Saturday, February 2, 2019

Facebook Defies Markets: No Accountability for Unethical Managements

When Facebook announced a record $6.9 billion profit for the final quarter of 2018, up 61% from the last quarter of 2017, the company’s management could also boast of an estimated 2.7 billion users of Instagram, WhatsApp, Messenger and Facebook each month, 1.52 billion of whom used Facebook every day.[1] This was particularly surprising at the time because the company had “earned the ire of users and regulators [in the E.U. and U.S.] for a growing list of privacy issues, including the Cambridge Analytica data scandal and a massive security breach.”[2] Cambridge had improperly used information on tens of missions of Facebook users, and hackers had accessed the telephone numbers and email addresses of 30 million users. Even though Facebook’s CEO, Mark Zuckerberg “touted the steps taken by the company [in 2018] to deal with the missuse of the platform,” his company had been criticized on the eve of the announcement for being in violation of the agreement with Apple regarding an iOS app (Facebook Research) distributed to employees and customers through Apple’s “Enterprise Development Program.”[3] That program prohibited distribution to customers and accessing “information such as private messages, web searches and location data.”[4] How could users not have reacted negatively, hence bearing on Facebook’s stock-price and profit-level? How could a company’s unethical management—a point I had documented in Taking the Face Off Facebook in 2015, prior to the scandals—not be punished by the market?
Interviewing Facebook users and industry insiders at the time, I learned that the evolving norm among Facebook users was not to share so much personal information, including opinions. Some went from active users to keeping the social network to keep in touch with contacts, and of course business reasons still existed. In spite of knowing that using Facebook could help my book sales, I kept away. It does not seem that many other people walked away before or even during the scandals. So it was difficult for me to comprehend the herd-mentality and thus why Facebook numbers had improved in 2018. Why should I continue to boycott Facebook? I asked myself at the time of the announcement.
Moreover, if financial markets do not take account of unethical conduct it could be expected to spread because of the lack of financial accountability. Economic accountability may necessitate that people have an active disgust for excessively self-seeking, unethical managements, especially in cases in which users or customers have been the primary victims. In the case of Facebook, apparently billions of people did not care, at least enough to go beyond protecting themselves by limiting the personal information they would share on the site. Just as a viable republic requires an educated and virtuous citizenry, according to John Adams and Thomas Jefferson of eighteenth-century America, so too do markets that can act to weed out companies with unethical managements. In other words, perhaps we get what we deserve.



[1] Seth Fiegerman, “Facebook Posts Record $6.9 Billion Profit Despite privacy Scandals,” CNN Business, January 30, 2019.
[2] Ibid.
[3] Kaya Yurieff and Ahiza Garcia, “Apple Says Facebook’s Controversial Market Research App Violated Its Policies,” CNN Business, January 30, 2019.
[4] Ibid.

The Right in European and American Politics: Disentangling Right from Right

The far-right in Europe has been quite different than the right-wing in American politics. Putting aside the usual caricature of “people in pointy hoods and the Ku Klux Klan,” Marine Le Pen said she still believed “the American right [was] much more to the right than the National Front.” She may have agreed with those who wanted to manage American frontiers more effectively and prevent massive illegal immigration, but she was also a big believer in the state’s ability and obligation to help its people. “We feel the state should have the means to intervene,” she said. “We are very attached to public services à la française as a way to limit the inequalities among regions and among the French,” including “access for all to the same level of health care.”[1] This statement implies that survival is a human right--something the American right has tended to eschew in favor of a survival-of-the-fittest mantra that conflates the state of nature with the interdependency in a developed economy. 
Therefore, it can be concluded that American right has been more far-right than the European far-right has been in terms of government having a responsibility to take care of people in need, even providing a survival-net so that no one need go hungry, homeless, and without medical-care. Of the latter, it took President Obama, a corporate Democrat, to widen the net on medical insurance, though even he caved to the private-insurance lobby, which threatened it would withdraw its support unless the president dropped his support for a public option.  
So from an American standpoint, it is particularly striking that the European right has consistently advocated universal health-care. To the American right, even a “public option” for government-run health insurance can only be odious socialism, which in turn, if generalized, could bring down the Union. Moreover, the American rich who retort, “I don’t want to help others with my tax dollars—just defense,” is absent from the E.U.'s far-right. This point demonstrates a real cultural divide between the E.U. and U.S. 
In terms of federalism, the “Euroskeptics” have been much more skeptical of the E.U. than the state rights advocates in America have been of the federal-level of governance in the U.S. Even though in both unions secession movements have resulted from the Euroskeptic ideology, it has had more influence in terms of the constitutional design of the E.U.'s federal system as well as in European politics. For example, the governor of Hungary came to the defense of Poland when the federal Commission went after the latter for subjugating the judiciary to politics. In terms of federalism, the European right is more to the right than is the American right.
Immigration is another policy area in which the European right is further right. France's president Sarkozy’s attempt to send the Roma out of his state makes Arizona's Jan Brewer’s proposal to allow her state's police to verify the citizenship of people already involved in a police action seem down-right moderate. Whereas in the spring of 2011 the Danish government considered putting up border guards to keep African immigrants out, the Arizona government did not add border guards of its own in 2010. To be sure, U.S. President Trump did exactly that in 2018, perhaps to keep certain peoples out or to stop drug-trafficking and illegal immigration. In European far-right politics, going after particular peoples already legally in the E.U. has been fair-game. In the E.U. state of Belgium, some establishments in the Flanders region as late as 2010 have brandished signs stating “No Walloons Allowed”—similar to “No Blacks Allowed” in Alabama until the 1970s. It would be interesting to compare racism in the E.U. against Africans with racism in the U.S. against Black Americans (who go by the misnomer of African-Americans, which is an ethnic rather than a racial designation).
Perhaps it could be said that whereas culturally and in terms of federalism the European right has been more to the right, the European value of solidarity has moderated that far-right appreciably, whereas the right-wing in American politics has known no such moderating factor. Therefore, caution should be exercised when comparing seemingly-parallel parties in American and European politics. The two unions have rather distinct politics even though “right” and “left” apply to both unions. 

For more comparisons, see Essays on Two Federal Empires, available at Amazon.

1. Tracy McNicoll and Christopher Dickey, “What a Tea Party Looks Like in Europe,” Newsweek, September 6, 2010.

Thursday, January 31, 2019

The Ministerial Exception: A Religious Right to Discriminate

In early 2012, the U.S. Supreme Court recognized, for the first time ever, a “ministerial exception” to employment discrimination laws, saying that churches and other religious groups must be free to choose and dismiss their leaders without government interference. In his written opinion, Chief Justice Roberts wrote, “The Establishment Clause [of the First Amendment to the U.S. Constitution] prevents the government from appointing ministers, and the Free Exercise Clause prevents it from interfering with the freedom of religious groups to select their own.” The wrench in the works here concerns the matter of delimiting the exception, given the inflation in what constitutes “ministerial” in terms of tasks.

The full essay is at "The Ministerial Exception."

Can an American Member-State Exit the Union?

A war was fought over it. In early 2013, the White House made it explicit in replying to a petition. Yet still there was a sense among at least some Texans that something was amiss. Following U.S. President Obama’s re-election in 2012, citizens of Texas, Louisiana, Alabama, and five other member-states in the U.S. signed petitions for the White House to allow their respective states to secede from the Union. At the time, few people other than the secessionists themselves took the petitions seriously. Yet the underlying contending principles deserve more serious reflection even if no "exit" is anticipated. Most importantly, the matter concerns how and whether the rights of member-states (and majorities of the people, therein) are to be circumscribed in a federal union that leaves said republics semi-sovereign and with residual sovereignty.
In his reply to the petitions, Jon Carson, director of the White House Office of Public Engagement at the time, argued that the American Founders did not provide a right for states to “walk away” from the Union because it is perpetual. He cited Texas v. White, a U.S. Supreme Court case in 1869 that ruled that individual states do not have a right to secede. The republics constituting the polities within the Union have residual sovereignty yet not the most basic authority, or right, to secede. As a republic is a polity whose political system is that of representative democracy, the right denied would be that of the majority of the people. Hence, Texas v. White can be interpreted as infringing on democratic principles. 
For his part, the communications director for the Texas Nationalist Movement, Jeff Sadighi, pointed to the section of the Texas constitution that asserts Texans have the right “to alter, reform or abolish their government in such a manner as they may think expedient.”[1] To alter or reform the government of Texas refers to the governmental system there presumably by constitutional amendment. Although it is possible that an amendment could allow for a "Texit" from the U.S., typically amendments pertain to a government itself as a political system rather than to relationships with other political entities, even if governmental sovereignty is split. To abolish a standing government is to do just that. Since to avoid a brutish state-of-nature some governance is required, presumably the constitution also gives a right to create a new government. The question here is whether such a government would be bound to the U.S. even if secessionability were part of a new government of Texas.
For an answer, we must locate the term "perpetual union" at the federal level, for the Texas v. White decision relies on the federal insistence that the Union is perpetual--meaning that it cannot be abolished and that member-states cannot secede, or "exit" as per twenty-first century parlance. In 1777, The Articles of Confederation and Perpetual Union were proposed to the 13 sovereign member-states. Ratification concluded in 1781. The treat did not establish a federal government; there was only the Continental Congress wherein delegates from the republics met. Article XIII states that "the Union shall be perpetual." In Texas v. White, the U.S. Supreme Court took this to mean that a member-state could not leave the union. I submit that this inference is fallacious. For the Union itself to be perpetual does not require that no member-state leave the Union; it would not be abolished were a state to "exit." Even had the member-states in the Confederate States of America had succeeded in exiting in the 1860s, the U.S.A. could have continued to exist, minus those states. In short, perpetual does not imply that something remains as it is; rather, perpetual means that the thing itself cannot be abolished.
The most blatant error in Texas v. White is that the Court assumed that The Articles of Confederation were still valid. In 1789, that treaty was replaced by the U.S. Constitution, and no reference to perpetual is in that ongoing document
In contrast, the argument against the Texas v. White decision rests on constitutional language. In particular, the 10th Amendment explicitly refers to the residual (i.e., unspecified, and thus unlimited) powers being held by the states and the people, rather than to the federal government, which includes the U.S. Supreme Court, the Congress, and the U.S .President. The "people" refers both to roles as citizens of the respective states and U.S. citizens. The former implies that the majority of a state's electorate have just as much residual sovereignty as does a majority of the U.S. electorate; the notion of popular sovereignty as the ground of a representative democracy gives a majority foundational authority. So it makes sense that residual sovereignty ultimately belongs to majorities of electorates. In federalism, each citizen is one of two polities--her member-state and her federal government. That the amendment assigns residual sovereignty to the states along with the people implies that the latter have residual sovereignty especially in so far as a person is a citizen of a state. Moreover, the residual sovereignty of a member-state and the people more than outweigh the limited, or enumerated, authority of the U.S. Government, and especially the historical treaty that since 1789 has not been in effect.
The U.S. Supreme Court, a branch of the federal government, reached its Texas v. White decision in spite of the fact that it is so obviously without an ongoing constitutional basis; the Court went instead merely on the stretched assumption that what had been stated in the Articles is somehow to be implied in the U.S. Constitution, which replaced the Articles. The explanation may lie in the Court being caught in an institutional conflict of interest. In short, the head of a branch (or arm, as per The New York Times' terminology on the E.U., which in turn seeks to distinguish itself from the U.S. in part by having arms rather than branches) has an institutional interest in protecting the government or level of government that has the branch or arm over being a level (i.e., unbiased, and thus fair) adjudicator of constitutional conflicts between a member-state (or even the member-states) and the government in which the Court is a part. Americans, and even the world, miss this conflict of interest whose support is in the U.S. Constitution.
It may be that the E.U.'s constitutional language allowing states to secede reflects a more balanced federal system with respect to the states and the Union. In fact, the E.U.'s Supreme Court, the ECJ, has cleverly evaded the conflict of interest that plagues its counterpart in the U.S. by having a given state nominate a state jurist to be confirmed by all of the states. With such a state-based process, the inherent bias of the European Court of Justice toward the E.U. level is institutionally (here, in terms of process) countered such that the state and federal levels have weight. That the U.S. has not learned this point from looking at the ECJ is troubling, as this implies that the U.S. Constitution may not be flexible enough even to be improved.

For more on such conflicts of interest, see Institutional Conflicts of Interest, available at Amazon. For more comparisons of the E.U. and U.S., see Essays on Two Federal Empires, also available at Amazon.


1. Manny Fernandez, “White House Rejects Petitions to Secede, but Texans Fight On,” The New York Times, January 16, 2013.


Sunday, January 27, 2019

Is God the Invisible Hand?

A Baylor University survey on religion and economics in 2011 revealed something that may be distinctly American, culturally speaking. The results indicated that about “one in five Americans combine a view of God as actively engaged in daily workings of the world with an economic conservative view that opposes government regulation and [advocates] the free market as a matter of faith.”[1] Specifically, those Americans believed that the “invisible hand” of a competitive market is actually God at work. Put another way, the assumption is that the economy “works” because God wills it to by intervening directly in the market mechanism itself. Government regulation, in diverting economic supply and demand from “the invisible hand,” is thus sinful. Regulating the economy challenges God’s omnipotence (i.e., power) by interfering with God’s intervention in our daily lives via the operation of the market mechanism. 

The full essay is at "Is God for Regulation?"

1. Cathy Lynn Grossman, “Religion Colors Money Views,” USA Today, September 20, 2011. 

Secession E.U.-Style: Beyond the Economic Implications

Financial markets place bets on political outcomes, such as how or even whether the E.U. state of Britain would secede from the Union. Leading up to the March, 29, 2019 secession date, the shifting odds moved stock, bond and foreign exchange markets, especially given the instability in the state government in general and more particularly on reaching a deal with the federal government in Brussels on just how the state would secede. Of course, the political magnitude of a state seceding from a Union such as the E.U. or U.S. is not captured by how markets anticipate the risks. To reduce secession to the end of a trade treaty does the secession and the Union itself a grave injustice. More generally, political changes do not reduce to their economic anticipations or effects. Nor is it wise to assess the political viability of future political events by the economic assessments in financial markets.
On January 16, 2019, for example, Capital Economics, a research group in London, placed a 70% probability that Britain would find a way to “fudge and delay” its secession past the deadline, as per the E.U., Article 50, of March 29, 2019.[1] To investors, the implications that the British pound would probably rise and the stocks would likely surge are of value. This does not capture, however, the political downside of a government dealing with such an important matter by “fudge and delay.” In other words, what such a way of handling something as important as seceding from a union in which the states are semi-sovereign means in terms of governance is not captured by the 70% projected likelihood.
March 29, 2019 remained “a meaningful deadline” even as British “lawmakers were unable to agree on a course of action.”[2] This reflects terribly not just on that government, but democracy itself. The establishment of an ordered means by which a state could secede from the E.U. represents a significant advance over the U.S., which has left states with one option—secession by force. Yet the British government mishandled the matter of seceding from the E.U. after the state invoked the secession process at the federal level. This undermined the E.U.’s prudent advance over the U.S. in introducing a flexible constitutional (or "basic law") way for states to secede without the need to resort to force.
The probability of somewhere below 20% but above zero that the secession would occur without any negotiated agreement represents a more dire economic prospect. In November, 2018, the Bank of England projected “a major shock that could subtract more than 10 percent from Britain’s gross domestic product” from this low-probability outcome.[3] Yet even such a remarkable economic effect on the state would not capture the severity of the political failure. Secession from a union is not just ending a trade treaty; much more than the economic aspect is involved. At the very least, the failure of the negotiations between the state and federal government would point to a major weakness in the E.U.’s Article 50, and thus to a political need to alter it. In short, secession should not depend on the vagaries of negotiation. After all, it had broken down between U.S. President Lincoln and the state of South Carolina in 1861. 
Another possible scenario facing Britain before the March deadline was that the state would not secede after all. "Goldman placed a 40 percent probability on the chance that Britain, in the end, would not leave the European Union at all, which would be accomplished through another referendum repudiating the original vote."[4] Because the original referendum had been billed as the decision point on the question, to go back on that decision just because it was difficult for the British government to implement betrays democracy itself, for the people had spoken with the understanding that it would be final. To say, "Oh, actually it wasn't" would be bad form. That the people had spoken, each side playing by the same rule (i.e., the question would be settled by that referendum), is something that government officials and legislators should--from a democratic standpoint--have fully respected from the day of the referendum. That the losing side on the question would set up another referendum would undermine democracy because even those decisions billed as determinative could not be taken as such. Goldman's 40% probability can thus be read as saying something about democracy in Britain and democracy itself, and we can't get this merely from the way the announcement of the 40% probability affected financial markets and individual investors. 

See Essays on the E.U. Political Economy and Two Federal Empires, both available at Amazon.


1. Jeff Sommer, “Governments Malfunction and the Markets Place Their Bets,” The New York Times, January 25, 2019.
2. Ibid.
3. Ibid.
4. Ibid.