Vertically Integrated Monopolies

Try as I might I can’t figure out exactly what the editors of the Wall Street Journal are saying they like or don’t like in this editorial:

Americans nowadays have a plethora of options to stream movies online, and many may not recall the last time they viewed a film in a theater. So credit to the Justice Department for getting with the digital times.

The Antitrust Division on Friday asked the U.S. Southern District Court of New York to terminate the 70-year-old Paramount consent decrees that restrict how films are distributed in theaters. As antitrust chief Makan Delrahim noted, “These decrees have served their purpose, and their continued existence may actually harm American consumers by standing in the way of innovative business models for the exhibition of America’s great creative films.” Hear, hear.

During the 1930s, eight major studios controlled film distribution, and five also owned theaters. In that pre- Netflix -DVD-VHS-multiplex era, theaters had single screens, crimping film distribution. The Justice Department discovered that the major distributors were colluding to limit competition. In 1938 the government sued the distributors under the Sherman Antitrust Act for conspiring to fix licensing terms, among other things.

Distributors lost at the Supreme Court and were required to divest their theaters. Government consent decrees also prohibited them from engaging in licensing practices that are common in other industries. For instance, distributors were forbidden from bundling film licenses or providing exclusive licenses to theaters in geographic areas.

New distributors such as Disney (which isn’t covered by the decrees) benefitted, but the movie scene has changed in seven decades. Even small-town theaters have multiple screens—an AMC in Peoria is currently showing 16 films—and most films can be streamed online within months of their debut.

Small distributors and filmmakers also have other launching pads. Netflix plans to release more than 50 films this year—more than Warner Bros., Disney and Paramount combined. MGM distributed 52 movies in 1939, including “Gone with the Wind,” “The Wizard of Oz” and “It’s a Wonderful Life,” but distributed only three last year. All were duds.

Let’s stop right there. Does no one copy edit this stuff? It’s a Wonderful Life wasn’t released in 1939 but in 1947, one of Jimmy Stewart’s first post-war pictures. And it wasn’t distributed by MGM at all. It was distributed by RKO. Gone With the Wind was produced by Selznick’s organization and distributed by MGM. The Wizard of Oz was produced and distributed by MGM and shown in its theaters. BTW two of three of those movies flopped.

The context of the consent decree they don’t seem to like is that Metro-Goldwyn-Mayer (and other studios) were vertically integrated monopolies. They produced the movies, distributed them, showed them in their own theaters, and they didn’t show movies other than their own in those theaters. They used their monopolies to prevent upstarts from competing with them and used their control of the whole process to lock performers into contracts that paid them far less than they were worth.

Do the editors just not like government regulation? Or do they like government regulation that subsidizes big businesses but not regulation that controls them? Personally, I have no problem with any level of government regulation of companies that wouldn’t exist at all without government-granted monopolies.

As I have documented in earlier posts there are only a handful of vertically integrated companies today that control broadcast television, streaming, cable, and, increasingly production. Those companies are creatures of government action either via exclusive franchises or insanely long copyright durations. Amazon wouldn’t exist, at least not in its current form, unless it had been exempted from collecting and paying sales tax for nearly 20 years. It, too, is a creature of government.

IMO Disney needs to be broken up. I presume that the editors would like that even less than the consent decree that prevented the old studios from owning their own theaters.

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What Happened?

Here’s the kernel of a rather lugubrious report at the Washington Post by Joel Achenbach:

The all-cause death rate — meaning deaths per 100,000 people — rose 6 percent from 2010 to 2017 among working-age people in the United States.

Men overall have higher all-cause mortality than women, but the report pulls out some disturbing trends. Women are succumbing to diseases once far more common among men, even as men continue to die in greater absolute numbers.

The risk of death from drug overdoses increased 486 percent for midlife women between 1999 and 2017; the risk increased 351 percent for men in that same period. Women also experienced a bigger relative increase in risk of suicide and alcohol-related liver disease.

Increasing midlife mortality began among whites in 2010, Hispanics in 2011 and African Americans in 2014, the study states.

My answer to the question in my title is that it’s been a long time coming. When the pursuit of pleasure or, worse, numbness replaces everything else that people have used to bring meaning to their lives, why should we be surprised that they’re overdosing, drinking themselves to death, obese, or killing themselves?

I think that what we’re seeing is a loss of hope, particularly among the young. The groundwork was laid decades ago for the dramatic loss of hope we’re seeing. The Vietnam War. Watergate. Malaise. Financialization. Globalization. Mass immigration. Offshoring. Information coming at them faster than they can process it. Decline of traditional living arrangements. In 1968 more than 80% of people between the ages of 25 and 35 lived with their spouses. Now half that percentage do. When you include cohabitation the total percentage rises to 54%—still a dramatic change.

For most young people rather than preparing themselves for a better job increased formal education has loaded them with debt. The reason is simple. We aren’t creating enough jobs that require more education and they’re in competition with people from all over the world for those jobs and located all over the world. That journalism degree? It’s worthless. More people graduate with journalism degrees every year than have jobs in journalism. Prospective employers don’t even look at the thousands of resumes they receive. They winnow them using emotionless software for just the qualifications they think they want before they even start interviewing. When interviewed the HR department managers may say they want the ability to communicate but that only applies after they’ve limited those they’ll actually interview to just those with the nominal qualifications they’re seeking.

It is much easier to tear down than to build up. We have been tearing down for decades. Building back up will take even longer even if we had the will to do it.

Update

The paper on which the WaPo article was based may be found here. The findings from its abstract are:

Between 1959 and 2016, US life expectancy increased from 69.9 years to 78.9 years but declined for 3 consecutive years after 2014. The recent decrease in US life expectancy culminated a period of increasing cause-specific mortality among adults aged 25 to 64 years that began in the 1990s, ultimately producing an increase in all-cause mortality that began in 2010. During 2010-2017, midlife all-cause mortality rates increased from 328.5 deaths/100 000 to 348.2 deaths/100 000. By 2014, midlife mortality was increasing across all racial groups, caused by drug overdoses, alcohol abuse, suicides, and a diverse list of organ system diseases. The largest relative increases in midlife mortality rates occurred in New England (New Hampshire, 23.3%; Maine, 20.7%; Vermont, 19.9%) and the Ohio Valley (West Virginia, 23.0%; Ohio, 21.6%; Indiana, 14.8%; Kentucky, 14.7%). The increase in midlife mortality during 2010-2017 was associated with an estimated 33 307 excess US deaths, 32.8% of which occurred in 4 Ohio Valley states.

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Modern Felony

I found this story from our local CBS affiliate thought-provoking:

CHICAGO (CBS) — Police on Monday warned of a string of robberies in the West Woodlawn community, in which the victims may have been lured by dating apps.

The incidents all happened in the 6200 block of South Rhodes Avenue, police said.

One incident happened on Friday, Oct. 25 at 1 a.m., the other just an hour and 50 minutes later at 2:50 a.m. Another incident happened Wednesday, Nov. 13 at 1 p.m., and another on Saturday, Nov. 23, at 11 p.m., police said.

Police said victims may have been lured to the area by “social media dating sites,” though they did not specify which ones. In one instance, the victim’s car was taken, police said.

Get that? Old-fashioned hold-up men needed to seek out their victims. It’s much easier for modern felons. Their victims come to them.

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Why Do the Ratings Agencies Exist?

I have a question about John Tamny’s article about the role of the ratings agencies in the financial crisis of 2008 at RealClearMarkets:

Which brings us to 2008, or 2007-2008 if readers prefer. It really doesn’t matter. Going back to that timeframe it was said by some that faulty ratings of mortgage debt by the agencies set the stage for 2008 by tricking financial institutions into buying bad debt. No, that’s not realistic either. Nor was it.

It would have been nice if he had actually cited some quotes to verify that since I don’t recall anybody saying that. What is incontrovertibly true is that the ratings agencies didn’t prevent the financial crisis, a somewhat different proposition than claiming that they “set the stage” or caused the financial crisis in any way.

I see the ratings agencies as rent-seekers that wouldn’t exist without their federal mandates which should be abolished since they aren’t serving their putative purpose. Caveat emptor remains the standard and there’s little that can be done about that.

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The Futile Search for a Master Solution to Mass Shootings

I found Matthew Larosiere’s RealClearPolicy article on armed security guards at every school as the solution to mass shootings interesting:

Of course, an armed guard could deter shooters, but other problems would inevitably crop up. In schools, for instance, the school-to-prison pipeline would become even wider. An increased police presence in school has already funneled thousands of kids into prison due to overzealous enforcement against troubled youths. But dumb teenage behavior — getting into fights, experimenting with drugs, etc. — shouldn’t irreparably ruin lives. Armed guards, whether police or private, would increase the likelihood that correcting troubled behavior escapes the confines of guidance counselors and lands in the hands of law enforcement.

Another concern blends aesthetics and costs. Do we really want to live with gendarmerie (a blend of military and police) everywhere people gather, when it may ultimately only help a little? For example, France is absolutely crawling with machine gun-toting gendarmes, but that didn’t stop Paris from being the site of some of the deadliest mass murders in modern history. So, then, would a drastic shift like that really be worth it?

It’s not a popular thing to say, but obsessing over preventing mass shootings isn’t actually productive — in fact, it may be perpetuating the problem. And armed guards aren’t the solution, in the same way that gun control isn’t. In the end, we’d be much better served by addressing the deep-seated, largely cultural issues plaguing the soul of America than experimenting with expensive, ineffective, and dangerous band-aids that will never actually stop the bleeding.

IMO searching for solutions that will end mass shootings with a single master-stroke is inherently futile. The United States is a country of 330 million people. The incidence of such shootings is quite low. There will always be a certain number of crazy people.

We’d be better off trying to mitigate the risk rather than attempting to eliminate it. Enforcing the laws that are already on the books would be a good start. I also agree with those who’ve suggested that a way of mitigating the risks of mass shootings is by making firearms possession déclassé rather than trying to eliminate it. While we’re at it why not address the role played by opinion-forming institutions? Why are movies and television so filled with gunfights even as the producers, writers, directors, and actors decry firearms?

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Donald Trump and Black Voters

I think that this article at RealClearPolitics by Vernon Robinson III and Bruce Eberleis is far-fetched but interesting:

Just as Roosevelt overwhelmingly lost the black vote in 1932, doing worse than Al Smith in 1928, Trump lost the black vote in 2016. But, again like Roosevelt in 1932, Trump did reach out to the black electorate in 2016. Both FDR in ’32 and Trump in ’16 had some limited but encouraging success in winning over these voters: Roosevelt in New York where he had been governor, and Trump in Pennsylvania where his outreach helped provide his margin of victory in that key state.

The groundwork laid in 1932 was crucial to FDR’s success with black voters in 1936. In fact, in that first election, a wealthy oilman and key supporter of the Democrat, Frank Benedum, “saw the conversion of the black vote as a potential means of swinging Pennsylvania into the Roosevelt column,” Nancy J. Weiss wrote in “Farewell to the Party of Lincoln.” Benedum knew the key was longtime Republican supporter Robert L. Vann, editor of the Pittsburgh Courier, one of the biggest and most influential black newspapers in America. By 1932 Vann was fed up with the GOP. In his view, all the Republicans seemingly cared about was black votes, not the goals and aspirations of black Americans.

Sound familiar? It should, as it presciently echoes what would be the frustrations of black Democrats almost 90 years in the future.

It’s interesting for a number of reasons. Democrats are, indeed, ignoring “the goals and aspirations of black Americans”, taking them for granted. That’s something I’ve been warning about for a long time. And Trump is, indeed, courting black voters. That’s typical Trump political strategy—impelling the enemy to expend resources on defending territory that should and must be secured.

The Democrats’ divide et impera interest group-based political strategy has not yet reached its limit point, when black voters contend with Mexican-American voters for the crumbs that fall from the governmental table but that time is coming and it will not be a happy one.

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Atlantic, Pacific or Both? Or Neither?

In his latest Wall Street Journal column Walter Russell Mead muses about the implications for our alliance with the countries of Western Europe of the U. S.’s inevitable refocusing of interest on the countries of the Pacific:

What will the trans-Atlantic alliance look like in a world focused on the Indo-Pacific? That, more than President Trump’s unpredictable diplomacy, is the question that haunts Europe. During the Cold War, protecting Europe from Soviet aggression was Washington’s highest foreign-policy priority. That didn’t only mean that the U.S. put troops in Europe. Washington took European opinions seriously, engaged with Europeans, cut deals with them and was willing to make concessions to preserve alliance unity.

Clearly, some of that has changed. The next U.S. president may not share Mr. Trump’s undiplomatic instincts or his affinity for Brexiteers such as Nigel Farage and anti-Brussels figures like Hungary’s Viktor Orbán. But will he or she engage in the ritualistic ceremonies of diplomatic consultation with the various chancellors, presidents, commissioners and high representatives that Europeans so love? When America’s most urgent foreign policy worries involve smoothing over Japanese-Korean spats or facing down China in the Taiwan Strait, just how relevant will Europe be? When Europe calls Washington, will anybody answer the phone?

I think his assessment of the relationship between Europe and the United States is, flatly, wrong. I think that the trans-Atlantic alliance is just fine when we bear the cost of defending Europe or pursue European interests, particularly Germany’s, and becomes “braindead” when we pursue our own. I can think of any number of instances over the last 30 years when we have pursued European interests that didn’t advance ours and one instance over the last 30 years in which the countries of Europe pursued our interest in something that was of little interest to them. “Be reasonable; do it my way” has always been their primary operating principle.

Unlike the countries of Europe we have not only trans-Atlantic interests but trans-Pacific ones and, even more, purely American interests. Our biggest trading partners are China, Canada, Mexico, and Japan. Our aggregate trade with European countries is just about the same as our trade with Mexico and, let’s face reality, our interest in Mexican security is a lot greater than our interest in Italy’s.

The nations of Europe are in the midst of an identity crisis like nothing they’ve experienced in almost two millennia and which they must solve without our help. We can only get in the way. They will be so absorbed by that for the foreseeable future that they will have little helpful to contribute to our trans-Pacific or American interests.

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Does Virtue-Signalling Help or Hurt?

Over the weekend the people of Hong Kong reprimanded the government in Beijing in local elections. The editors of the Wall Street Journal approve:

The 452 district councillors have little power beyond answering to local concerns, but these elections were the first city-wide chance to render a verdict on nearly six months of protests against the government. More than 71% of voters turned out, and by our deadline the South China Morning Post was reporting that pro-democracy candidates had won 201 seats to only 28 for candidates representing the Hong Kong establishment or pro-Beijing parties. Twelve independents had also won.

It’s a stunning result. Some Hong Kong officials had speculated that a silent majority opposed to the protests might turn out to support the government. But the result showed that, whatever worries voters have about the excesses of some protesters, they are more worried about a Hong Kong government that follows Beijing’s orders.

and urge President Trump to sign the symbolic resolution passed by Congress:

The vote is also a message, or perhaps a plea, to President Donald Trump to support Hong Kong’s call for freedom. Mr. Trump hasn’t exactly been a voice of Reaganite moral clarity on Hong Kong, and he hasn’t decided whether to sign the Hong Kong Human Rights and Democracy Act that passed the House and Senate in nearly unanimous votes this month.

“We have to stand with Hong Kong, but I’m also standing with President Xi,” Mr. Trump said Friday. “He’s a friend of mine. He’s an incredible guy. . . . But I’d like to see them work it out. Okay? We have to see and work it out. But I stand with Hong Kong. I stand with freedom. I stand with all of the things that we want to do, but we also are in the process of making the largest trade deal in history. And if we could do that, that would be great.”

We understand Mr. Trump’s pragmatic desire not to insult Mr. Xi amid the trade talks, but his rhetorical indulgence of dictators is often cringe-worthy. The best you can say about Mr. Xi is that he hasn’t sent in Chinese troops to crush dissent in Hong Kong.

Do we stand on the side of liberal democracy and self-determination? Of course we do. What isn’t clear to me is whether the Hong Kong Human Rights and Democracy Act will help the people of Hong Kong, hurt them, or have no effect other than to signal how righteous we are. Shouldn’t we engage in more than just an affirmation of our lofty ideals? Or is it enough to express them while making our decisions pragmatically?

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Commander-In-Chief

The editors of the Washington Post are unhappy about the firing of the Secretary of the Navy:

Most offensive is what Mr. Trump’s actions say about his view of the military. “We train our boys to be killing machines, then prosecute them when they kill!,” he tweeted in October when he announced he would review these cases. Perhaps Mr. Trump has watched too many bad war movies, but if he were to consult with his military leaders or talk to the many fine men and women in uniform, they would tell him they are trained to engage in combat while following the laws of war and upholding the country’s ideals.

I have no opinion about the underlying case or, indeed, whether the firing was warranted. Article II, Section 2 of the Constitution designates the president as command-in-chief of the military. Implicitly that means that the president has the authority to and occasionally will act against the best military advice.

I get it. The editors (and their columnists) don’t like Trump.

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Lots of Jobs But They’re All Bad

I want to commend your attention to an article at Quartz by Gwynn Guilford for which the title of this post is a summary:

The numbers tell one story. Unemployment in the US is the lowest it’s been in 50 years. More Americans have jobs than ever before. Wage growth keeps climbing.

People tell a different story. Long job hunts. Trouble finding work with decent pay. A lack of predictable hours.

These accounts are hard to square with the record-long economic expansion and robust labor market described in headline statistics. Put another way, when you compare the lived reality with the data and it’s clear something big is getting lost in translation. But a team of researchers thinks they may have uncovered the Rosetta Stone of the US labor market.

Read the whole thing. This situation has not been lost on the Germans who characterize our strategy of maximizing the number of minimum wage jobs as “the American model”. How has this occurred?

  • Decline in primary production
  • Decline in manufacturing jobs
  • Increased trade with countries without enforced health, labor, or safety standards
  • Immigration, particularly illegal immigration
  • Outsourcing, both onshore and off

That doesn’t just have serious implications for the economy as the author points out. It has serious implications for our politics and government as well. Just as one example when most jobs don’t kick enough into the Social Security system to pay for the retirement benefits, it puts an inevitable strain on the entire program.

We are presently at a fifty year low in unemployment and nearing a fifty year low in job quality.

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