Since the Iowa caucuses are Monday, I thought I’d contribute my two bits of political analysis on the Democratic presidential contest. The one thing I’m certain of is that after Iowa and New Hampshire, there will be no more than three candidates left in the competitive field. The political market, like any market, has a scarcity of resources, in this case money, free media, and paid media. Except for Howard Dean, none of the Democrats have enough resources to withstand poor showings in both early contests. This is why Dean is the frontrunner. The question now becomes, who will rise to the other two spots in the final field of three? There are five contenders for the two spots: Dick Gephardt, Joe Lieberman, John Kerry, Wesley Clark, John Edwards, and Al Sharpton.
Gephardt has the most potential, and paradoxically the most to lose in the first two states. He appeals to a core Democratic value, trade protectionism, and his tenure as House minority leader gives him the most experience of all candidates in working with Congress and the party’s various factions. But if Gephardt doesn’t finish at least second in Iowa and New Hampshire, he won’t be able to raise enough money to purchase paid media in the larger states. Because Dean already has the backing of the public-sector labor unions, Gephardt cannot rely on AFL-CIO support to insure him.
Lieberman is the favored candidate of the moderate Democratic establishment (the New Republic-DLC crowd). He has no chance to win. Lieberman may be a pragmatist darling, but there is also no issue or constituency he can rely on for base support. This lack of political “hard capital” makes it impossible to raise the “soft capital” to actually win delegates.
Kerry remains the betting favorite to emerge from the early contests as Dean’s primary challenger. If that does happen, it virtually ensures Dean’s nomination. Kerry has all of Lieberman’s liabilities without any of Lieberman’s media credibility. He was a fraudulent candidate from the start.
Clark is even more of a fraud than Kerry. He has no agenda aside from seeking power. This makes him an appropriate heir to Bill Clinton, but Clark has none of Clinton’s talent for retail politicking and media management. He will almost certainly drop out if he doesn’t finish better than third in New Hampshire.
Edwards is the only candidate with a chance to stop Dean. His decision to avoid the early anti-Dean onslaught was rewarded with an endorsement by the Des Moines Register, Iowa’s statewide newspaper, and this should translate into at least a third-place finish on Monday. Edwards has the “upside” that Lieberman and Kerry lack, meaning he will attract money and free media should he finish well in New Hampshire. And if Edwards can’t make a run, he’ll emerge as an early favorite to be Dean’s running mate.
Sharpton will not win the nomination, but his potential impact on the race should not be discounted. Since he’s unlikely to fare well in Iowa or New Hampshire, the first real test for Sharpton will come in South Carolina. If he’s able to sustain himself, Sharpton could become the voice of minority disaffection with Dean and the “white Democratic” establishment. There is substantial discontent within this faction of the party, and it’s only a matter of time before it manifests itself. Remember what happened to George Bush I in 1992, when Pat Buchanan won enough support to force the White House to give him a primetime speaking slot at the convention. Buchanan’s now-infamous “cultural war” speech proved to be the iceberg that sunk Bush’s Titanic campaign. Sharpton could serve a similar function for Dean.
To sum up, I see Dean, Kerry, and Edwards emerging from New Hampshire as the three candidates of consequence, with Al Sharpton hanging out in the background. Since Kerry won’t win, the question is, will he get out of the race quickly enough to bolster Edwards’ chance of toppling Dean? The longer Kerry remains in the race, the more likely it’s Dean accepting the nomination in Boston.
Finally, since it’s never too early to speculate, I’d consider the possibility of Dean throwing caution to the wind when selecting a vice president. Edwards would be the safest choice, but if by the convention Dean feels his back is against the wall, he might take a stupid risk to invigorate his base. After this week’s endorsement, I think Carol Mosley-Braun is precisely the type of person a panicked Dean would consider. And if you think a Dean-Braun ticket is beyond the realm of possibility, I have two words for you: Dan Quayle.
John Kerry, battling in a leadoff contest far too close to call, said Saturday that rivals for the Democratic nomination for president are trying to dampen his momentum with a "smear effort."
Two other candidates, Howard Dean and Dick Gephardt, circulated to reporters on Friday comments Kerry made five years ago indicating he would drastically scale back the U.S. Department of Agriculture and revamp farm subsidies. Iowa is dominated by farming, and politicians of all stripes here support subsidy programs. [AP] (empasis added)
Wouldn't that make them politicians of the same stripe?
::: posted by Nicholas Provenzo at 4:39 PM |donate | link
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Antitrust News: Microsoft Still Accused of Antitrust Acts
Once under the antitrust's boot, always under antitrust's boot. Consider the following:
One of the most important provisions of the antitrust settlement negotiated with Microsoft Corp. is falling short of the federal government's hopes that it would energize rivals of the world's largest software maker, the Justice Department acknowledged Friday.
U.S. antitrust lawyers told the trial judge they are increasingly uneasy that efforts to persuade competitors to license Microsoft's Windows technology for their own software products "are not likely to spur the emergence in the marketplace of broad competitors to the Windows desktop."
The landmark antitrust settlement compels Microsoft to offer its technology to competitors to build products that seamlessly communicate with computers running Windows software. When the settlement was negotiated, the judge and government lawyers described that requirement as among its most significant provisions toward restoring competition in the technology industry.
Government lawyers told U.S. District Judge Colleen Kollar-Kotelly in court papers that Microsoft's licensing agreements have turned out too complex and potentially too expensive for competitors.
The Justice Department said Microsoft has agreed to change the agreements. But even after changes are made, government lawyers warned, Microsoft "cannot foresee with confidence that the improvements will be sufficient and remove the need for further changes."
Microsoft said it will lower prices and make agreements as attractive as possible for its business rivals, but it argued that it shouldn't be held responsible if competitors choose not to use its Windows technology for their products.
Unsatisfied that the license offers were effective enough, the trial judge urged government lawyers in October to investigate why only nine companies had paid Microsoft for licenses. The government said Friday that number has climbed to 11, and Microsoft said it was negotiating with 20 more. [AP]
The issue here is that Microsoft's competitors don't wish to license Microsoft software. Yet under the aegis of its antitrust settlement with Microsoft, the government is now holding Microsoft to an impossible standard: Microsoft's competitors must license Microsoft's software, and Microsoft must do whatever it takes to secure those licenses.
Under terms such as these, Microsoft has lost the right to its property. It may own its software products in a nominal sense, but in reality, its property only exists to serve the interests of others.
And it is this destruction of property rights that makes antitrust the "Magna Charta of free enterprise."
::: posted by Nicholas Provenzo at 12:11 PM |donate | link
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Friday, January 16, 2004::
Capitalism & Law: Competing Directors
The FTC issued a new rule today raising what's known as the Section 8 threshold. Under Section 8 of the Clayton Act, a person may not serve as a director or officer of two competing corporations. The threshold for applying this rule is whether each corporation has a combined capital, surplus, and profits exceeding a given amount. The FTC raises this figure annually based on changes in GNP. The new threshold announced today sets the floor at a combined $20.09 million or total "competitive" sales of $2.009 million.
Like everything in antitrust, these standards and figures are wholly arbitrary. The FTC gets to decide what sales are "competitive" or how the combined capital, surplus, and profits figure is calculated. And on a more basic level, there's simply no cause for banning individuals from serving two "competing" companies. Remember, companies exist to make a profit for their shareholders; competition is a secondary function. If two competitors feel they can benefit from sharing the services of an individual, then that is their prerogative. It may not be a good idea, but that judgment should not be made by the FTC.
Shouting "no to America!" tens of thousands of Shiite Muslims took to the streets Thursday to protest a U.S.-backed formula for choosing Iraq's new legislature.
The protest came as an aide to Iraq's foremost Shiite cleric, Grand Ayatollah Ali al-Husseini al-Sistani, warned that he might issue a fatwa, or religious edict, rejecting a U.S.-backed government if his demands for direct elections are ignored.
The turnout in Basra, estimated by British soldiers at up to 30,000, was the biggest protest organized by Shiite clerics against the power transfer plan.
The United States wants regional caucuses to choose a new parliament, which will then select an Iraqi administration. It says security is too poor and voter records too incomplete for fair elections.
The clerics want direct elections, fearing the caucuses may be rigged to keep Shiites out of power.
The Americans are also wary of elections because of who might win. With Iraq in turmoil, Islamic radicals or Saddam Hussein's Baath party might dominate a vote simply because they have the best organizations. [AP]
Isn’t that gratitude.
It is obvious the Iraqi people do not fear us. It is unimaginable that there would be tens of thousands on German’s protesting against the United States after the American defeat of Nazi Germany. Yet this mystically-driven Iraqi rabble thinks it has the right to tell us “no” after giving the world Saddam Hussein for the past 30 years. It does not.
Individual ruin is only fate worthy of any in Iraqi who would raise a fist against the United States of America. The Bush administration speaks of making Iraq an example to the rest of the Arab world. If today’s protests are any indication of what that example is to be, it is the wrong one.
::: posted by Nicholas Provenzo at 4:51 PM |donate | link
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Rights and Reason: When is one's man need a mortgage on the life of another?
When one lives in Venezuela. According to Reuters:
The poor, oil-rich nation is considering decriminalizing the theft of food and medicine in cases where a thief is motivated by extreme hunger or need.
Supreme Court Judge Alejandro Angulo Fontiveros told Reuters on Wednesday that the so-called "famine theft" clause should be part of a broad penal code reform measure for humanitarian reasons.
"This is a guide for judges to avoid injustice," said Fontiveros, who is in charge of drafting the reforms. "They lock up for years a poor person who lives in atrocious misery and what they need is medicine."
Under Fontiveros' proposal to the Supreme Court, those who take food, medicine or inexpensive goods without using violence to ease hunger caused by prolonged, extreme poverty would not be punished.
I think the relevant appraisal comes from Ayn Rand’s Atlas Shrugged:
"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world?' You are.
Indeed.
::: posted by Nicholas Provenzo at 3:42 PM |donate | link
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Antitrust News: Mountain Online
The Justice Department has now made its brief opposing my appeal in U.S. v. Mountain Health Care available in HTML format.
FCC Chairman Michael Powell recently addressed the National Press Club on "The Age of Personal Communications: Power to the People." Much of his talk was a simple overview of new and emerging technologies, such as Internet voice protocol. But like most everything Powell has said and done as FCC chief, he tried to mix contradictory premises. First he talked about the need for regulators such as himself to exercise restraint:
Government can make things better, but Government, too, can make a mess of things. It is particularly prone to the latter when addressing budding technology developments that it does not yet fully understand or appreciate. Regulation can smother the risk-taking oxygen young entrepreneurs need to survive. They can weigh down innovation with forms and filings and drain capital by adding significantly to the costs of the service. And the cost of government compliance can mean higher, less competitive, prices for consumers.
Nice rhetoric, but then Powell contradicts himself a few paragraphs later when he reaffirms the FCC's core mission:
Communications is probably one of the most powerful attributes of mankind. Few capabilities in our society have a greater impact on our community than communications. Thus, as it has long been, communications policy is more than the efficient allocation of goods and resources. It is about people; their access to information and their development of community and personal relationships. I believe it a sacred duty to continue to protect important social values through the great digital migration.
First among equals is the unflinching commitment to universal service. We must make sure that the digital migration brings the technologies of today and tomorrow to every single American at affordable prices. This year we will continue to tackle important universal service reforms that ensure that the nation can continue to pass into a new era, while not sacrificing its inviolate commitment to all Americans.
Whenever a government official speaks of a "sacred duty," I get nauseous. And not surprisingly, the sacred duty here is an altruist cause, ensuring "universal service". This means the government will tax those people who choose to live in abundant communications markets, such as big cities, to provide "service" to those who choose to live in rural, less populated areas. Why I have a sacred duty to fund broadband access for folks living in Montana escapes me. Thankfully, we have highly qualified antitrust lawyers like Michael Powell to make these decisions for me.
J.P. Morgan Chase & Co. will acquire Bank One Corp. for $58 billion in stock, creating a banking giant with $1.1 trillion in assets. Obviously the deal requires approval from antitrust regulators, but that's unlikely to be a major problem. The Justice Department, which has jurisdiction over banking mergers, generally doesn't challenge these type of deals. That doesn't mean, however, the lawyers won't nitpick. Expect to see the DOJ perform a gut-wrenching analysis of this deal market-by-market, and possibly extract a few token divestitures in some cities to prevent "reduced competition".
Yesterday, President Bush proposed an extra $1 billion dollars in spending for NASA over the next five years as part of his plan to put a permanent base on the moon and land astronauts on Mars.
In a speech prepared for delivery Wednesday, Bush is calling for a lunar base to be established within two decades and a manned landing on Mars sometime after 2030, an official said.
The proposal comes after members of Congress and others have called for a new national vision for the National Aeronautics and Space Administration, urging a human space initiative that would reinvigorate an agency wounded by last year's loss of space shuttle Columbia and trapped by expensive projects that limit manned spaceflight to low Earth orbit.
Bush, speaking with reporters Tuesday on a trip to Mexico, said his plan centers on human exploration of space.
"The spirit is going to be one of continued exploration ... seeking new horizons and investing in a program that ... meets that objective," he said.
His proposal for $1 billion over five years, in effect, would provide startup funds for highly complex projects that could take decades and may require hundreds of billions of additional dollars to complete. [AP]
The space program is funded by tax dollars—the redistribution of wealth from one person to another. While space research is perhaps the least offensive recipient of government funding, the fundamental problem remains: space research has nothing to do with the legitimate function of government. And while it is often argued that the value of technological spin-offs justifies government involvement in space, it must not be forgotten that those spin-offs are the fruit of a poisonous tree.
It’s also interesting that for all the prattling about competition being so important and antitrust being the Magna Charta of free enterprise, few take issue with the government’s monopoly in space. What businessman could hope to compete with the government lifting payloads into space? How high is the regulatory burden placed on vehicles built and launched by private enterprise? Where the justice in a tax-fed government agency deciding what is to be the priority in mankind’s development of space?
But perhaps the cruelest aspect of the government’s involvement in space is the fate of the scientists and engineers who do produce incredible technological achievements. The men and women who make spaceflight possible are heroic. Yet as the Apollo space program showed, when these engineers and scientists achieve all that is asked of them, they will see their budgets slashed and their achievements ignored. I say the work of these heroes ought not to hinge on the political whims of the day.
And today’s space program does look like an exercise in whim worship. What value comes from re-landing men on the moon, or landing men on Mars, when robotic probes can more efficiently carry out the mission? Why do we have a space station that is more a platform for giving idle ex-Soviet space engineers something to do with themselves than a means for engaging in groundbreaking scientific research? Freedom in space—freedom from government funding, control and prioritization—would put the best minds where they would bring the most value, and not subject these minds to the misbegotten whims of political masters.
The pioneering of space is an incredible achievement of mankind and of the United States in particular. It is said that this renewed interest in space comes off the heels of the Columbia disaster, and is meant to serve as a tribute to their memory. Perhaps, but I say the best tribute to the heroes of space exploration, both living and dead, would be bring to wilds of space the same level of freedom that once made it possible for men to settle the wilds of the American continent.
::: posted by Nicholas Provenzo at 8:39 AM |donate | link
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Wednesday, January 14, 2004::
Antitrust News: Foreign Preemption
Yesterday I noted the FBI existed to serve the Justice Department, not the government as a whole. Today the Bureau demonstrated what I meant. The Wall Street Journal reports that last weekend, "[FBI] agents subpoenaed Philippine executives attending an industry conference in Hawaii, ordering them to appear before a Honolulu grand jury this week." Is this a new terrorism case? Hardly. The grand jury is investigating antitrust charges against several Philippine phone companies. Specifically, the Justice Department is meddling in a year-long dispute between the Philippine companies and their American counterparts, who claim to be the victim of a price-fixing conspiracy involving fees charged by the foreign telephone companies for processing international calls originating in the U.S.
According to the Journal, this dispute was largely settled before the DOJ convened its grand jury. Over the last few months, U.S. and Philippine companies settled their differences over the fees. In other words, the market took care of itself. But that has little impact on the DOJ's thinking. After all, DOJ lawyers need to justify their budgets and offices, and they can't do that by accepting a private settlement of a private business dispute.
And incidentally, the Journal also reports that neither the FBI nor the DOJ bothered to inform the Philippine government of this investigation beforehand. Philippine President Gloria Arroyo--a strong U.S. ally--"demanded that the U.S. explain the Justice Department's action". Arroyo is right to be angry: Price-fixing is not illegal in the Philippines. But the DOJ "has long claimed the authority to prosecute foreign firms or individuals if their actions affect U.S. commerce." In Bush administration parlance, this means the U.S. will engage in "preemption" against foreign businesses who follow their nation's laws but don't share the DOJ's enlightened view of antitrust.
Meanwhile, the U.S. needs the Philippines as an ally in the battle against Islamic militants (aka the "War on Terrorism"). Given that the FBI, the nation's chief domestic counterterrorism agency, is spending its time harassing our friends over a non-issue, one must question whether the Bureau is more interested in protecting Americans from terrorism, or protecting the jobs of their bureaucratic overseers at the DOJ's Antitrust Division.
I will be making a return appearance on Fox Sports Radio's "Steve Czaban Show" on Thursday evening at 9:30 p.m. Steve and I will discuss antitrust issues facing the Bowl Championship Series.
A good friend of the Center, art historian Lee Sanstead is an expert in romantic realism. Sanstead travels far and wide to capture romanticism in perhaps the only place where its reign is unquestioned: America’s cemeteries. He recently photographed the sculpture of artist Patricia Cronin. The artist is 40-years-old, and this sculpture, featuring her and her lover is to be her tombstone. [More photos here]
I expect that as knowledge of this work spreads, it will be damned by the opponents of gay equality from pulpit to statehouse—damned as un-Christian, indecent and wicked. After all, it is expressions such as Cronin’s that supposedly degrade the institution of marriage. By this standard, a sculpture of a woman, alone and unloved is all that any gay really deserves.
I say this: it will be a welcome day when all one sees in a work such as Cronin’s is the artist’s sublime appreciation for love.
::: posted by Nicholas Provenzo at 1:45 PM |donate | link
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Antitrust News: Monopolizing Imaginary Markets
Yesterday the FTC, in an odd moment of humility, decided not to challenge the 2001 acquisition of Novazyme Pharmaceuticals by former competitor Genzyme Corporation. Lately the FTC staff has been demanding the Commission undo mergers after the fact when anticompetitive harm is magically “discovered.” This is what happens when you have 300 antitrust lawyers on staff with nothing to do.
Anyway, what makes this investigation noteworthy is that the market allegedly monopolized by this merger does not yet exist. Prior to 2001, both companies engaged in research to develop a treatment for Pompe disease, a rare ailment affecting about 10,000 infants and children worldwide. Because the disease is rare, the federal Orphan Drug Act gives the first company to develop a treatment seven years of market exclusivity. Research has continued on Pompe disease since the merger, but no treatment has actually been tested and marketed.
Three FTC commissioners, led by Chairman Timothy Muris, said, “[t]he facts of this matter do not support any a finding of any anticompetitive harm.” Muris charitably notes the merger may actually hasten the development of a Pompe treatment and save lives. This is a rare moment of lucidity from Muris, whose three years in office have been marked by his various rampages against businesses he doesn’t like (or businesses that didn’t hire him as a consultant when he was in private practice). But in this case, Muris admits there’s no evidence to conclude any consumer will be harmed.
Commissioner Mozelle Thompson disagreed, and he took the conventional antitrust view that the merger created a “monopoly” by eliminating the rivalry between the two companies. Keep in mind, this “monopoly” is for a market that does not yet exist, since there is no actual product on the market to treat Pompe disease. But facts are generally irrelevant in antitrust cases. What matters, Thompson argues, is that we have competition in developing a cure. Without competition, he believes, there is no innovation. And in a truly egomaniacal statement, Thompson asserts, “[P]rotecting innovation competition has been a Commission success story over the past decade. Our actions have directly benefitted [sic] competition and consumers, and these actions have sent a strong signal of support to innovators.” In other words, the FTC is responsible for market successes, because it thwarts the anti-consumer actions of greedy producers. If you believe Thompson’s view, than you are not a capitalist. The FTC has never benefited any consumer. They are not experts in any market, but experts in manipulating process to benefit those who curry political favor.
The fifth commissioner, Pamela Jones Harbour, abstained from the vote but issued a statement largely mirroring Thompson’s “antitrust lawyers know best” view. This is no surprise, since Harbour spent most of her career running the antitrust division of the New York attorney general’s office. Her statement actually cuts to the heart of the matter, especially where she says, “Competition drives innovation, a crucial element in increasingly global markets.” This is the most important concept to understand. The FTC, and antitrust lawyers generally, believe that competition is the foundation of capitalism, and that without constant competition, “monopolist” firms will ground the economy to a halt.
True capitalists, however, see right through this charade. We know that competition is a byproduct of capitalism, not its source. Capitalism is a social system where all property is privately owned and individual rights are enforced by the government. Competition may or may not occur in a particular market, but it is not an essential element. What Harbour and her colleagues fail to understand is that innovation occurs because businesses seek to achieve, not because they seek to compete with one another. Nor does the FTC understand that competition cannot be artificially regulated. Of course, artificial regulation is the FTC’s reason for existing. Why else do they need a staff of hundreds to define “relevant markets” and develop complex, meaningless antitrust theories?
A commenter below, responding to my post on the Bush administration’s attempt to claim unlimited war powers, thoughtfully asks, “But the question still remains what would a proper Patriot act look like?” Here’s my brief answer: The problem is not that the federal government lacks ample power to combat terrorist threats, but rather that the government itself is not properly structured to effectively use its powers.
The PATRIOT Act was less of a mistake than the legislation creating the Department of Homeland Security. The DHS was the typical product of Bush administration thinking—they saw a need to do something, and acted with expediency rather than reason. This White House is impatient with the legislative process, and as a result, they tend to favor bad legislation over no legislation. The DHS is a department set-up to fail, which is a shame, because Secretary Tom Ridge is a good political leader who could be put to much better use.
But the real problem, I think, lies with the Justice Department, specifically the FBI. This agency should be abolished. For years—indeed decades—we have heard nothing but reports of the FBI’s ineptitude, secrecy, and lack of institutional accountability. The FBI started as an auxiliary to the DOJ’s law enforcement mission; now it’s been given a central role in counterterrorism activities. This makes no sense. A major component of any counterterrorism strategy must be effectively sharing information with state and local law enforcement, and this goes against the entire organizational culture of the FBI. The Bureau exists to serve the attorney general, not the government as a whole.
My off-the-cuff proposal would be to abolish the FBI, convert the director of central intelligence into a cabinet-level secretary with direct authority over all counterterrorism activities (foreign and domestic), and restrict the DHS to civil defense functions.
Today the Supreme Court issued its first antitrust decision of the Term, Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP. In a victory for opponents of antitrust expansion (that includes CAC), the Court unanimously reversed the Second Circuit’s opinion that allowed a class action antitrust case against Verizon to proceed. The case, initiated by a New York antitrust law firm, claimed that Verizon violated the antitrust laws by providing bad phone service.
Verizon operated New York State’s portion of the old Bell telephone monopoly. In 1996, Congress passed the Telecommunications Act, which required local telephone monopolies to give competitors access to their networks. The plaintiffs here were customers of AT&T, a Verizon rival. They claimed Verizon failed to meet its obligations under the 1996 Act to give AT&T timely access. As a result, the plaintiffs said they were the victim of Verizon’s deliberate efforts to maintain their local telephone monopoly.
The Court rejected this argument, reaffirming the traditional antitrust principle that merely refusing to deal with a competitor--in this case, Verizon’s alleged refusal to give AT&T access--does not itself violate the Sherman Act. Justice Scalia, writing for the court, said Verizon’s “prior conduct sheds no light upon the motivation of its refusal to deal upon whether its regulatory lapses were prompted not by competitive zeal but by anticompetitive malice”.
Scalia also noted that the 1996 Act imposed numerous regulatory burdens upon Verizon and other telephone companies, and that enforcement of those obligations would likely be undermined if the antitrust laws were thrown into the mix. Still, Scalia insisted on repeating the late Thurgood Marshall’s adage that the Sherman Act is the “Magna Carta of free enterprise”. Justice Marshall’s quote in its entirety, taken from U.S. v. Topco Associates, is notable for its deluded view of capitalism:
Antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms. And the freedom guaranteed each and every business, no matter how small, is the freedom to compete - to assert with vigor, imagination, devotion, and ingenuity whatever economic muscle it can muster. Implicit in such freedom is the notion that it cannot be foreclosed with respect to one sector of the economy because certain private citizens or groups believe that such foreclosure might promote greater competition in a more important sector of the economy.
Unfortunately, Justice Marshall failed to recognize that when the government decides to protect the “freedom to compete,” it does so by taking away the rights of others to compete. When the government sets antitrust policy, it creates a fixed standard for conduct, any deviation from which can be condemned as a Sherman Act violation. Marshall also fails to distinguish the Bill of Rights--a limit on the powers of government--from the antitrust laws, a limit on the individual rights of man. Even the Magna Carta was a document designed to limit government power, not that of “private individuals or groups”.
Bruce Fein, an attorney and Washington Times columnist, endorses the view that President Bush has unlimited war powers. He says we must allow the president to unilaterally suspend the writ of habeas corpus so that he can indefinitely detain anyone—including American citizens—without any due process restrictions. Fein says there's no substantial risk for abuse of these powers:
The president's muscular war powers asserted in the Hamdi case could conceivably occasion injustice against a few in pursuit of safety and freedom for hundreds of millions. Cases of mistaken identity are possible, although persuasive evidence of the same has yet to surface. And President Bush theoretically could contrive justifications for enemy combatant designations to punish dissenters or popularly disfavored minorities. But he has not done so. No credible evidence suggests the Guantanamo Bay or three illegal enemy combatant detainees have been imprisoned for nefarious reasons.
With history in mind, the Supreme Court will sustain presidential war powers in Hamdi and companion cases. The tiny risk of presidential overreaching is dwarfed by the urgency of crushing an enemy who keenly relishes civilian slaughters, fanaticism and the Stone Age.
Fein's arguments have no credibility. Last year he argued the government needed unlimited power to strip away the constitutional rights of high school students because of the continuing threat of illegal drugs. Nobody can seriously argue the government's "war on drugs" has not produced a laundry list of documented abuses. The same will hold for the "war on terrorism" if it's allowed to decay into an ongoing conflict without focus or objectives. Indeed, Fein argues "the global terrorism war confronts no clear end point." If that's the case, we should just abandon the Constitution now, since there will never be a time when Fein will feel secure enough to permit his fellow Americans to enjoy their individual rights.
Nick links below to DC Indymedia's (poorly) altered image of Time's cover featuring American soldiers as the "Person of the Year." Indymedia paints a swastika on one of the soldiers. It's a disgusting image, and there should be rational consequences. A commenter at VodkaPundit offers this suggestion:
When I saw this, I actually made an audible gasp that sounded so insincere Soap Opera actors could make it sound more credible. I have to say that I am shocked and angry. This is a complete outrage! As an American I respect people's freedom of speech and expression, but an out and out slight against servicemen goes too far. I think that the soldiers on the cover of time magazine ought to have the right to sue the "artist" who rendered this picture.
I think this is an idea worth pursuing. The First Amendment only prevents the government from imposing prior restraint on speech; it says nothing about judicial punishment for those who abuse the right. The soldiers on the Time cover should be permitted to file defamation or other appropriate tort action against IndyMedia and those persons responsible for altering the image.
Following up on my post below, the Washington Post reports today that numerous states are looking to destroy, once and for all, price competition in the cigarette market to protect government revenues:
When Virginia tobacco farmer Mac L. Bailey started a cigarette manufacturing company 10 years ago, his business consisted of little more than a secret tobacco blend, a couple of hand-held rolling machines and a burning desire to take on the big tobacco companies that paid farmers like him a relative pittance for the lucrative product they grew.
"I saw years when I didn't have enough to pay my expenses," said Bailey, 60. "I looked at what the farmer was getting and what the big manufacturers were getting, and I said, 'That's too much money for the big guys.' "
Today, Bailey owns a private jet, and his company, S&M Brands of Keysville, Va., produces about 1 million cartons a month. The growth of discount cigarette companies such as Bailey's has reshaped the industry -- and led to an odd alliance between big tobacco companies and many of the states that sued them over the public cost of smoking.
Numerous states are considering or have adopted legislation aimed at increasing the price of discount cigarettes and protecting the market share of the "Big Four" tobacco companies -- Philip Morris, Lorillard, Brown & Williamson and R.J. Reynolds. The Big Four are vowing a push this year in the Virginia General Assembly.
Under the 1998 master tobacco settlement, upstarts like Bailey have a choice: Pay the state an annual ransom or agree not to compete for the settling companies’ market share. And the states are dead serious about stamping out discount cigarettes. The Post reports the National Association of Attorneys General—normally the most pro-antitrust organization in the country—is leading the charge for greater restraints of trade to prevent the loss of as much as $600 million in future tobacco settlement payments.
This should be a national scandal. Everyday small businessmen face antitrust prosecution for conduct that no rational person would condemn as illegal, yet four of the nation’s largest cigarette manufacturers and 46 state governments are allowed to run around and openly exterminate lawful businesses. This goes far beyond hypocrisy. The perpetrators of these actions are evil men, and they should be condemned as enemies of the American people, just as surely as we condemn those who commit any act of aggression against the United States.
This is what the Neanderthals at DC Indymedia think of our military.
::: posted by Nicholas Provenzo at 12:46 AM |donate | link
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The Culture: But did they get UN approval first?
I noticed an amusing headline headline in the Washington Post.
::: posted by Nicholas Provenzo at 12:36 AM |donate | link
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Monday, January 12, 2004::
The Arts: Sparrowhawk: Jack Frake
I just finished reading book one of novelist Edward Cline's Sparrowhawk series. Jack Frake is a triumph and I can not reccomend it enough.
The challenge in writing historical fiction lies in capturing both the details of a period and the spirit that inhabits it; to be believed, historical drama demands faithfulness in both set and actors. In Sparrowhawk: Jack Frake, Cline succeeds where countless others have failed. He tells the story of a boy, Jake Frake, who grows up under the weight of a brutal and hopeless society in early 18th century England, and yet aligns himself with unbowed heroes and emerges a young man of valiant and courageous character. In Jack Frake and his compatriots, one sees the genesis of the ideas that will one day compel colonists in America to declare, as inscribed in the marble of the Jefferson Memorial, “eternal hostility against every form of tyranny over the mind of man.” Cline does not treat these ideas as disconnected parlor games; he shows them embodied in men of action and passion. The result is compelling.
Edward Cline has crafted a testament to the unbreakable sprit that makes men great. I eagerly look forward to reading the upcoming installments of the Sparrowhawk series.
::: posted by Nicholas Provenzo at 5:12 PM |donate | link
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Antitrust News: Smoking Out the Cartels
The FTC likes to compare price-fixing cartels to "smoke-filled room conspiracies." If ever there was an appropriate use of that phrase, it would be the cartel formed by state governments to extort cigarette companies. Last week the Second Circuit considered the latest case to arise from the perpetual "War on Smoking", Freedom Holdings Inc. v. Spitzer. This appeal reinstated a suit brought by tobacco importers against the State of New York. Specifically, the importers challenged the state’s enforcement of the 1998 Master Settlement Agreement (MSA) between 46 states and the nation’s four largest cigarette manufacturers. The MSA purports to compensate states for the healthcare costs incurred from smoking-related illnesses, and restricts the industry’s general marketing and sales practices. The MSA requires manufacturers to make an annual payment to the states based on each firm’s individual market share.
The MSA payments function as an additional tax on cigarettes, since the additional costs are passed on to the consumer. This price increase creates a problem, however, since various small cigarette companies were not parties to the MSA. These companies could conceivably undercut the MSA companies on price, gain market share, and thus decrease the annual payments to the states. To combat this, the states passed laws that require these smaller companies to either join the MSA and abide by its terms, or pay money into an “escrow fund” that effectively taxes the non-MSA companies at a higher rate. The express purpose of these laws is to discourage price competition that would otherwise undermine the states’ ability to realize the maximum revenue possible from the MSA.
New York went one step further. Many non-MSA sellers were not paying into the escrow fund and selling “contraband” cigarettes. Accordingly, New York required all cigarettes sold in the state to bear a tax stamp indicating the manufacturer or importer was complying with the escrow rules. Yes, this is indeed a “stamp tax,” the kind that caused so much trouble when New York was ruled by the British crown. The irony is obviously lost on New York officials.
A group of importers challenged the contraband rule, alleging it violated the Constitution’s Commerce Clause and, of all things, the Sherman Act. The trial court dismissed the complaint on summary judgment. The Second Circuit reversed on the Sherman Act claim, holding that New York’s enforcement of the MSA could very well be an illegal cartel arrangement. Gee, you think?
The truly amazing—and appalling—thing about this case is how New York articulates two completely contradictory objectives. On the one hand, the state claims its protecting public health by enforcing the MSA, which raises the price of cigarettes to discourage consumption; on the other, the contraband laws exist to maximize the state’s revenues from the sale of cigarettes. And keep in mind, the states are under no obligation to use its MSA payments to subsidize public health costs. Most states in fact use the MSA funds for general budget items.
Then there are the lawyers. Most states retained private counsel to represent them in the cases leading to the MSA. When the ink dried on the settlement, these lawyers cashed-in big time. The New York lawyers alone took home more than $600 million. Peter Angelos, the Baltimore Orioles owner and a prominent tort lawyer, tried to claim $1 billion in fees from Maryland. The Kansas attorney general paid millions to her own former law firm. And Texas paid over $3 billion in fees to five lawyers who also happened to be among the top ten political donors in the state.
So what we have here is a giant cigarette cartel that’s being forced to fund the operations of a large alliance of state governments and trial lawyers. How this benefits “public health” is beyond my ability to conceptualize. But I do know this: If ever there was a proper use for the antitrust laws, this is it. Of course, you shouldn’t need antitrust to undo this situation. The state attorneys general and private attorneys who cooked up this scheme should be sitting in prison for committing what is possibly the largest extortion scheme in world history. Since that’s never going to happen, we should focus our efforts on deposing the political leaders who committed these atrocities.
Antitrust News: 'Innovation' no more at Lindows.com
A San Francisco judge has ruled that Lindows.com may not file voucher requests on behalf of consumers as part of the settlement of a California antitrust suit against Microsoft.
Last October I blogged about San Diego-based Lindows.com, which had set up a special website to facilitate an "instant settlement" of a 1999 lawsuit bought on behalf of California consumers against Microsoft. The lawsuit claimed Microsoft violated the California's antitrust and unfair competition laws, and under terms of its settlement, Microsoft agreed to provide vouchers ranging in value from $5 to $29 to consumers who submitted written claim forms.
Yet rather then have consumers submit their own claims against Microsoft, Lindows.com sought to file consumer's claims for them with so-called "digital signatures," in reality, nothing more then the claimant's name in a web form. In addition, it offered a free PC to the first 10,000 claims applicants and ever so conveniently, allowed consumers to purchase Lindows software with an advance on their settlement proceeds.
Unfortunately for Lindows.com's planned scheme to loot its Redmond rival, the terms of the settlement explicitly required claimants print out, sign and mail their claim forms and certify the accuracy of their claims. Superior Court of California Judge Paul Alvarado agreed, ruling that Lindows.com's attempt to file voucher requests for consumers was invalid and any claim it submitted on behalf of consumers was to be rejected.
This is good news. Lindows.com's attempt to cash in on the California antitrust suit was obnoxious. The California lawsuit was not about consumers injured by Microsoft. (The paltry number of consumers taking advantage of the settlement confirms that most consumers have no quibble with Microsoft.) This and all the other suits against Microsoft are about the software giant's rivals attempting to use antitrust to hobble an industry leader rather then compete with it head to head.
::: posted by Nicholas Provenzo at 12:35 PM |donate | link
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The Culture: Just what should conform to what?
One of the Volokh's is impressed with a recent interview of University of Tennessee law professor and Instapundit Glenn Reynolds. They liked this part:
What philosophical thesis do you think it most important to disseminate? > That there are more things in heaven and earth than are dreamt of in philosophy.
What philosophical thesis do you think it most important to combat? > That life should conform to a philosophy."
I enjoy Instapundit, but in this instance I'm less impressed with how its creator expressed his philosophic views. I read Reynolds' one liners as swipes against philosophy. If Reynolds has a problem with how most philosophy is practiced today, I couldn't agree more. Still, one should never imply that that philosophy that has little to do with anything real and true. Philosophy should conform to existence--and it's the tool by which one would ever come to know anything it. I don't need to tell Objectivists that there is a lot wrong with philosophy today, but an attack against philosophy as such is nothing less then an attack on man.
I received a fortune cookie with dinner last night that said, "Today's philosophy is tomorrow's common sense." Heh. If it were that easy.
::: posted by Nicholas Provenzo at 9:40 AM |donate | link
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A good friend of the Center, art historian Lee Sanstead is an expert in romantic realism. Sanstead travels far and wide to capture romanticism in perhaps the only place where its reign is unquestioned: America’s cemeteries. He recently photographed the sculpture of artist 