Category Archives: Lessig 2.0

Supercapitalism == super


I bought this book because I heard it described on the radio (NPR, no less) in a way that made it sound like the dumbest book of the decade. It turns out that it was the summary, and not the book, that was dumb. Indeed, this is a fantastic book by an extremely smart and experienced liberal. It is the first book on the Corruption Required Reading list.
A clue that there’s something interesting here is that here a liberal is arguing (among other great arguments) that the corporate income tax ought to be abolished (shareholders should pay that tax instead), and that corporations should not be giving health benefits to workers (the tax benefit is a huge skew to the economy, producing an inefficient and ineffective national health care system, costing close to $140 billion a year). Both sensible proposals signal that Reich is thinking, not simply rehearsing. And thought from a person as experienced as Reich, a Professor at Berkeley and Labor Secretary under Clinton, is critical to achieving the reform we need.
But the book will be on the required reading list for corruption because of the place corruption has in the argument. The basic arc of the argument is to first describe what Reich calls the “Not Quite Golden Age” in America, roughly the first half of the last century, when barriers to competition meant capitalism was relatively rich and big. Oligopoly defined the period; cooperation among big guys was the consequence.
This relatively quiet period for competition had some interesting consequences. (Big) business could afford to do socially helpful things (health care, etc.). Government could lean on them, and it was possible, because of the implicit protection of relatively weak competition, for them to give the government what it wanted.
We’ve now left the NQGA, Reich says, and entered a period of Supercapitalism — a time when competition has grown dramatically, and when half of us (meaning half of each of us, or at least half) more effectively demand lower prices in the product and service market place and higher returns in the investment market place. This hyper competition is forcing extraordinary rationalization in both markets. Wal-Marts and an exploding stock market are the consequence. The half of us that lives in the product/service and investment markets have been rewarded by this competition. Supercapitalism is producing super-efficiency, at least here.
The problem, from Reich’s (and my) perspective, is that the other half of us – the part that thinks not as an actor in a market, but as a citizen – has atrophied. That is, the half of us (again, of each of us – Reich’s point is that each of us has these two parts) that demands that government set sensible and efficient limits on private action has atrophied. Deep skepticism about government has made most of us turn away from it as a tool of sensible policy making. We instead (and this is a truly brilliant part of the book) turn to corporations to make good policy in government’s stead. We push for “corporate social responsibility” and praise corporations who agree to do the “good” thing, imagining that this means something other than the “money making” thing. This, Reich says, is “politics diverted” – trusting companies to do good policy rather than getting government to set good policy, imagining “corporate social responsibility” will produce something different from corporations maximizing profits.
This is a critically important point for people to get — and one that many good thinking souls don’t yet agree with. It’s related to an answer I gave to a great question by Jon Zittrain at the Corruption vAlpha lecture. As I said there, we need to understand the nature of the corporation — to make money — and come to love it, and yet, to keep it in its proper place, just as you can love a tiger, but know that it’s not the sort of thing that should play with your kid. (Here’s the question and answer). Corporations are not more efficient governments. They are instead increasingly efficient money making machines. And while there’s nothing at all wrong with money making machines — indeed, wealth and growth depends upon them — there is something fundamentally wrong with trusting these machines to restrain the drive for profits in the name of doing the right thing. The cushion that enabled that in the past (relatively limited competition) is gone. The job of GM is even more now to make money for GM.
Recognizing this point forces you to recognize how important it is that we make government work. It is government’s job to set the appropriate limits on corporations (and individuals) so that when corporations and individuals pursue their self-interest, they will not harm a public interest. If government were doing that sensibly, it would force carbon producers to internalize the negative externality of carbon (something our current government doesn’t do), just as it would force those who benefit from creative work to internalize the positive externality of creativity (something our current government is obsessed with doing).
And this leads to the link with the work on corruption: for notice (surprise!, surprise!), government is pretty good at forcing internalization when it benefits strong special interests (again, copyright), and not when it harms strong special interests (again, carbon). Here, and in a million contexts, the government is coopted by the powerful influence of powerful interests. Reich points to the obvious and well known examples of money buying (indirectly) influence. He also points nicely to the “corruption of knowledge” as he calls it, coming from corruption policy analysis. Nothing gets fixed till we fix these corruptions, powerfully identified in this very clearly and beautifully written book.
[Criticism? Only one small nit: Reich works hard to argue that we should not think of the corporation as a person. Corporations have no “corporeal form,” he argues. A corporation instead is just a legal form for the activity of people. The law should therefore focus on those people, and not on this corporation. The corporation should therefore have no rights. It should also have no “corporate” responsibility. The only rights and responsibilities here are rights and responsibilities of people.
I agree that in lots of cases, the law should focus on the people, and not the corporation. But I reach that conclusion based upon the utility of focusing upon the people inside a corporation rather than upon the entity itself. In my view, however, there are times when it does make sense to think about the corporation as an entity and to allocate responsibility in that way. Reich concedes as much when it is civil liability at stake. But focusing on the non-thingness of a corporation, he rejects criminal liability for the corporation. I reject a thingness theory of criminal responsibility. My view is informed by the work of (in my view) one of the most brilliant members of the legal academy, Meir Dan-Cohen. His work is not online (not brilliant), but see, e.g., his Freedoms of Collective Speech, 79 Cal. L. Rev. 1229 (1991). ]
Buy (Amazon, B&N) or borrow this book soon. And thank you to Robert Reich. Continue reading

Posted in Corruption, Lessig 2.0 | 45 Comments

Corruption Interview – short version

I got off a plane in Copenhagen and drove directly to this interview. Continue reading

Posted in Corruption, Lessig 2.0 | 18 Comments

Corruption Lecture – alpha version

As promised, here’s the first lecture on corruption. It is an alpha version. I’m eager for comments and feedback. My first written feedback came from Aaron Swartz, with whom I had conspired last winter about making this move. I’ll post his comments and some replies later today. I’ve also set up a page on the wiki where I will collect significant versions of the argument. Summary and criticism there would be helpful. Continue reading

Posted in Corruption, Lessig 2.0 | 76 Comments

Back to the Future: The "corruption" that is the FCC

The wires are sparking with news of the GAO report (pdf) that FCC insiders routinely tipped lobbyists and corporate insiders about agency agenda decisions before they were made public. This is critical, because under agency “sunshine rules,” FCC members can’t be lobbied for the week between the public announcement of an agenda and the meeting. Knowing what’s going to be announced on the agenda in advance thus gives lobbyists and corporate insiders an opportunity to lobby before the sun[shine rules] rise. From the report:

FCC generally followed the rulemaking process in the four case studies of completed rulemakings that GAO reviewed, but several stakeholders had access to nonpublic information. Specifically, each of the four rulemakings included steps as required by law and opportunities for public participation. Within the case studies, most ex parte filings complied with FCC rules. However, in the case studies and in discussions with other stakeholders that regularly participate in FCC rulemakings, multiple stakeholders generally knew when the commission scheduled votes on proposed rules well before FCC notified the public. FCC rules prohibit disclosing this information outside of FCC. Other stakeholders said that they cannot learn when rules are scheduled for a vote until FCC releases the public meeting agenda, at which time FCC rules prohibit stakeholders from lobbying FCC. As a result, stakeholders with advance information about which rules are scheduled for a vote would know when it is most effective to lobby FCC, while stakeholders without this information would not.

When I commented upon this to a colleague, his response was typical: “What do you expect? And anyway, so what? What’s wrong with giving affected parties a bit more time to make their case?”
“What’s wrong” first is that the rules say otherwise.
“What’s wrong” second is that the rules are bent in a completely predictable way. Agency insiders curry favor with precisely the people they’ll be getting a job with after they leave the FCC.
And “what’s wrong” third is just what this indicates about the kinds of bending we might expect goes on inside the FCC. If the agency is willing to bend the rules to favor futures employers, are they willing to put the thumb on the scale in difficult contested policy determinations?
But my colleague was right about one thing: “What do [I] expect?” Here’s an agency chaired by a former lobbyist. Is it likely to be scrupulous about rules meant to constrain or balance the lobbying process?
This example is just one many that is our government. (As I’m learning as I work through the extraordinary reading list compiled by my Read-Write readers at the Lessig Wiki on Corruption. But it needs to become a bigger issue for the candidates in this election. Let’s hear a promise by the presidential candidates that they will only appoint FCC commissioners who promise not to work for those they have regulated for at least 5 years after their term is over. That would be real change.
Continue reading

Posted in Lessig 2.0, Telecom | 10 Comments