California and the Eleven Dwarfs Take on the Paramount-Warner Bros Merger

In Wealth of Nations, Adam Smith foresees that capitalist industrialists could collude with government at the expense of labor. In On the Genealogy of Morals, Friedrich Nietzsche argues that keeping laborers to a subsistence wage is necessary for capitalists to have enough wealth accumulated to invest in culture. Rather than being immoral, exploitation is simply part of life and thus the resulting economic inequality cannot be removed at its source. Low wages may simply be a feature of how labor supply typically relates to business demand for workers, whereas highly educated professionals are not so numerous and can demand higher compensation. Meanwhile, what about consumers as capitalist industrialists continue to accumulate capital in part by being able to pay large workforces subsistence wages and engage in mergers and acquisitions, such that competitive markets are turned into oligopolies and even, as in the case of Rockefeller’s Standard Oil in the 1870s, monopolies capable of extracting “monopoly rents”? In the U.S., the Sherman and Clayton Acts in the early 1900s were oriented to safeguarding competitive markets from being undermined by business titans, but enforcing those federal laws would seem to fly in the face of collusion between capitalists and their respective governments. As a case in point, the U.S. Justice Department gave the green light to Paramount’s take-over of Warner Brothers/Discovery even as President Trump had a financial interest in the deal going through. In the American federal system, the state governments could act as a check, and on July 13, 2026, the announcement came that California plus eleven other states, led by their respective attorneys general, filed a lawsuit challenging the merger on the basis that it would violate Section 7 of the Clayton Act. American consumers had reason to be thankful that they were still in a federal republic of republics, even though the growth of power at the federal level had nearly eclipsed the federalism, at least as it was originally intended—as enabling checks by the feds on the states and vice versa.

The Clayton Act “holds that mergers that may substantially lessen competition or tend to create a monopoly are illegal.”[1] In seeking to acquire Warner Bros. Discovery for $111 billion, Paramount’s mega-merger was raising concerns before closure that “combining two major Hollywood studios would hurt the industry while giving too much power” to Paramount’s CEO, David Ellison, in the film and television industries.[2] Hence California Attorney General Rob Bonta “led a group of 12 attorneys general in filing a lawsuit challenging the merger, claiming it would ‘lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately audiences on every sofa and movie theater seat in the U.S.’”[3] In other words, all that typically goes with a competitive market becoming first an oligopoly, with just a few suppliers each with substantial market-share and thus market-power with which to become price-setters rather than takers, and then possibly even a monopoly in which consumers have only one choice of supplier and thus must pay whatever that supply decides. Because Paramount had completed an $8 billion merger with Skydance Media in 2025, the addition of Warner Bros. Discovery would give rise to tremendous market-power, hence occasioning an oligopolistic industry-structure. 

It is because the U.S. Justice Department announced on July 10, 2026 that even incorporating Warner Bros. Discovery would not harm competition and could even “strengthen competition across the media and entertainment industry, including in streaming video, traditional television and theatrical film distribution” that California and eleven other states jumped into action on the following Monday.[4] That a supplier with such massive market-power would actually make the industry more competitive is hard to believe, for, as Adam Smith lays out in his classic text on competitive markets, each supplier must be small enough relative to the entire market that no one supplier could set prices, but instead would have to take whatever prices are set by supply and demand, mechanistically in the market rather than by the intention of a dominant CEO.

Fortunately, under the U.S. federal system, “state attorneys general retain independent authority under antitrust laws, and the DOJ’s decision [would] not prevent additional legal challenges” to the proposed merger.[5] The personal financial interests of high officials in the U.S. Government, whether in the White House or Congress, could be checked, in effect, by the governmental sovereignty retained by the states, for in U.S. federalism, like E.U. federalism, governmental sovereignty has been divided between the federal and state levels, such that each would have an autonomous basis upon which to challenge over-reaches by governmental institutions on the other level. Put crassly, wealthy capitalists seeking a mega-merger would be best advised in both the E.U. and U.S. to pay off enough key federal and state officials so no one on either level would be motivated to institute a judicial contest. Other things equal, a federal system means that corruption by business of government costs more.

Federalism itself can thus be seen as serving a public purpose for the good of the whole. Were governmental sovereignty to reside exclusively only at one level—federal or state—as in a consolidated government and a confederation, respectively, it would be easier for powerful CEOs of large corporations to be able to engineer mega-mergers at the expense of market competition. In 2026, it was thus in the interest of American and European consumers to balance their respective federal systems, with more governmental autonomy going to the American states at the expense of the federal government, and more governmental authority going to the E.U. at the expense of the member-states. Perhaps as a result, more industries could be remade into competitive markets from being too oligopolistic and even de facto monopolies. 

To be effective, anti-trust laws must be enforced even if business executives and boards don’t exactly like the idea and would rather buy off governments at the expense of labor, consumers, and even the economic systems themselves, for there is a certain beauty to forces of supply and demand finding equilibria without any one participant (or few participants) being a price-setter as well as a policy-setter for an industry as a whole. The sheer frustration that typically goes with calling a company’s customer “service” phone-bank cries out for the existence of competition, and thus consumer choice. When that choice has to do with entertainment, and thus with which stories get told and with how much creativity and variety is possible, having a number of struggling suppliers (i.e., different gate-keepers) rather than just a few centralized powers is arguably crucial.

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1. Brian Flood, “Paramount Advisors Push for California Exit as State Sues to Block Warner Bros Discovery Merger: Report,” FoxBusiness.com, July 13, 2026.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.

The Screen Actors Guild Strike: American Capitalism Is Inherently Unbalanced

On July 14, 2023, Hollywood actors joined the writers in going on strike against the studios, which had changed the business model in ways, according to the Screen Actors Guild (SAG), that were leaving the vast majority of actors out financially. At the time, AI (artificial intelligence) was the red-hot buzzword, promising unheard of advances but also baleful clouds on the horizon. The president of SAG sounded the alarm on not only the threat of AI given the studios' new business models predicated on ubiquitous streaming and digital technology, but also the more long-standing and ingrained American corporate system of Capitalism wherein upper managements get away with not sharing the surplus of corporate wealth due to an inherent or institutional conflict of interest. Indeed, Fran Drescher, the president of SAG, was not far from calling into question the taken-for-granted assumption in Capitalism that residual profits should go to stockholders exclusive. Questioning that default (as well as claiming that CEOs get to set their own compensation by controlling their respective boards of directors) would have made Drescher's announcement of a strike truly revolutionary. She was so close. 

Regarding AI, even Drescher's position can be perceived as short-sighted even though it was an improvement on the studios' new business model. The ability of studios to use the likenesses (images) of actors who have been bodily scanned (creepy) in one project for use as computer-generated “acting” in future movies in which the actors themselves are neither compensated nor participate was among the issues to be arbitrated in which the studios and SAG were far apart. To an actor, the loss of control over one’s image can complicate or even detract from one’s efforts to construct a public image. To be sure, not being paid for such extended likenesses being used was noxious to the actors even though no additional work on their part would be required. This just means, however, that royalties, or residuals, rather than pay for the use of the images would be appropriate, and thus fair. Furthermore, rather than being able to pressure actors on a project to agree to their respective likenesses being used in perpetuity, studios should be required to get permission for the specific uses (rather than a general permission) at the time of each future project. Actors would not feel that they might lose their existing work if they refuse to give a general permission in perpetuity. Even such an arrangement, incorporated into the studios' new business models, might not last long. A student of AI suggested to me that just as non-profit organizations have open-source libraries of written works, such organizations in the film industry might make available, royalty-free, images of volunteers that start-up film companies, students, and even Hollywood studios could use. Extras, or background actors, could conceivably be used only in shots in which mere images won't do. 

Of greater significance, SAG’s position extended to challenge a basic tenet of Capitalism itself. Were the strike a true inflection point, as Fran Drescher, the president of SAG claimed, the union had an opportunity to make the dogmatic, or arbitrary, tenet transparent if for no other reason that Drescher was aware and critical of the long-held assumption that had long before become embedded as a “necessary” plank in the economic system.

I contend that it is arbitrary to set the owners of a corporation as the receivers of the residual from the surplus of revenues over expenditures (i.e., profit), whereas banks and labor get only a fixed amount classified as expenses. All three groups can be thought of as providing inputs, or resources, that a management can use to make a profit. From this perspective, it seems arbitrary to say that only one of the group has a right to the residuals from the profits. The philosopher John Locke claimed that a person “mixing” one’s labor with land gives rise to a property right on said land. Centuries later, the U.S. Supreme Court ruled that a maker of wedding web-sites could refuse to have same-sex couples as clients because she had expressed herself in her work. It seems rather obvious that screenwriters and actors are also in an expressive profession. In “mixing” their self-expressive labor in a film, writers and actors can be said to have an ownership interest in what is typically referred to as art. Painters, after all, sign their paintings. It is possible that the writers and actors of a film have more of a claim on the profits than do the studios. In depicting the strike as occurring at an “inflection point,” the president of SAG had the opportunity to make such a claim, thus challenging the monopoly on profits hitherto enjoyed by the owners of the studios.

In announcing the strike in 2023, Drescher called attention to the large gap in compensation between the CEO’s of the studios and 99% of the members of the SAG union who were struggling financially. To be sure, the inclusion of “extras,” or background non-speaking roles that are on a per-project pay basis, means that the 99 percent were not depending on acting as a full-time job. Even so, the astounding pay of “A-list” movie actors may give people outside of the industry the misimpression that acting constitutes a wealthy profession.

The impression left by films grossing hundreds of millions of dollars that studios are wealthy is more accurate. The studios plead poverty, the SAG president exclaimed in astonishment, and yet somehow they have the money to pay tens of millions of dollars to their CEOs. In fiscal 2022, for example, the CEO of Disney made $24 million just before the company laid off 7,000 employees.[1] Drescher could have added that Netflix co-CEOs earned $43.2 million and $39.3 million in 2020—when the company raised the monthly price of its subscription.[2] Doubtless the management claimed that the company had no choice but charge customers more. It is interesting that managements can so easily put their companies in convenient straightjackets.

The union president must have sensed an opportunity to challenge the greed of American CEOs more generally as evinced in the increasing inequality between their compensation and the average of their respective workforces. “High seven figures, eight figures, this is crazy money that they make,” she said.[3] Implying that a basic shift in wealth distribution between upper managements and workers was justified, she stated, “What’s happening to us is happening across all fields of labor. . . . When employers make Wall Street and greed their priority, and they forget about the essential contributors that make the machine run, we have a problem.”[4] A basic problem in the American system of Capitalism.

The ratio of CEO compensation to that of the average worker in the U.S. in 2020 was 299.[5] Just one year later, the ratio was nearly 400, according to Statista. Even as the coronavirus shuttered or hampered many businesses, which meant mass layoffs, CEOs made out well nonetheless. Some CEOs made a thousand times that of the average worker. The annual ratios in the E.U. were much lower than in the U.S. That CEOs of American corporations had typically reached complete control of their respective boards of directors, which are technically to function in part as a check on their managements, presents not only accountability issues more generally, but also a situation in which the CEOs can set their own compensation and that of their managerial cadres. At one major corporation in 2023, the stockholders voted to deny the management’s proposed compensation package. Astonishingly, the resolution was nonbinding and the board approved the package anyway. This points to the existence of a major structural flaw in corporate governance in the U.S.

In pointing to the greed of CEOs of American companies in general, Drescher expanded her union’s agenda beyond the immediate financial interest of the members. She was making a societal contribution in claiming that the huge disparity of wealth between managements and workers was by then so large that an inflection point had been reached wherein SAG would try to set an example for other unions to follow in objecting to the arbitrary feature of American Capitalism wherein CEOs do not have to share the surplus of corporate wealth. She could have gone a step further by taking the opportunity to question the underlying assumption that stockholders should get the residual of profits that are not retained or invested. Even though the business model of studios had changed due to AI, the greed of American CEOs and their ability to set their own compensation packages had existed for some time and was finally too much for workers to take. That is to say, it was time for an enduring yet arbitrary (rather than necessary) aspect of American Capitalism to be changed. The system had been broken for some time, and the advent of AI meant that the harm would soon become even more unbearable.

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[1] Samantha Bergeson, “Fran Drescher Blasts Bob Iger’s Strike Comments: ‘I Would Lock Him Behind Doors,’” IndyWire, July 14, 2023.
[2] Todd Spangler, “Netflix’s Ted Sarandos to Earn $40 Million in 2022, Read Hastings Pay to Top $34 Million,” Variety, December 31, 2021.
[3] Bergeson, “Fran Drescher Blasts Bob Iger’s Strike Comments: ‘I Would Lock Him Behind Doors.’”
[4] Ibid.
[5] Moira Ritter, “CEOs Made 299 Times More Than Their Average Workers Last Year,” CNN.com, July 15, 2021.

Pittsburgh Businesses Encroach on Public Property with Impunity

Private property, competition, and the market-mechanism have come to be assumed to be integral to the economic system of Capitalism. The assumption that this cluster of attributes is necessary is faulty though, as, for example, the state can own some or all of the “means of production” (i.e., firms) that are subject to market competition, especially if privately-owned enterprises also exist. China had a mix of private and state-owned enterprises compete in several industries when the state opened the economy to competitive forces setting supply and demand. In Wisconsin, the Green Bay Packers, an NFL football team, is owned by the residents of that city, such ownership being Socialism, and yet that team has competed not only to win, but also in the hiring of players and managers. A competitive market does not require that the property of the means of production be privately owned. Even in the case of private ownership of companies, the widely accepted custom wherein the owners receive the residual profits after expenses is dogmatic in the sense of being arbitrary. Alternatively, creditors or employees/managers could receive any excess revenue after expenses have been paid. In short, Capitalism as it has come to be known and exercised is more arbitrary than capitalists may realize. Even the taken-for-granted distinction between public and private property is not as stark as may be typically supposed. This is no excuse, however, for businesses that knowingly encroach on public property as if it were their own private property. A Capitalist economic system predicated on private property may contain not only the seed of monopoly, as Marx claimed, but also a tendency of private enterprises to over-reach on the public domain. If so, government has a responsibility to prune back the overweening tentacles. Two examples make this point.

Once while walking on a narrow sidewalk, I glanced down at my phone and was instantly startled as I ran into and tumbled over a metal chair in the middle of the sidewalk. A restaurant’s employees had set up tables on the side of the sidewalk with chairs out into the middle of the sidewalk, and a bit beyond a table had been placed in the middle of the sidewalk, with a potted plant placed making it even more difficult to navigate around the tables and chairs. Who would want to eat in the middle of a sidewalk, with people passing by at close range? The manager of that restaurant was guilty not only of missing this rather basic point, but also of the incredible presumption that the public sidewalk was essentially part of the business’s private property, which astonishingly placed the public at a disadvantage on public property!

A month earlier, I had called the zoning department of the city. I had been assured that a restaurant cannot obstruct a sidewalk. However, the city then failed to act, perhaps capitulating to the business interest (and wealth). So, after I nearly fell from running into the chair, I called the city again. The employee who answered insisted that the city gives permits allowing businesses to permanently block or obstruct public sidewalks. So, I called again and spoke with another person who had more of a sympathetic ear when I explained that I had almost fallen, and that a hazard exists because numerous pedestrians walk into the street because of the obstruction. Two weeks later, with Franks Bar and Grill still interlarding on public property, I left a phone message for the code enforcement person. Two weeks after that, as the photo below demonstrates, the restaurant was still blocking the sidewalk. 

I know that the city had opened an investigations months earlier, so I surmise that the restaurant's owner or manager knew of the complaints and dismissed them. Additionally, I suspect that the city of Pittsburgh had bowed to the business interest at the expense of the public good. This is as much of a problem as is the presumptuousness and dismissiveness of a business that can take advantage of a corrupt municipal government.

Another example of companies encroaching on public "space" is the overreaching of security guards and private police employees presuming that their turf extends beyond a company's private property. When I lived temporarily in Pittsburgh, while I was walking on a public sidewalk along a hospital that was part of the University of Pittsburgh, I stopped at a food-truck only to realize that a security guard was perched on a small hill from which he seemed to have been presumptuously patrolling the sidewalk. In the distance was another security guard. 

Initially, I thought he was in line to order food from the food truck as I was. So I held back. Strangely, he likely viewed my standing position with suspicion, or, more likely, dislike as I was looking generally in his direction. Not all subtle, he strategically walked past me up close and stopped further along on the sidewalk, presumably there to talk to another food vender, yet his body position reveals his real orientation. 

The presumptuousness of that university-affiliated hospital was visible in the choice of the security guard’s uniform mimicking that of the police—including with a silver “badge” and handcuffs. If the hospital was breaching the state's monopoly of police powers, which in general is a larger problem, I submit that the visible artifacts added to the possible presumptuousness of the wearers that company security hyper-extends "off campus" even if the state permits it. The artifacts also misled the public into supposing that the company's police were the same as the city police. At the very least, a company's private security or "police" employees do not necessarily receive the same training as the regular police receive. There is also the problem of legitimacy from a democratic standpoint once the state's monopoly of police powers, as per the U.S. Constitution, is violated by companies. 

Just a public property is distinct from private property, a company's employees are distinct from a government's police force (and power). Encroachment onto a government's use of force puts a company in a conflict of interest in that its security employees are not in an even-handed position in disagreements between a company's management and its stakeholders. Human nature being what it is, we should not assume that the employees would be fair in cases in which a management oversteps its own authority ethically or legally. 

I contend that business managers have a tendency to overreach, even perceiving public property as fair game to be captured for the private, narrower, interest of a business as the public interest suffers. This tendency on the microlevel is the same as that which fuels a company in a competitive industry to become a monopoly. John D. Rockefeller, for example, pressured competitors unwilling to be bought by his Standard Oil company. The titan had the audacity to view himself as a Noah saving the drowning competitors from being ruined by the destructive competition especially in the 1860s, and as a Christ-figure saving them. Unlike Rockefeller, Jesus in the Gospel stories does not kill off people who are unwilling to accept his help. Rockefeller even pressured the railroads to pay Standard Oil a “drawback” when they carried the oil of his competitors. Such encroachment breached what was thought to be ethical business conduct at the time, which in turn included some practices that would come to be regarded as unethical. The titan’s presumptuousness thus extended to treating the railroads as akin to his own property. By such means of encroachment, Rockefeller built his company into a monopoly in the refining industry. Fortunately, the U.S. Supreme Court broke up Standard Oil in 1913, but made the mistake of keeping in tact the same ownership in all of the resulting companies. The managements thereof were even allowed to be in the same building! A willingness to stand up to powerful businesses and competency as to how to break up their excessive market power from previous encroachments are both important if the private-property attribute of modern Capitalism is not to eviscerate the attributes of competition and the market-mechanism. Given the tendency of business managers to shirk the public interest, society needs some means of protecting public property from the inevitable encroachments.

Oligarchs in Ukraine Decide the E.U./Russia Question: Big Business on Top of Democracy?

One of the many lessons shimmering in the sunlight from stars such as Gandhi and Mandela is the possibility that popular political protest really can matter after all. Alternatively, managing (or manipulating) the crowd could be a mere front dwarfed in influence by that of a rich and power elite. Although the Ukraine will serve as our case study, democracy itself is under the microscope here.
As 2013 was losing steam and heading into the history books, the people of the independent state of the Ukraine were poised to turn back east or aim toward statehood in the European Union. The matter of who in the republic would decide was at the time obscured by the appearance of power in the pro-Europe protests in the capital city. Peeling off this veneer, the New York Times provides us with a more revealing look.
"Protesters may be occupying government buildings and staging loud rallies calling for the government to step down, but behind the scenes an equally fierce — and perhaps more decisive — tug of war is being waged among a very small and very rich group of oligarchical clans here, some of whom see their future with Europe and others with Russia. That conflict was ignited, along with the street protests, by Mr. Yanukovich’s decision to halt free trade talks with the European Union” in November, 2013.[1] In other words, very wealthy businessmen were very active politically in setting the course of the ship of state.

Petro Poroshenko is a Ukrainian oligarch who sees more money for his conglomerate and himself in greater ties with the E.U. Does it matter what the majority of the Ukrainian people want? NYT

Although blocking government buildings makes excellent news copy, all that visible strife may have been diverting attention from the dark corridors of power in search of a deal that would set a much larger course. To be an independent state between two contending empires is not the safest place to be. If finally moving one way or the other hinges on a certain constellation of wealthy and business interests coalescing enough to pull the strings of state, what the people think really does not matter. As put by the New York Times, “In this battle of the titans, the street becomes a weapon, but only one of many.”[2] Put another way, what the titans do with their arsenals of wealth and power is the decisive point, not what the people in the streets happen to think.
The implications for representative democracy are stunning, if not dire, and for the illusion, utterly deflating. Does not adulthood involve the recognition that something taken hitherto as real is in actuality an illusion? Perhaps it is high time that Toto pull the curtain open to reveal the Wizard as the person pulling the levers for billowing smoke and bursts of flames to divert our attention from his existence, not to mention his manipulation and power.

1.Andrew Kramer, “Behind Scenes, Ukraine’s Rick and Powerful Battle Over the Future,” The New York Times, December 6, 2013

2. Ibid., emphasis added.

A Strong State vs.The Market Mechanism in China

Under Marxist ideology, the Chinese economy was a command-and-control economy eschewing the market mechanism. Mao's collective farms provide us with a good example. The economy of the U.S.S.R., also Marxist, was based on production quotas and fixed prices. They changed by fiat rather than by changes in demand. State owned, or socialist, productive enterprises were given quotas based on the prior year's production (plus more). This push replaced that of producing more to sell more. Any hint of a market brought with it the stench of Capitalism. So one would suppose that China marked a significant departure when the government announced in 2013 that it would expand the range in which the yuan currency would float. Yet in 2019 in the midst of a trade tussle with the United States, the Chinese state demonstrated just how dominant the state still was relative to any market system.  

The reforms incorporating the market mechanism had begun under Deng Xiaoping. Although publicly-owned and state-owned-enterprises still dominated, they were set within a market economy. The mix of government-owned (i.e., socialist) businesses and a market mechanism has been uneasy in practice. Private or partially-privately owned enterprises could find it difficult to compete with competitors subsidized by the state. Widen the circle to international trade and foreign private enterprises could be found having the same complaint. Of course, the domestic and foreign consumers stood to benefit by the subsidized lower prices, so assessing the existence of state-owned enterprises is more complex than first meets the eye. In part, this is so because governments tend to emphasize the interests of business rather than consumers.  

The United States, for example, has protested against the Chinese government devaluing its currency. A low currency means that exports are less expensive in exported markets.  The complaint has been that "a weak yuan gives Chinese exporters an unfair price edge in foreign markets and helps swell the massive U.S. trade deficit with China."[1] In the face of the trade dispute with the U.S. in 2019, China promised in August "to avoid 'competitive devaluation' to hold down export prices in the face of of Trump's tariff hikes."[2] However, the yuan's low point of 7.0927 on August 23, 2019 was the currency's weakest rate since January 2008.[3] The heavy hand of the central bank could easily dominant market forces because the bank set the exchange rate every morning and let the yuan fluctuate only 2% against the dollar during the day. 

Interestingly, the Chinese government had announced in 2013, "The exchange rate is going to be more market-oriented" [4] People's Bank of China Vice Governor Yi Gang made this statement on a panel at the International Monetary Fund’s 2013 spring meeting in Washington. In other words, “China's central bank plans to widen the yuan's trading band in the near future," he said.[5] This meant that China's leaders would "press ahead with change despite the surprise slowing of the economy."[6] On the surface, this shows that the "Communists" were really serious about moving closer to a market economy. At a deeper level, this shows just how much power the government still had over its economy--power that could be used to restrict the market in service to state objectives. In the literature of international political economy, the Chinese government would be classified as a strong state because it could resist external pressure. By contrast, six years later, the U.S. Federal Reserve would lower a key interest rate due to political pressure from the White House, where concerns of a possible recession in 2020 were intensifying. The weak state classification could also explain the accumulating federal public debt (i.e., the failure to resist pressures to tax less and spend more). 

From a big-picture perspective, balance or equilibrium in the global economy is in everyone’s financial interest. Keeping a currency artificially low is like a dam keeping waters from reaching a balance. The pressure from the held-up water can be expected to destabilize the global economy. China’s policy to gradually let the yuan’s value be market-determined was thus taken to be a prudent step. However, American frustrations on state subsidies and a low yuan in 2019 suggest that the Chinese government rather than the market mechanism was still very much in control of the Chinese economy. 

1. Joe McDonald, "China Let Its Currency Sink to an 11-Year Low After Trump's Trade Threats," Time Magazine, August 26, 2019. 

2. Ibid.

3. Ibid.

4. Natasha Brereton-Fukui and Bob Davis, “China Vows Wider Yuan Movement,” The Wall Street Journal, April 17, 2013.

5. Ibid.

6. Ibid.

Pruning Back an Ideological "Re-Definition" of Socialism

Should language lose its integrity for ideological purposes? On Fox News in the wake of the passage of Obamacare, Brit Hume and Newt Gingrich, a former Speaker of the U.S. House of Representatives, both (re)defined socialism as “government control of private property.” Their rendering falls short, however. According to the Random House Dictionary (via Dictionary.com), socialism is “a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole” (italics added). Whereas government regulation of privately-owned means of production and distribution involves some of the control being in the hands of the community as a whole through its government, socialism includes the vesting of both ownership and control with the government. 
Hume and Gingrich doubtless believed that words can be redefined to suit ideological objectives. Public discourse is difficult enough in a democracy. The dialogue "across the aisle" becomes more difficult when one or both sides decide that language can (and even should!) be subordinated to ideology to the extent that dictionary definitions (and common usages) are presumed to be changeable simply by applying a new meaning to the words on the public airwaves or speeches. Ideologically akin people will doubtlessly follow along, and soon the word has a meaning that contradicts the dictionary definition.  
Going further, to intentionally scare people by redefining a word in such a way that the word appears worse than it actually is nothing short of misleading manipulation. Even in such a case, not even the opposing partisans alert the people through the media or speeches that X means Y rather than Z according to dictionary definitions. No one stands up for language, so ideology can have its way and prey on words.
If government control via regulation is not convenient to the business sector and its advocates, what about government ownership without control! As per the definition of socialism, government ownership without formal control does not constitute socialist enterprise. Ownership and control can indeed be separated. Bearle and Means, in their classic treatise, The Modern Corporation and Private Property, point to the separation in modern large corporations, wherein stockholders as a group are the owners and control is maintained by managers. Theoretically, a government could own a company that is controlled by its management. Perhaps public policy would be served by the ownership alone, or the managers could have taken de facto control away from the government officials.
Therefore, the definition of socialism is more delimited than typically thought. To be sure, the meaning of words can change naturally, but such shifts are gradual as per changing times and thus uses, rather than sudden, as from being artificially interlarded for short-term political use. In the case of socialism, the term has historically applied to an entire economic system, such as those of the U.S.S. R. and China before capitalism made such inroads. A person would not say that healthcare is socialism, or even that taxes are socialistic. In Arizona, the dominant ideology has viewed taxes as theft.
With the fall of the command-and-control economic systems of the U.S.S.R. and China, socialism has come to be increasingly applied to governments owning and controlling particular enterprises rather than every means of production and distribution. Hence a capitalist economic system can contain socialist enterprises. For example, the Green Bay Packers’ football team in Wisconsin has been socialist because the citizens of the Green Bay together have owned the team. The community need not transfer ownership formally to a government for an enterprise to be socialistic. So too has the China National Tobacco Corp. 
In short, socialism can be distinguished from government regulation of privately-owned economic enterprise. Conflating the two by effectively redefining the word, socialism, muddies the public discourse and sows confusion, neither of which is helpful to viable republic. Furthermore, socialism can be applied to particular enterprises as well as to an entire economy whose means of production and distribution are owned and controlled by the community as a whole (often through its government). The application to particular enterprises does not reduce socialism to control alone. 

An Empire's Economic Scale Demands a Market System: The Case of China

A trend of increased-scale economies can be observed through history as city-states have given way to the increased military power of centralized Medieval kingdoms. Many of those expanded into Early Modern kingdoms as advances in military technology make it possible for kings to extend the territory under their control. Even empires have gotten bigger. Modern-day Germany was once considered an empire, as were Switzerland and the Netherlands. Today these polities are states in a modern form of empire, the EU. Similarly, the emergent United Colonies of America was considered to be an empire within the British Empire, with the individual colonies being viewed on both sides of the Atlantic as Early Modern kingdom-level polities on par with the states of the E.U. in the twentieth century. Similarly in China, as kingdoms were added, an old form of empire took shape. Because these enlargements came about gradually over centuries, it has been difficult for the human mind to recalibrate how the modern large empire-scale economies should be designed to take into effect the distinct challenges of the scale. We can see such an adjustment in the case of China as economic centralization came to be replaced by regulated markets, albeit with a sizeable involvement still of the government in the economy. 
Communism, for lack of a better word, has somehow morphed into Capitalism in China, as if a genetic mutation had taken hold through mitosis. This reflects an important trend that can be traced back to Deng Xiaoping (1904-1997), who “abandoned many orthodox communist doctrines and attempted to incorporate elements of the free-enterprise system into the Chinese economy” beginning in the late 1970's, according to the Encyclopedia Britannica. Decades later, upon becoming prime minister, Li Keqiang announced in 2013 that the central government would reduce the state’s role in the economy. The Chinese government issued a set of policy proposals to reduce “government intervention in the marketplace” and give “competition among private businesses a bigger role in investment decisions and setting prices.”[1] According to the proposals, a tax on natural resources would be expanded, market forces would play a larger role in determining bank interest rates, and, according to the government, policies would be enacted to “promote the effective entry of private capital into finance, energy, railways, telecommunications and other spheres.”[2] Foreign investors would be given more opportunities to invest in finance, including banking, logistics and healthcare. Foreign exchange controls would also be loosened further.
The proposals were enough for Stephen Green, an economist with Standard Chartered, to remark, “This is radical stuff, really.”[3] Huang Yiping, chief economist at Barclays, pointed to lower growth projections and massive amounts of debt as giving the Chinese government a rather practical motive in continuing the trend of refurbishing communism. Many experts doubted, however, whether the Communist Party would “abandon the state capitalist model, break up huge, state-run oligopolies or privatize major sectors of the economy that the party considers strategic, like banking, energy and telecommunications.”[4] Additionally, corrupt government officials would doubtlessly resist losing what the New York Times called their “secret stakes in companies,” not to mention all the bribes.[5]
Even so, it is astounding that the prime minister, a communist, would say: “If we place excessive reliance on government steering and policy leverage to stimulate growth, that will be difficult to sustain and could even produce new problems and risks. The market is the creator of social wealth and the wellspring of self-sustaining economic development.”[6] Marx and Lenin would hardly recognize the Chinese Communist Party. Because China has over a billion people, the old “command-and-control” economic model based on centralized directives on production quotas and prices had become increasingly difficult to coordinate. Bottlenecks in supply causing shortages on the shelves could eventually occur, with political instability increasingly likely.  The sheer scale of China, an empire of former kingdoms, has rendered centralized control highly inefficient.

The Emperor Kangxi of the Qing Dynasty. He ruled for 60 years, greatly expanding the size of the empire.      Source: Chinahighlights.com

Interestingly, even as Emperor Kangxi (1654-1722), the second emperor of the Qing Dynasty (1644-1911), expanded the empire by taking over central Asian Muslim kingdoms, he resisted the preceding Ming Dynasty’s laissez-faire policy on internal trade and industry by turning some crucial industries into monopolies. Interestingly, John D. Rockefeller would probably have concurred, based on his own theory that the coordination in a monopoly in a vital industry such as oil could put an end to destructive competition. In any case, Kangxi apparently saw no contradiction between expanding the empire and centralizing some important sectors of the economy. Similarly, Mao saw no internal tension in collectivized consolidation on a large scale. As tempting centralization has been for Chinese dictators seeking increased control and thus power, government regulation of competitive markets is eminently better in empire-scale economies, not only of China, but the E.U., U.S., and Russia as well. 

1. David Barboza, “China Plans to Reduce the State’s Role in the Economy,” The New York Times, May 24, 2013.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.

Coal Industry Challenges Lower Carbon-Emission Targets: Human Nature on Full Display

With heat-waves underway and glaciers melting, climate-change was undeniable in the summer of 2015. Human nature itself was on full display. It was almost as if the human race could not summon itself into action even as the hardships of a warming world were a foregone conclusion.

"We're the first generation to feel the effects of climate change and the last generation that can do something about it," said Obama on August 3rd when he announced a new set of regulations for U.S. power plants that call for a 32 percent reduction in greenhouse gas emissions, from 2005 levels, by 2030. The EPA also issued final rules for new power plants that call for phasing out new coal-fired units unless there is technology in place that can capture and store carbon emissions. Obama said the rules would reduce carbon dioxide pollution by 870 million tons, the equivalent of what is produced by 108 million homes or 166 million cars.[1] He acknowledged a battle lurked ahead, as industry groups were already gearing up to fight the rules in court.

                            Penguins face receding ice and rising waters. (Natacha Pisarenko of AP)

On the same day, the World Glacier Monitoring Service released a study providing new evidence that the world’s glaciers had melted to the lowest levels since the late nineteenth century, and the ice-melt in 2015 would likely be twice the rate in the 1990s and three times the rate the decade before that. "Globally, we lose about three times the ice volume stored in the entirety of the European Alps every year," Michael Zemp, director of the WGMS and lead author of the study said.[2]  On July 20^th, “James Hansen, the former NASA climateologist who brought climate change to the public’s attention in the summer of 1998, [had] issued a bombshell: He and a team of climate scientists had identified a newly important feedback mechanism off the coast of Antarctica that suggests mean sea levels could rise 10 times faster than previously predicted: 10 feet by 2065.”[3] Coastal Florida, including its vast commercial and residential real-estate, hang in the balance. Meanwhile, Californians, in the fourth year of the worst drought there in a millennium, witnessed a 50-acre brush fire swell seventyfold in just a few hours, with many other fires raging too.[4]

In spite of the clear indications that the Earth’s atmosphere was warming at an uncharacteristically high rate, the National Mining Association of coal-mining companies requested a stay in court on the EPA’s new rules while the courts have the opportunity to determine the lawfulness of the agency’s attempt to commandeer the nation’s electric grid."[5] Doubtless the focus on the EPA's power-grab did not include the fact that that July was the hottest globally since record-keeping began in 1880. The first seven months of the year were the hottest January-to-July span on record. In fact, from ice-cores scientists determined that the planet was its warmest in at least 4,000 years.[6]

Because coal-fueled power plants made up about 40 percent of the carbon emissions in the U.S. at the time, the companies were playing with fire in that their legal opposition to the rules could make an appreciable difference in how much climate change results from emissions. Put another way, a point of law could conceivably decide whether the lives of future generations of people are just uncomfortable or impossible.

"[T]he Rule . . .  aims at nothing less than the comprehensive 'transformation' of the American electric power grid," wrote Hal Quinn, the NMA's president and chief executive officer, in a letter to Environmental Protection Agency head Gina McCarthy. "Congress, however, did not give EPA the power to restructure how the nation produces and consumes electricity."[7] Even if reducing carbon emissions by a third from power plants constitutes a restructuring of the power grid, Obama’s point about his generation then in power being the first to perceive the impacts from global warming and the last to realistically keep the world’s ecosystem from getting away from us dwarfs the matter of a regulatory agency overreaching.

Of course, the matter may be as simple as that of a narrow private interest being indifferent to the general welfare. Implementing the rule, Quinn wrote, "will irreparably injure the coal mining industry, coal mining workers, and coal mining communities" and "has no purpose other than to reduce the use of coal for electric generation as a means of reducing power sector [carbon dioxide] emissions."[8] The harm to the coal-mining industry in terms of lost revenue was Quinn’s real concern. That the human race could stand in the balance in just a few generations makes the sordid nature of the industry’s self-interest transparent. In fact, the increased demand for electricity for air-conditioning could mean that the mining industry had a financial stake in global warming even though in just a few generations demand for electricity decreases due to more climate-related deaths. 

James Jansen and his colleagues warned that if carbon emissions were not cut soon, the social disruption and dire economic consequences of the sea-level rise along could be devastating. “It is not difficult to imagine,” the scientists wrote, “that conflicts arising from forced migrations and economic collapse might make the planet ungovernable, threatening the fabric of civilization.”[9] That such a prospect was rendered realistic given the clear signs of global warming already extant makes the narrow focus of the coal executives even more astonishing. To be sure, business and societal norms and perspectives can be expected to differ, and even clash, for business is but one component of society. For a part to seek to maximize its own gain at the expense of the continued viability of the whole in the foreseeable future renders the strategy highly unethical, not to mention problematic from the standpoint of society. The latter arguably has an ethical right—obligation even—to constrain the maximizing tendency of the hypertrophic part.

Beyond business and society, human nature itself, particularly in its preoccupation with instant gratification even at the risk of self-preservation in the long term, can explain why such a genetically-successful species could also be that species that alters its ecosystems to the extent that the species itself goes extinct. The force of reason pales in comparison with selfishness. On August 3, 2015, the generation that could grasp the actuality of climate change was both doing something about it and putting up obstacles. Human nature was on full display. The question is whether such nature is compatible with its own survival.

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[1] Kate Sheppard, “Obama On Climate Rules: ‘This Is Our Moment To Get This Right’,” The Huffington Post, August 3, 2015.

[2] Nick Visser, “World’s Glaciers Melting At Fastest Rate Since Record-Keeping Began,” The Worden Report, August 3, 2015.

[3] Eric Holthaus, “The Point of No Return: Climate Change Nightmares Are Already Here,” Rolling Stones, August 5, 2015.

[4] Ibid.

[5] Kate Sheppard, “Coal Interests Prepare To Challenge Obama’s Power Plant Rules,” The Worde Report, August 3, 2015.
[6] Nick Visser, "It's Official, July Was Earth's Hottest Month on Record," The Huffington Post, August 20, 2015.

[7] Sheppard, "Coal Interests."

[8] Ibid.

[9] Holthaus, “The Point of No Return.”

Property Rights in China: On the Separation of Ownership and Control in the Stock Market

It is too simplistic to say that economies around the world converged as capitalistic after the collapse of the Soviet command-and-control economy. Even the notion that China’s communist party has embraced capitalism does not do justice to the ways in which China’s capitalist system is unique. This became particularly apparent in early July 2015, when the bubble burst in the Chinese stock market.

Already down by more than 30% since early June 2015, the benchmark Shanghai Composite Index lost another 5.9% on July 8, 2015 and Hong Kong's Hang Seng index closed down 5.8 percent.[1] Hundreds of companies halted trading in their stock after emergency measures announced by the central government the previous weekend failed to stop the rout. The measures themselves are particularly noteworthy, for they illustrate the unique way in which capitalism under communism regards property rights.

The Chinese government directed “state companies and executives to buy shares, raised the amount of equities insurance companies can hold and promised more credit to finance trading.”[2] On July 8th, the Cabinet agency that oversaw China's biggest state-owned companies said it had told them to avoid selling shares and to buy more "in order to safeguard market stability."[3] Ordering companies and their senior managers to not only not to sell stock, but also buy more, runs against the assumed linkage between economic liberty and property rights. Because the managers of state enterprises are essentially state employees, the government’s encroachment on freedom to buy and sell assets is mitigated.

However, “(i)n a separate order, the securities regulator told directors, executives and senior managers of publicly traded companies who have sold shares in those companies within the past six months to buy them back and said they are barred from selling. It said they are required to buy more if the price falls by more than 30 percent in the next 10 days.”[4] Here, the government reaches individuals receiving money from private companies—albeit publically traded ones having charters granted by the government.

To force people to buy and sell assets does not mean that their respective markets are replaced by a Soviet-style command-and-control economy. Changes in supply and demand still affect pricing. The value of an asset of which some of its buyers and sellers have been forced to buy or sell is at an intersection of a supply and demand that does not reflect preferences and thus utility curves—not only for the given asset, but also, moreover, for economic liberty in being able to make and implement purchase-decisions. Put differently, the preference of the government, both regarding the asset-class and control, is also in the mix.

Because the individuals ordered to buy rather than sell stock in their respective companies owned the stock, private property is cleft from control pertaining to the buying and selling of the stock. Were the purchased an asset usable, such as a car, the owners could still control that sort of use, so economic liberty is not lacking; rather, it has been restricted. We can conclude, therefore, that private property and private markets can exist and function even when economic liberty is limited.

In 1932, Berle and Means wrote a book pointing to the separation of (stock) ownership and (managerial) control in American corporations.[5] The control here pertains to policy decision at the corporate level. In the Chinese case, the control at issue pertains to being able to buy and sell stock; such control remains intact in the American system of managerial capitalism.

The Chinese government’s order may seem counterintuitive  not because ownership is distanced from control, but, rather, because of the type of control—that over buying and selling rather than use per se. Moreover, the order calls into question earlier academic predictions that the fall of the U.S.S.R. and China’s adoption of capitalism would lead to a singularity or isomorphism of the world’s economic systems. Simply changing what is to be controlled separately from the ownership can make an economic system look quite different. Lastly, this case demonstrates just how interlinked political and economic variables are. The twentieth century witnessed empiricism take hold both in economic and political “science”—the reductionism itself distancing the two disciplines from each other.

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1. Joe McDonald, “China Stock Market Plummets As Sell-Off Continues,” Associated Press, July 8, 2015.

2. Ibid.

3. Ibid.

4. Ibid.

5. Adolf A. Berle and Gardiner C. Means, The Modern Corporation and Private Property (New York: Macmillan, 1933).  The book's theme is the separation of ownership from control of the modern corporation and its consequences. Berle and Means point out the divergent interests of directors and managers, and of each of these from the owners (i.e., stockholders) of the firm.