The Commons

The Commons hosts commentary from contributing writers across the political spectrum, advancing American Compass’s mission through discussion that combines intellectual combat and personal civility.

If Only Private Funds Still Enabled American Power Share This

| Jun 15, 2020 | Finance

Re: Private Funds Could Be Your Friends

Grant Kettering’s critique of Coin-Flip Capitalism defends private finance as “a major competitive advantage and source of comprehensive national power.” In his view:

In alliance with other sectors such as government- and academically-funded scientific research institutions, private funds have served effectively as tutors to companies pursuing American innovation in absolutely foundational areas such as semiconductors (Intel) and information technology (Apple, Google) as well as contributors to the depth and breadth of U.S. capital markets, lowering our national cost of capital and helping to ensure that the dollar maintains its privileged status as the primary global reserve currency. Viewed in a comparative and historical perspective, it is not an exaggeration to say that the private fund industry has been one of the primary enabling sources of American comprehensive national power over the last 70 years, having transformed small company finance from the province of half-baked club deals or matters of oligopolistic or mercantilist activity into a serious, market-driven institution that has produced manifest results [emphasis in original].

I don’t disagree with this history. The problem is that it is history. It’s no accident that his examples are decades old. And it rather begs the question to celebrate a “primary enabling source of American comprehensive national power” during a period in which that power is eroding. Read More

What are America’s pensioners getting from private equity? Share This

| Jun 11, 2020 | Finance

Re: Coin-Flip Capitalism

Imagine a schoolteacher in a mid-sized American city. She earns approximately $60,000 per year and each month contributes somewhere between 6 and 12 percent of her wages to the state’s public employee pension plan. Given her salary and associated living expenses, a robust personal savings plan seems out of the question. For the teacher – and the firefighter, the police officer, and many other public employees – pension benefits are the only hope for financial security in retirement.

The managers of the teacher’s pension fund allocate a significant portion of the teacher and her peers’ contributions to several private equity funds. The employees of one of those funds identify a profitable, mid-sized business to buy, one of many companies they will acquire that year. The company’s cost structure appears heavy, and the investors reason that the business could get by with fewer managers. Consultants hired by the investors identify an overseas factory that can replace part of the company’s U.S.-based production at much lower costs. Read More

Balanced Trade, Robust Industry, and Rising Productivity: Pick All Three Share This

| Jun 10, 2020 | Trade

Re: Failing a Test on Trade

Professor Dan Drezner is again illustrating how we ended up with a misbegotten consensus on globalization built upon inadequate assumptions and shallow analysis. A couple of weeks ago, we encountered him badly mischaracterizing a study about the supposed value of trade liberalization. Breezing past that issue, he is back now with a more outlandish claim, that: “a world in which ‘trade were balanced, domestic industry robust, and productivity rising’ is a world that not only does not exist, but very likely cannot exist” (emphasis in original).

Cannot exist! In the blackboard model of comparative advantage on which Drezner relies, this is exactly what happens. If it’s not what we should expect, or at least pursue, then which facet would economists concede is not achievable in a well-functioning global economy? Read More

Chaos In The Time Of Covid Share This

| Jun 10, 2020 | Community

In physics, to reveal deeper truths, you slam particles together to expose their inner structure.

The pandemic has been like that, slamming different parts of the country together, revealing it to be deeply divided by geography, race, education, and wealth. It is hard to imagine it once fit together or will ever fit together again. Read More

A Tale of Two Media Share This

| Jun 08, 2020 | Big Tech

Re: In Praise of Big Internet

Faced over the past few years with a deepening sense of dread around the increasing irrelevance of academic political theory, I shifted much of my perspective on the accelerating unraveling of the modern order to media theory–specifically, media theory rooted in the work of Marshall McLuhan and his son Eric. While political theory as an endeavor is far from dead, the profound disconnect between the conceptual frameworks dominating the discipline and the reshaping of our inner and outer realities by digital technology has made it difficult to push the political debate around “tech” today in the direction the McLuhans draw us.

One way to make the attempt is to contrast two kinds of critiques of technology today. As Rob Atkinson suggests in his recent post, one criticism is that “big tech” is decadent. Rather than building a new foundation for a new socioeconomic era of American flourishing, or even just bolstering up a declining America, possibly buying us precious time to figure out something new, critics of tech decadence warn that our top corporations now mostly monetize our idleness and mindless entertainment and hoard their winnings, innovating nothing of real use or power.

I would agree that a criticism like this is at least incomplete, but at its best, criticism of tech decadence is more fundamental and incisive than that. Read More

How Should We Regulate the Social Media Companies? Hint: More Competition Might not be the Answer Share This

| Jun 04, 2020 | Big Tech

natanaelginting –

Donald Trump threatened to close Twitter down a day after the social media giant marked his tweets with a fact-check warning label for the first time. The president followed this threat up with an executive order that would encourage federal regulators to allow tech companies to be held liable for the comments, videos, and other content posted by users on their platforms. As is often the case with this president, his impetuous actions were more than a touch self-serving and legally dubious absent a congressionally legislated regulatory framework.

Despite himself, Trump does raise an interesting issue—namely whether and how we should regulate the social media companies such as Twitter and Facebook, as well as the search engines (Google, Bing) that disseminate their content. Section 230 of the Communications Decency Act largely immunizes internet platforms from any liability as a publisher or speaker for third-party content (in contrast to conventional media).

Should this statute be amended?  Are there First Amendment considerations of which we should be mindful, as Timothy Wu has suggested?  Does market competition per se provide a way forward? Read More

In Praise of Big Internet: The Economic Importance of Internet Companies Share This

| Jun 04, 2020 | Big Tech

Image: Shawn Collins –

It has become bipartisan sport to attack “Big Tech”, but most of the ire is directed at “Big Internet”: consumer-facing Internet companies like Amazon, Google, Facebook, Twitter, and Uber.

While much of the so-called techlash is focused on the purported negative social impacts – abuse of data, platform bias, and other charges – underlying many of these attacks is a deeper critique: Big Internet provides little or no economic value. They are just glorified purveyors of cat videos and other tools that let people engage in mindless activities. Tech billionaire and Trump advisor Peter Theil reflected this view when he wrote, “we wanted flying cars and we got 140 characters,” implying that internet apps were, in the words of perennial tech critic Nick Carr, a waste of time. Read More

Private Funds Could Be Your Friends Share This

| Jun 03, 2020 | Finance

Re: Coin-Flip Capitalism

The basic motivation behind American Compass’s Coin-Flip Capitalism project seems to be scrutinizing the private fund industry—an industry that is indeed poorly understood by most—under the suspicion that, amidst its mysteries and its trillions, it may be detracting from our national welfare. Fair enough.

But as a long-time participant in the industry, and even more so as someone dedicated to U.S. national security, I see serious analytical flaws and even more serious geostrategic flaws which I think detract from the substance and the spirit of Coin-Flip Capitalism, leading it off track when there are more important issues in American political economy that deserve urgent and sustained attention. Read More

Libertarianism For Me, Authoritarianism For Thee Share This

| Jun 01, 2020

If you spend significant time in poor communities, especially poor black communities, you wonder why they don’t explode in protest more often. The inequality that is a concerning statistic to academics and politicians is their daily commute from cleaning the office of a Wall Street bank to a home surrounded by boarded-up buildings. The oppressive state that Libertarians warn about, is the cops who hassle or arrest them about whatever they do. The declining life expectancy that has generated worried op-eds, is their friends, family, and neighbors dying from a batch of heroin gone bad.

When you talk to residents of these communities the dreams and hopes you hear in well to do neighborhoods is replaced by a listing of fears, frustrations, and wrongs they have suffered at the hands of authorities. Read More

Economies of Scale Versus Big Business Share This

| Jun 01, 2020

Last week, some very large employers – including Salesforce, Tesla, and Walmart – called for a corporate merger moratorium for hospitals and doctors groups. It’s unusual to have the paragons of big business assert the need for aggressive antitrust, but it speaks to how confused our current economic debates really are. My first blog post for the Commons was on the need for conservatives to think about corruption, to use bright line standards such as a merger moratorium to remove the temptation to concentrate power and misuse it. These very large institutions seem to agree, though of course, only where they are the victims of monopoly power and not the perpetrators of it.

This dynamic speaks to the problem of corruption in our governing institutions, a fear of concentrated power that has traditionally animated both the populist left and, at least rhetorically, the modern Republican Party. But this fear has waned. Samuel Hammond recently wrote an ode to Alexander Hamilton on this blog, as the godfather of industrial policy, fitting with the instincts of a right-of-center reform coalition to promote bigness, and to create national champions that can compete with China. Hammond notes it is not just the right but the socialist left who valorizes Alexander Hamilton, as a central planner, though they seek the Green New Deal and transformational industrial goals different from traditional conservatives goals. Regardless, both the statist left and planner right believe that economies of scale and scope require policies to support, or at least overlook, corporate concentration. Read More