Democracy And Free Markets: Is That All?

Current State of Regulation and Market Economies in the U.S.

The Microsoft example is interesting. My view is that with the monopolizing trend, it is possible to make money for a short time and then either get bought out, or the ideas more successfully competed with, or basically stolen. The only long term profit is to be made in a quasi monopolistic position which is gained by regulation or well defended patent. Microsoft found a new quasi-monopoly niche that did not exist before. But not many can do this. Microsoft did not do it by technical creation, but by legal inventiveness guided by Gates' father.

The real power of Microsoft can be seen in the way bigger programs and more memory and speed worked together to prevent the perfection of simple systems: elegance was given over to the logic of creating a next generation that could not run on old computers. So we were never given a chance to perfect what we had, at a much lower price.

I don't expect a tight dictatorship, but continual consolidation with desperate innovation that gets co-opted coming from the edges. It will not be illegal to start companies - providing they don't violate increasingly comprehensive copyright or security measures - but it will be harder.

The crucial issue here is the regulatory environment.

That includes corporate charters for the big guys with new societal goals making specific requirements on those corporations. As we all know, the states lost the ability to impose conditions through charters through the mystical idea of corporations being false persons with 14th amendment rights.

Also the copyright extensions are moving towards the core idea that all things need to be owned. Shorter copyright terms, as originally envisioned, would let productive tools move more quickly into the public realm. We have to get past the idea that big corporations are natural.

1. Greater income split between wealthy and poor, middle class not doing well

2. Greater percentage of wealth owned by smaller number of people

3. Greater percentage of business done by smaller number of large firms (must include overseas operations to see this).

4. Narrowing of political options

5. More people in jail

6. Mean spirited climate

7. More surveillance and security

8. Increasing infrastructure costs

9. More uncomfortable to be an American overseas

—and, most importantly:

10. It is harder to be relaxed and happy.

The drivers are

1. Increasing population

2. Overseas competition

3. Overseas debt (US holds negative paper, overseas holds positive US paper

4. Conflicts of meaning (abortion, guns, prayer, evolution are symptoms)

For many the US is working, for many it is not the trends are important. For many who are immigrants, the cause of despair back in country of origin is in part the impact of globalization of old colonialism (shell in Nigeria), or new globalization, to which local elites aligned themselves, hollowing out the country economy.

Note that in my opening I said that it was the tendency towards monopolization, which includes the tendency towards empire and wars, increased security and surveillance, increased control. There are signs all around, and unless I am misled, most are worrisome.

Participant) I said that Doug's first two points:

1. Greater income split between wealthy and poor, middle class not doing well; and

2. Greater percentage of wealth owned by smaller number of people

is being addressed with changes in corporate governance.

Kip asked that I explain what I mean.

In the meantime, Don said, (in a larger context)

I also see [a]. . . broad gap growing between the citizens and the governmental power structure here in the United States.

I assume we can agree that wealth and power structure are somehow related. In any case, I see the gaps to which Don refers as attributable to the concentration of both power and wealth in a minute fraction of the population, and trending in the wrong direction -- which is what I think Doug said.

For several years now the annual meetings of most large corporations have had to deal with minority proposals limiting the compensation and "perks" of senior executives, and "sweetheart" relationships among the officers and directors. E.g. The CEO has nearly unconstrained power to select new directors, and is likely himself to be found on the boards of some of their companies. (This has been true for many years, of course.)

Each year these minority proposals have received a larger -- though still less than a majority -- vote. This year in some companies, instigated of course by recent corporate scandals, the boards are reforming themselves. Long-time directors are being retired; 3-year terms are being discontinued; "golden parachutes" are, under some conditions, to be referred to the shareholders; etc. This morning's paper observed that the CEO of Agilent is being paid about half of what he earned in 2000.

A recent issue of Atlantic Monthly has a story on the fall of the House of Saud, in which details are given of the pervasive influence of the Saudi ambassador to the U.S., Bandar by name, linked to those in high political office serving on the boards of oil-industry corporations. The general idea is not new, but the details shocked me!

I've mentioned once or twice the importance of reforming our funding of national elections. To me, these things are all closely related. We will not fix one of them until we make substantial progress on all of them. And we ARE making just a little progress on a few of them.

That's what I meant.

I am not sure if these relate to behaving within the laws of a civil society or not. It seems to me that while we all are busy with self-actualization, and improving organizations and communities in which we work and live, there are others who simply step outside of the boundaries. I am referring to managers of Enron, corrupt Wall Street insiders and many others who in recent years have severely damaged our trust in public institutions. (I am using the word public in its broad sense. I understand that Enron is a private corporation).

I see another trend too, and that is among those who are disillusioned with such institutions and would want to step out of the frame. However, since OUT THERE is yet to be defined, the outlaws will be mingling with outlaws! How can we tell the good ones with the bad?

Let me give you an example to see if I am on the right track and in sync with this discussion. I served in our Academic Senate at San Diego State University, the flagship campus of the 22-univeristy system of California State University for two years. It was very difficult to figure out the budget of our institution. It just did not make any sense. We have a campus that is impacted. Meaning, we have no room for additional students. Yet the second line item in the budget was millions of dollars devoted to public relations for attracting new students.

Our large public institutions (including the UN as we discussed in the last forum) have lost their effectiveness, and need to be redefined. My second question is that if this process is going to be an organic one: meaning old institutions would either divide like cells, or die; or is it going to be a political process in which the OUTLAWS of today would define a new order OUTSIDE of the frame?

"He called on investors to rise up and revolt over colossal executive pay packages, saying in the past 20 years there had been "an enormous disparity in the rates of compensation between people at the top and people at the bottom, and a disconnect between people at the top and the shareowners who give them the money"."

I'd like to add that in classical economic theory, profit tends to zero when information is more widely distributed, or as the lingo goes, with completely efficient information. The reason is that, the success of any product will be well understood by all, and those with resources will move to compete in order to maximize return. Their costs will be less because they do not have the costs of development of product or market. The result is to put downward pressure on the prices charged by the early entrant. This process drives all profit out of the system. The only way to make a profit is by short term advantage in timing, by defendable monopoly, or by being bought out. Defendable monopoly requires not free market interference, such as patent, copyright, or government contract.

If the tendency in markets is to monopoly and zero profit then what?

This is not theoretical. Overall wealth trends, market concentration, and profit projections show how serious this is.

And democracies become caught up in the process, from fund raising to support the monopoly drive, and the role of the mainstream media, one person one vote turns slowly into ode dollar one vote.

Korea has something like 70% DSL access to homes, the US has something like 15%. Our cell phone system is near the worst in the advanced economies; the telco's are loaded with debt and about to start serious bankruptcies. the admin is a defender of old style companies, rather than encouraging new economy activity, technical innovation, avoiding high standards in pollution and environmental remediation that are technically demanding, and enhancing of leading edge competitiveness.

We are tending towards low technical innovation, low community participation, high rates of incarceration and bankruptcy.

The good news is we are muddling through, but projections? Strategy? Development of our people and institutions?

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