. President, shut up and do your job.

    • Chris Marschner

      How is it an ad hominem attack? Trump never said Bezos or Amazon have violated any laws. He simply said they were playing unfairly. Hell, people write all the time I have unfair racial advantages.

      Trump claiming a firm is getting preferential treatment through subsidies not available to others or to the detriment of others is at worst an unsubstantiated opinion. If in fact he is correct, the appropriate avenue to explore is a renegotiation of rates. I have to assume all federal agencies ultimately report to the executive branch and he is at the top of that food chain. Therefore, he can state his position on that matter.

      Currently, using existing mechanisms to measure market power will not consider the barriers to entry we have in a digital world. Our existing methods evaluate only market share in a given industry (Lerner Index) or using product substitutibilty (cross price elasticity of demand) Neither indices measures market power across multiple industries and products.

      Imagine if one firm had a patent on marketing that prevented other firms from slicing and dicing data to reach prospective buyers. Basically we have two majors. GOOGLE and Amazon and to a lesser degree social media firms. The two giants are crowding out innovative startups or aquiring them. Because they are outside the core business , industry concentration is not affected but each of these acquisitions augment the basic digital service and effectively preclude any entrants that could have been competitive with the acquired firm had it nit been gobbled up by Google or Amazon. Both firms buy intellectual property not businesses. Amazon sued many online firms early on for violating its “one click” shopping method. No longer can traditional marketing and selling methods compete with behemoths like Amazon. To be effective an online firm must partner with Amazon to sell beyond its local market area. This means that Amazon dictates to small firms the share it pays to Amazon for being included in its search results yet Amazon also competes directly with those same small independent firms. They can drive price down forcing the independent to lower prices until they are eventually driven from the market.

      Just some thoughts to consider.

  2. adimagejim

    Attacking private firms publicly with malice would land most of us in court if we had the influence of the Presidency behind us.

    I dislike Bezos. I dislike Amazon. I dislike the politics of the former and its manifestation in the latter. I also dislike, but voted for, Trump.

    Nevertheless, if Amazon is exhibiting monopoly market power, stop tweeting and bring the suit. Driving the stock price down without legitimate charge is not ethical and likely not legal. This is especially true if the President’s real target is The Washington Post. I loathe The Post, but I will defend their right to publish lies and garbage all day long.

    Using the economic power of the Presidency to wage financial war on an opponent and his companies without legal cause or plans for proceedings is beneath the Office and deserves some form of rebuke up to and including impeachment if he does not cease and desist.

  3. We should be very concerned about what Amazon could do once it is so sufficiently embedded in our economic activities that new entrants have virtually no chance at surviving and that current policy is ignoring or is unable to effectively understand and predict future decision making by an all powerful firm.

    Aren’t we already at or near that point with some tech giants like Google/Youtube, Facebook, maybe Twitter,…in the new communications market?

  4. adimagejim

    In the US…

    Amazon has competitors and market entry is not difficult for platform sellers. (Their media interests have competitors as well.) Succeeding is. They have a large competitor entering the US market now, Alibaba.

    Google is a monopoly with more than 99% of the search engine market in the US across all browser platforms. Their last hurdle to absolute supremacy is whipping independent Apps with their data in line with them. Does the government have the guts to try to break them up a la ATT in the 1980s?

    Allowing Facebook’s acquisition of Instagram was a mistake. Consolidation of social media networks is a concern.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s