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America’s Monopoly Crisis Hits the Military

268 points by jdkee 7y ago

deboflo 7y ago
This article explains everything. Holy cow.
topkai22 7y ago
Fascinating that the author starts an article on the danger of monopolization with Bell Labs as an icon of American innovation, as the reason Bell Labs existed was Bell's monopoly of the American telephone system. I really wish he had addressed that, especially as it suggests that a well regulated monopoly may be desirable. I also wish he'd addressed that the barriers to entry in many of these areas are extremely high, and not just for monopolistic reasons - There is an analogue to Moores law (I can't remember the name) that states that the cost of a semiconductor fab facility doubles roughly at the pace semiconductors shrink. Where this is happening (and its been happening in defense aerospace for a long time), there is a natural trend toward consolidation because the payoff is too low to up another facility or line. Overall an amazing article though.
- AstralStorm 7y ago
  Military tech can do easily without highest level integration. (In fact enhancing robustness and simplifying maintenance.) The problem is keeping lower tech fabs afloat as they wouldn't get much external business. And if course sourcing base rare earth and chemical components into processes. Even machinery itself is getting problematic. EU faces the same problem, tackling it semi-successfully with regulation, but it's size limited. Russia keeps its military to itself in working condition with few dependencies, but it is getting increasingly outdated...
- wrycoder 7y ago
  Not only that, but semiconductor equipment manufacturing and, to a great extent, its design has been offshored to the Far East. Many of the associated US engineering experts have since retired. The lead time to replace this capability is likely decades, not years.
  - swagasaurus-rex 7y ago
    I meet many people in the younger generation who cannot find skilled work even with STEM degrees. There is a real human toll that comes with these decisions, in that so many talented individuals that work coffee shops and service jobs, unable to score a technical job without X years experience because their genius and talent is simply not valued by companies. At least, not at the wages these companies have come to demand.
  - khuey 7y ago
    The Department of Commerce claims that the US produces half of the world's semiconductors and slightly less than half of the world's semiconductor manufacturing equipment. https://www.trade.gov/topmarkets/pdf/Semiconductors_Executive_Summary.pdf https://www.trade.gov/topmarkets/pdf/Semiconductors_Executiv...
    - nickpsecurity 7y ago
      That probably includes companies that are U.S.-owned with overseas fabs. I don't think I'd count that as U.S. production if thinking about jobs or subversion. Corroborated by something in the report which corroborates many of the fabs mostly being outside the U.S.: "Over 90 percent of global semiconductor manufacturing equipment sales outside the United States take place in five markets: China, Taiwan, Japan, Korea (South) and the EU, creating a very concentrated market. "
aswanson 7y ago
America's short-term focus on quarterly results will be its eventual undoing. No long-term thinking; it's like making your kids drop out of school & farming them out for child labor to make monthly family income look good. Totally shortsighted.
wrs 7y ago
In broad strokes this is also what has happened to the US health care system and other important realms in the past few decades: making numbers in spreadsheets (and the compensation of a small number of people) a higher priority than the actual problems supposedly being solved, whether it’s communications, national security, or the well-being of the population. Somehow, profits as measured by the finance sector have become an absolute positive, as if there’s never any tradeoff with other non-financial goals. Money isn’t real, and generating more of it can never be a sensible primary goal; phones, airplanes, and health are real.
- taxicabjesus 7y ago
  IMHO, health care in the United States is used as a job project, to provide jobs for all the people who used to build stuff. When I was a taxi driver, one of my jobs was to take poor people to their medical appointments. The taxi company I used to drive for has reformed itself around its contracts with the various insurance companies. I never got a number for how much the government paid to get people to their appointments, but I imagine it was on the order of $2/mile (the driver got $1.50/mile, iirc). Some of the people I took to their appointments certainly had transportation charges that were higher than the fee paid to the service providers -- say $100/round trip for transportation, vs. $30 for the counseling session or doctor's appointment...
  - debatem1 7y ago
    Why was the government paying a contract between an insurance company and a taxi company?
    - vharuck 7y ago
      State governments typically plan activities by connecting private sector groups and greasing the wheels. A lot of money goes to encouraging regular checkups or screenings, but people are less likely to go if they need to take a bus: routes and schedules mean they need to take off more work, and it's easy to just skip and do one of the million other things that need done now (even just unwinding). But a taxi who comes to you is convenient and hard to say "No" to.
olliej 7y ago
I mean it seems like the simple thing here is just to treat price gouging the military equivalent to treason - after all money paid to executives paychecks rather than, say, armour is direct harm. In the early days of the MIC the companies were required to sell at cost because they were able to use the technology they developed with military resources in the commercial world. I still don’t understand how a single missile “costs” more than a million dollars, even with absurd mark up
- cheerlessbog 7y ago
  > still don’t understand how a single missile “costs” more than a million dollars, even with absurd mark up I assume the part that isn't profit is development. The actual unit cost of manufacture is quite small. This is why military contracts should be fixed price payable on achieving deliverables. Let the vendor own the risk and price it in. The military picks the lowest credible price.
  - olliej 7y ago
    Back in the days of the nuke programs the companies were not permitted to charge more than the per device cost. It was recognized that the tech that they developed depended on a lot of resources they got from the us gov - r&d, testing facilities, etc. In exchange for only chargin actual cost, they were allowed to monetize technology and equipment that was developed in conjunction with the government. That’s why they weren’t allowed to charge more than the cost of production: they didn’t pay for all of the r&d, they didn’t have to pay for cleanup (hence superfund sites). Their profit came from selling products using government funded research to non-gov entities
tsunamifury 7y ago
The American economic tournament is incentivizing the wrong north star metrics, and people are beginning to finally realize it. However most seem to not know what to do about it. Quality of life, on many dimensions, is any communities North Star, and the current metrics of employment and market size have detached themselves from that. I think things like Libra and other attempts will be the beginning of individuals experimenting with post Dow national metrics, and hopefully one of them will discover a better tournament for human growth and value.
taxicabjesus 7y ago
Overall I think this is an excellent article. But it misses a few points, mainly in how much of the United States' resources have been squandered in fighting pointless wars. In January 2017 Chinese CEO Jack Ma (Alibaba) commented on the United States' gifts to China [0]: "Ma says blaming China for any economic issues in the U.S. is misguided. If America is looking to blame anyone, Ma said, it should blame itself. "'It’s not that other countries steal jobs from you guys,' Ma said. 'It’s your strategy. Distribute the money and things in a proper way.'” "He said the U.S. has wasted over $14 trillion in fighting wars over the past 30 years rather than investing in infrastructure at home. "To be sure, Ma is not the only critic of the costly U.S. policies of waging war against terrorism and other enemies outside the homeland. Still, Ma said this was the reason America’s economic growth had weakened, not China’s supposed theft of jobs." Another Jack Ma quote from the same time period [1]: "'The past 30 years, companies like IBM, Cisco and Microsoft made tons of money.' "The question is: where did that money go? It was wasted, Ma explained. "'In the past 30 years, America has had 13 wars at a cost of $14.2 trillion. That’s where the money went.' He also questioned America’s decision to bankroll Wall Street after the 2008 financial crash, arguing the money would have been better spent in other areas. "'What if they had spent part of that money on building up their infrastructure, helping white-collar and blue-collar workers? You’re supposed to spend money on your own people.'" [0] Chinese billionaire Jack Ma says the US wasted trillions on warfare instead of investing in infrastructure - https://www.cnbc.com/2017/01/18/chinese-billionaire-jack-ma-says-the-us-wasted-trillions-on-warfare-instead-of-investing-in-infrastructure.html https://www.cnbc.com/2017/01/18/chinese-billionaire-jack-ma-... [1] Jack Ma: America has wasted its wealth - https://www.weforum.org/agenda/2017/01/jack-ma-america-has-wasted-its-wealth/ https://www.weforum.org/agenda/2017/01/jack-ma-america-has-w... Over the past 50 or 100 years, US Presidents from both parties have tended to be 'useful idiots'. Maybe Kennedy would've figured things out, but a loan gunman took him out before he could stand up to the "military-industrial complex" his predecessor had warned about. The peanut farmer (Carter) wasn't so bad, but he didn't seem to have a big-picture understanding of what he was up against. Reagan might've been effective, then he got shot by a loan gunman early in his first term [2], and was kind of useless after that. GHW Bush was indoctrinated in the dark arts due to his stint at the CIA. Clinton picked up Bush's "globalization" policies (NAFTA, WTO) and ran with them. GW Bush was a dyslexic useful idiot extraordinaire. Obama meant well, but he didn't have any life experience other than community organizing, academics, and politicking. [2] https://en.wikipedia.org/wiki/Attempted_assassination_of_Ronald_Reagan https://en.wikipedia.org/wiki/Attempted_assassination_of_Ron... Humanity's traditional problem was scarcity. The onward march of technology has allowed our species to achieve liftoff. Our problem is now in figuring out how to share the abundance.
jdhn 7y ago
As someone who leans conservative, it's interesting to see anti-monopoly ideas starting to come back in from the cold. However, as we all know, talk is cheap and action isn't. I guess I'll start believing that this isn't just a fad once a Republican Justice Department goes after existing monopolies.
- AstralStorm 7y ago
  Unfortunately, potentially well indoctrinated to give rich a break. And rich have stakes elsewhere, in short term status quo.
- sandworm101 7y ago
  It is a common problem among right-wing/conservative thinkers. There is an inevitable conflict between the concepts of "freedom of property" and "competition". If people (corporations) are to be given freedom over their property they might choose to put all that property under one leadership, creating a monopoly. The standard conservative reaction to such issues is a "market based" incentive against monopolies, such as what is being done with SpaceX/ULA. The government buys from two people, ensuring that at least two market actors survive. But the advantages of monopoly are extraordinary. Eventually the government has to step in and deny a merger (like they just did with photomultiplier tubes) or bail out a failed business. So conservative principals are inevitably sacrificed. The more mature option is to encourage a healthy market through regulation long before the market boils down to two, but that is definitely not a conservative ideal.
  - ernst_klim 7y ago
    >There is an inevitable conflict between the concepts of "freedom of property" and "competition". There is no such thing. All the american monopolies are due to protection policies defending them from the competition, i.e. due to the government's interventions. FCC, FDA, FAA are all run by corps' shills. US is a one big blatant example of regulatory capture and crony capitalism at its worse.
    - andrekandre 7y ago
tanderson92 7y ago
More from this author on monopolies (and politics): https://www.theatlantic.com/politics/archive/2016/10/how-democrats-killed-their-populist-soul/504710/ https://www.theatlantic.com/politics/archive/2016/10/how-dem...
- dredmorbius 7y ago
  Matt Stoller (the author), along with Lina Kahn (see her "Amazon's Antitrust Paradox" https://www.yalelawjournal.org/note/amazons-antitrust-paradox https://www.yalelawjournal.org/note/amazons-antitrust-parado...) are probably the two leading scholars of anti-trust and monopoly in the United States. Both are strongly recommended.
dctoedt 7y ago
FTA: "Policymakers must recognize that industrial capacity is a public good and short-term actors on Wall Street have become a serious national security vulnerability. While private businesses are essential to our common defense, the public sector must once again structure how we organize our national defense and protect our defense industrial base from predatory finance. For several decades, Wall Street has been organizing not just the financing of defense contractors, but the capabilities of our very defense posture. That experiment has been a failure. It is time to wake up, before it’s too late."
- andrekandre 7y ago
  that “experiment” being neoliberalism perpetrate by both parties, to the detriment of us all... a slight-of-hand to bring back the old days of rule by financiers and basically “cancel the future‘
sandworm101 7y ago
>> top market share because its equipment—espionage vulnerabilities aside—is the best value on the market. It is horrible. It is full of stupid security flaws, something that may or may not be linked to the NS concerns. It is "best value" because it ticks all the performance boxes, but is total junk in every other area. To cite Clarkson, it is like a kid with a turbo on his honda civic. It may be as fast off the line as a Ferrari, but in no other way is is anything like a Ferrari.
- bilbo0s 7y ago
  Except in this case, there is no Ferrari. That's the crux of the issue that the article kind of touches on, but not really. Are Ericsson and Nokia free of EU surveillance facilities? Is any American equipment free of surveillance facilities? This is the real problem, lack of open hardware that we can readily validate as "better" or "worse". With a Honda and a Ferrari, we're free to pop the respective hoods and look into what we find. Heck, we can go way further than that if we know our OBD equipment well enough. But not so with, say, your average router. So people out in the non American parts of the world say, "Meh, one's just as good as the other. They're all spying. May as well get the cheapest equipment I can." And right there, market share is won.
  - sandworm101 7y ago
    There is some good stuff out there. It ain't cheap, but it is possible to purchase and maintain secure networks. https://en.wikipedia.org/wiki/TACLANE https://en.wikipedia.org/wiki/TACLANE (just an example, one of the few publicly-available descriptions of such networking products.)
    - bilbo0s 7y ago
      The point is that no one outside the US is going to accept that such equipment is completely free of American surveillance facilities. So why pay the premium? Buy the cheap stuff, and just let the big guys spy on you. Since they will do so whether you spend a lot, or a little. That's how the Chinese are winning market share. Because in a world where everything is compromised, well, price all of a sudden is the dominant consideration.
ex3xu 7y ago
It's refreshing for me to see an article from a modern conservative outfit that actually seems to understand the adversarial relationship between the finance sector and the principles of economic conservatism. I particularly liked the section talking about historical precedents and bipartisan support for initiatives: > Believe it or not, America has been here before. In the 1920s and 1930s, the American defense industrial base was being similarly manipulated by domestic financiers for their own purposes, retarding innovation and damaging the nation’s ability to defend itself. And American military readiness was ebbing in the midst of an increasingly dangerous world full of rising autocracies. > Within the defense base itself, every example—from TransDigm to L3 to Chinese infiltration of American business—has drawn the attention of members of Congress. Representatives Ted Budd and Paul Cook are Republicans and Representatives Jackie Speier and Ro Khanna are Democrats. They are not alone. Democratic Senator Elizabeth Warren and Representative Tim Ryan have joined Khanna’s demand for a TransDigm investigation. Outside of this article, the best writing I've seen on this topic of short-term incentives is from British economist John Kay's book "Other People's Money", for example when he compares the annual reports from chemical company ICI in 1987 and 1994. 1987: ICI aims to be the world's leading chemical company, servicing customers internationally through the innovative and responsible application of chemistry and related science... 1994: Our objective is to maximise value for our shareholders by focusing on businesses where we have market leadership, a technological edge and a world competitive cost base. Kay goes on to explain how ICI, a leading British chemical company since its founding in the 1920s, attracted a short term flurry of investment activity but ultimately sold in 2007 just about a decade after their change of priorities. Kay primarily blames an over-expansion of the finance sector and the revolving-door culture on Wall Street, fairly consistent with the premises of this article.
- Theodores 7y ago
  Agreed, this was a truly refreshing article. Not least due to the 'conservative' perspective and the view of the finance sector. The finance sector is the enemy! Globalisation has been a big thing in the arms trade for the last twenty years. Obviously sales have always gone on but what happens if you end up with one monopoly defence contractor that sells to both sides in every conflict in every corner of the globe? In the UK the government used to make its own stuff. The shipyards were state owned and the Royal Navy really did rule the waves. The bullets and shells were made in state owned factories. This provided an anchor to the rest of the industry that needed and went through a lot of consolidation in the post war years. Projects and costs did over-run but a project could be put out to tender with 3-4 competing concerns submitting proposals. If the proposals were no good the government could do it in house. But then when everything gets sold off to private finance and then resold to giant trans-national mega corporations, the giant mega corporations get to be bigger and more powerful than the governments. They then become in charge so democracy isn't for the people and by the people. A similar thing has happened with property in the UK. The government and local councils used to own a large part of the housing estate. This provided an anchor in the marketplace so people could afford to rent affordable housing. When this was sold off it meant that prices skyrocketed and nowadays the government has to give a lot of tax revenue to private property owners to put up benefit claimants. Again the speculators and the interests of finance capital get to be in charge. I will take up your John Kay recommendation. Anyway, the article was most interesting as normally it is a left-wing anti-militarist, anti-capitalist viewpoint that sees finance capital as the enemy, not any view with 'conservative' in the name.
chewz 7y ago
War or no war China will be always happy to sell material to US. It had happened before with British buying Zeiss binoculars from Germany in exchange for rubber during WWI. https://en.m.wikipedia.org/wiki/First_World_War_glass–rubber_exchange https://en.m.wikipedia.org/wiki/First_World_War_glass–rubber...
- cheerlessbog 7y ago
  The cynicism in that negotiation is startling. Essentially they are both agreeing they want the war to be extended. Unless both sides considered the other was over estimating the benefit to themselves.
- jonathankoren 7y ago
  I had no idea that happened. Yet another fact to become infuriated about when thinking about the stupidity of the WWI.
mNovak 7y ago
Having a small business that works in defense, I can tell you the upper tiers of military recognize and are worried about diverse production and innovation. But, there's an issue called the "Frozen Middle", where the middle managers, decision makers, and contract officers will still pick the mega-primes because they're perceived as safe, in an environment were compliance and liability is extreme. So, it's hard for (very) small businesses to get a secure foothold, and god forbid they start winning bigger contracts, because the Primes will come muscle them out. Not mentioned in the article is the issue of blatant technology theft by the Primes from small business. This is very well known in the industry, and a huge issue because typically the Primes are the gatekeepers to integration on a weapons platform.
- nickpsecurity 7y ago
  You totally left off corruption at military level. The "Revolving Door" of the Pentagon where the big ones keep hiring the very people that issue them contracts and letting them go back. They get cozy six-figure jobs or other perks for issuing contracts starting in the millions. Last write-up with lots of detail I saw here was this one on SAIC: https://www.vanityfair.com/news/2007/03/spyagency200703 https://www.vanityfair.com/news/2007/03/spyagency200703 There's also the Congress side where the contracts they're pushing bring jobs to their districts. One joke, which might be true, about the B2 was that the ridiculously-expensive project kept getting support since part of it is made in every state. I never confirmed if that one was true, though. Just remembered it as a funding strategy. ;)
  - mjbmitch 7y ago
    In case anyone hasn't heard about SAIC in a while, they now go by Leidos.
    - nickpsecurity 7y ago
      Thanks! Just made a few headlines make more sense to me.
- robertAngst 7y ago
Aloha 7y ago
This covers most everything I wanted to say - From the comments in the article: "Very good article. I worked at Bell Labs from 1975-77 after my undergraduate degree. Today, young Scientists don't even know that Bell Labs existed or what it accomplished. I have worked in R&D since 1983 and have watched this process from that vantage point. People used to say, we are just moving the production but we will keep the R&D. That doesn't work. It may take some time, but the R&D eventually follows the shop floor."
- SkyMarshal 7y ago
  Andy Grove spent the last decade or so of his life campaigning about exactly that problem. R&D is not separate from production. Lose the latter and you lose the former. https://www.nytimes.com/2016/03/26/opinion/andy-groves-warning-to-silicon-valley.html https://www.nytimes.com/2016/03/26/opinion/andy-groves-warni...
  - rstuart4133 7y ago
    > R&D is not separate from production. Lose the latter and you lose the former. It's fortunate it doesn't apply to software, isn't it? Otherwise the West would be screwed. As it is Google / Apple et al don't make much at all, it's all done in China. But there is literally zero chance of their expertise all toddling off to China. Trump's Huawei ban has a better chance of leading to China developing it's on inhouse software expertise than Apple making stuff there.
    - SkyMarshal 7y ago
      They won't lose their software expertise, but China is gaining it, especially in some areas like AI. And b/c of that I'm not sure how much of a moat software-only expertise is as. It's hard to spin up a rich supply chain of industrial production, or re-spin it up in this case, but much easier to spin up software production and compete in that domain.
georgeburdell 7y ago
I reject some of the premise of the article. Just because we can't build mega structures doesn't mean we can't effectively project power and defend ourselves. There hasn't been a conventional war in years; no amount of fighter jets or tanks will cause the Taliban to submit. That said, my opinion is that equally to blame as Wall Street is the schism between the military and the coasts, which house most of the country's intellectual power. It's hard to imagine today that the Bay Area was the center of defense R&D two generations ago. Today there is largely the perception that the U.S. military is acting in a manner counter to what we perceive ourselves to be as a liberal democracy. Evidenced by the recent Google and Amazon protests, knowledge workers bristle at the possibility of their work being used for purposes that aren't entirely positive. As far as I'm aware, the Chinese have no such hang-ups. Is it the fault of the military for appearing too evil, or is it the fault of progressives singing the siren song of non-aggression in a hostile world, who knows. Now, the part I agree with is the supply chain issues. I go out of my way to buy American and local whenever possible, even if it means a higher price, because I realize the importance of domestic production will play in a future where the U.S. isn't the undisputed leader of the world.
- paganel 7y ago
  > Today there is largely the perception that the U.S. military is acting in a manner counter to what we perceive ourselves to be as a liberal democracy. This is a direct consequence of starting the Iraq war on very false premises (even lies) and then continuing to wreak havoc in the entire Middle East for the the sole interest of a few people and corporations. Eventually lies do get to you.
kneel 7y ago
>Americans invented the telephone business and until recently dominated production and research. But in the last 20 years, every single American producer of key telecommunication equipment sectors is gone. So qualcomm doesn't exist?
- georgeburdell 7y ago
  Qualcomm is largely modems. The actual base stations with which the modems communicate are not made by them to my knowledge. Nor the fiber optic infrastructure, switches, etc. Their statement is accurate. You can't build an all-American telecomm network today.
Dowwie 7y ago
>>> One of the most ardent opponents of consolidation in the 1990s is current presidential candidate Bernie Sanders, who in 1996 passed an amendment to block Pentagon subsidies for defense mergers, or what he called “Payoffs for Layoffs.”
asni 7y ago
I can't speak to other services, but the Air Force is pushing hard (relatively speaking) into investing in startups. Naturally, since the minds behind this are rather technologically inept the results are mixed. (3d printers and virtual reality for everyone!) but they have implemented some programs to provide funding and contracts for startups that fill a critical role - afwerx being an example. https://www.afwerx.af.mil/ https://www.afwerx.af.mil/
dctoedt 7y ago
Apropos of Wall Street's dominance: I've read that the "greed is good" [0] obsession with money started to catch on in the 1980s, after the Reagan tax cuts. Plus, corporate executives use their financial compensation as a way of keeping score in the career game, while compensation committees look to consultants to tell them what the average comp is for executives — which means that the average comp keeps drifting up (because we certainly wouldn't want to pay our CxO less than the average, would we?). The problem, of course, is that this obsession makes for a bad combination with a focus on the short term, which is practically Wall Street's middle name. I'm intrigued by the notion that the best long-term fix for short-term financial thinking is to go back to a 70% top marginal tax rate, for that portion of incomes that exceed some multiple of the median (maybe 10X?). That'd still be less than the 91% top rate in 1960 [1] — and it would reduce the competitive incentive for executives and investors to scratch and claw for more and more money as a proxy for [anatomy] measuring. [0] https://www.wikiwand.com/en/Gordon_Gekko https://www.wikiwand.com/en/Gordon_Gekko [1] https://taxfoundation.org/some-historical-tax-stats/ https://taxfoundation.org/some-historical-tax-stats/
- microcolonel 7y ago
  The tax code is completely different today from what it was when there were considerably higher marginal tax rates. The actual ratio of tax to GDP has not changed considerably since then. Try to actually understand the totality of the circumstances you're talking about. Too many people think they have just-so solutions to a problem they can't even characterize in any useful way. Please don't add fuel to the fire. The problems facing America can not be reduced to a misunderstood slogan or the name of a president or a street name or a single policy strategy. "Fight for fifteen"-ism and "the one per cent!"-ism do not magically make ordinary Americans richer. The catchier it is, the more likely there is a hidden beneficiary you aren't considering.
  - dctoedt 7y ago
    > Try to actually understand the totality of the circumstances you're talking about. Please enlighten us. > The tax code is completely different today from what it was when there were considerably higher marginal tax rates. I'm aware. (I was in law school taking a couple of tax-law courses during the 1980 election debates about Reagan's proposed tax cuts.) > The actual ratio of tax to GDP has not changed considerably since then. Please explain how this is relevant to individual incentives and the "emergent behavior" that they create.
solidsnack9000 7y ago
Yet, TransDigm's stock price thrives because Wall Street loves monopolies, regardless of who they are taking advantage of. Implicit in this passage is a judgment of Wall Street, a laying of blame, but that is misplaced, because while investors may be in a good place to assess the national security implications of the company's strategies, they are not in a position to address them. Failing to maintain critical supply chains and human capital is not their mistake to make. If the government (or governments, the 50 states matter just as much) allows or encourages certain mergers, permits off-shoring of critical industries and does little to ensure the technical capability of a new generation of Americans, investors are basically stuck with that. They can choose to buy or sell; they aren't policy makers.
- rossdavidh 7y ago
  Absolutely. The problem is not that Wall Street loves monopolies, but that every other part of the American society that was supposed to _not_ love monopolies, has been asleep at the switch in this regard for decades.
  - nickpsecurity 7y ago
    It's both. You can always invest in companies that make money and do less evil. Even better, mandate that they form as public-benefit companies or non-profits chartered to act like a profit-seeking business but minimize known forms of harm. Can get us some of the way. On buyer side, buy from ethical suppliers or just more ethical ones. My easy example is getting stuff from Costco vs Amazon if available at both. AFAIK, Costco isn't putting anyone in ambulances to avoid air conditioning or other major evils.
gumby 7y ago
Instead of worrying about domestic production, how about entangling the two economies such that they can't afford to attack each other. Canada, USA, and Mexcio aren't going to start shooting at each other because any attack would ruin the attacker's supply chain -- and customer base. This is similar to the NATO principle: entangle the countries' military objectives together but don't make it worthwhile for them to invest in actual military power -- essentials bribing them to not be able fight wars (this is why complaining that they don't pay "enough" is potentially destabilizing and could cost more later).
rb808 7y ago
I agree the loss of manufacturing & production skill in the US is a problem. I dont think you can blame Wall Street directly for "short termism". Monopolies aside, investment flows to the most efficient ways of doing things. Right now in a globalized world that really is to produce in China. If you want the most strategic and adversarial way that is a different problem. Globalization has been a drive for American governments the last half a century, was it wrong? You can't blame the investment community for globalization.
mensetmanusman 7y ago
I honestly don’t see America surviving the next century. There is no simple way to describe the inefficiencies, but one thrust follows the fact that it is in essence a ‘bad thing’ that our politicians are held in such contempt. I see our brightest minds instead going into finance to work to enrich themselves with no clear moral framework. Our best problem solvers in science and engineering fields, who we need in positions of government at this moment, are horrified at the prospect of how they would be treated by our media and shy away.
- jackcosgrove 7y ago
  I agree that good people avoid politics because of the media exposure, but that happens everywhere. I disagree that the brightest minds go into finance. That may have been true in the 80s and 90s but since the dot com era the brightest minds have gone into tech (as distinct from science and industry).
solotronics 7y ago
Many (most?) American corporations have already been subverted on a level where they make major decisions against US long term interests in favor of short term profits and working for China. Working for China I say!? how outrageous! A board member, middle manager, CTO, etc. can literally be bought by the Chinese government and NOTHING will ever happen. The Chinese have looked at our corporate system and found the weakness in decision makers. Without strong laws in place preventing this we will suffer a death of a thousand cuts as our companies sell out secrets and markets to the Chinese government. Edit: If you are a Chinese business man and make decisions perceived by the PRC as selling out your people to America you would probably disappear in the night. In the US you can do this with impunity. How to succeed without becoming totalitarian ourselves?
- api 7y ago
  Marx once quipped that capitalists would sell the rope used to hang them. The Chinese are really only nominally Communist (and barely even that) but that statement remains as true as ever. Finance has zero foresight.
  - SkyMarshal 7y ago
    The CCP may be nominally communist, but it’s scarily authoritarian.
fourthark 7y ago
It's good to see a successful think tank (Open Markets Institute) devoted to the anti-monopoly cause. I guess this means that there is a faction of the moneyed class which thinks monopolies aren't such a good idea. Edit: some background on OMI: https://www.wired.com/story/freedom-from-facebook-open-markets-institute/ https://www.wired.com/story/freedom-from-facebook-open-marke...
pergadad 7y ago
The author makes.many excellent points but one very big mistake: the assumption of evil intentions on the part of China (and Nazi Germany for that matter). They are not so much concerned with pushing the US into a dependency, but rather mich more with 1) building up key economic sectors and 2) assuring their own independence of US suppliers. That US capacity shrinks at the same time might be a side effect but is not the first priority any other country aims for. Its actually the US which has long and intentionally cultivated dependence of other countries in defense and these others do resent this situation the same way the author sees.it from the US perspective. Just look at the embarrassing Eurohawk project, which takes outdated US drone technology and adds a mild update, but to produce it the consortium first has to buy full drones from US suppliers. Totally ridiculous and immense >bn€ waste of funds, but initiated in a mutual understanding that there is a defense partnership and interreliance between the US and EU partner countries.
SkyMarshal 7y ago
It's incredible how much damage the financial industry has done to America over the past two or so decades. GFC, healthcare financialization/rent-seeking/price-gouging, and decimation of our industrial base. How much more of this can we take.

268 points by jdkee 7y ago

This article explains everything. Holy cow.

Fascinating that the author starts an article on the danger of monopolization with Bell Labs as an icon of American innovation, as the reason Bell Labs existed was Bell's monopoly of the American telephone system. I really wish he had addressed that, especially as it suggests that a well regulated monopoly may be desirable. I also wish he'd addressed that the barriers to entry in many of these areas are extremely high, and not just for monopolistic reasons - There is an analogue to Moores law (I can't remember the name) that states that the cost of a semiconductor fab facility doubles roughly at the pace semiconductors shrink. Where this is happening (and its been happening in defense aerospace for a long time), there is a natural trend toward consolidation because the payoff is too low to up another facility or line. Overall an amazing article though.

AstralStorm 7y ago
Military tech can do easily without highest level integration. (In fact enhancing robustness and simplifying maintenance.) The problem is keeping lower tech fabs afloat as they wouldn't get much external business. And if course sourcing base rare earth and chemical components into processes. Even machinery itself is getting problematic. EU faces the same problem, tackling it semi-successfully with regulation, but it's size limited. Russia keeps its military to itself in working condition with few dependencies, but it is getting increasingly outdated...
wrycoder 7y ago
Not only that, but semiconductor equipment manufacturing and, to a great extent, its design has been offshored to the Far East. Many of the associated US engineering experts have since retired. The lead time to replace this capability is likely decades, not years.
- swagasaurus-rex 7y ago
  I meet many people in the younger generation who cannot find skilled work even with STEM degrees. There is a real human toll that comes with these decisions, in that so many talented individuals that work coffee shops and service jobs, unable to score a technical job without X years experience because their genius and talent is simply not valued by companies. At least, not at the wages these companies have come to demand.
- khuey 7y ago
  The Department of Commerce claims that the US produces half of the world's semiconductors and slightly less than half of the world's semiconductor manufacturing equipment. https://www.trade.gov/topmarkets/pdf/Semiconductors_Executive_Summary.pdf https://www.trade.gov/topmarkets/pdf/Semiconductors_Executiv...
  - nickpsecurity 7y ago
    That probably includes companies that are U.S.-owned with overseas fabs. I don't think I'd count that as U.S. production if thinking about jobs or subversion. Corroborated by something in the report which corroborates many of the fabs mostly being outside the U.S.: "Over 90 percent of global semiconductor manufacturing equipment sales outside the United States take place in five markets: China, Taiwan, Japan, Korea (South) and the EU, creating a very concentrated market. "

aswanson 7y ago

America's short-term focus on quarterly results will be its eventual undoing. No long-term thinking; it's like making your kids drop out of school & farming them out for child labor to make monthly family income look good. Totally shortsighted.

wrs 7y ago

In broad strokes this is also what has happened to the US health care system and other important realms in the past few decades: making numbers in spreadsheets (and the compensation of a small number of people) a higher priority than the actual problems supposedly being solved, whether it’s communications, national security, or the well-being of the population. Somehow, profits as measured by the finance sector have become an absolute positive, as if there’s never any tradeoff with other non-financial goals. Money isn’t real, and generating more of it can never be a sensible primary goal; phones, airplanes, and health are real.

taxicabjesus 7y ago
IMHO, health care in the United States is used as a job project, to provide jobs for all the people who used to build stuff. When I was a taxi driver, one of my jobs was to take poor people to their medical appointments. The taxi company I used to drive for has reformed itself around its contracts with the various insurance companies. I never got a number for how much the government paid to get people to their appointments, but I imagine it was on the order of $2/mile (the driver got $1.50/mile, iirc). Some of the people I took to their appointments certainly had transportation charges that were higher than the fee paid to the service providers -- say $100/round trip for transportation, vs. $30 for the counseling session or doctor's appointment...
- debatem1 7y ago
  Why was the government paying a contract between an insurance company and a taxi company?
  - vharuck 7y ago
    State governments typically plan activities by connecting private sector groups and greasing the wheels. A lot of money goes to encouraging regular checkups or screenings, but people are less likely to go if they need to take a bus: routes and schedules mean they need to take off more work, and it's easy to just skip and do one of the million other things that need done now (even just unwinding). But a taxi who comes to you is convenient and hard to say "No" to.

olliej 7y ago

I mean it seems like the simple thing here is just to treat price gouging the military equivalent to treason - after all money paid to executives paychecks rather than, say, armour is direct harm. In the early days of the MIC the companies were required to sell at cost because they were able to use the technology they developed with military resources in the commercial world. I still don’t understand how a single missile “costs” more than a million dollars, even with absurd mark up

cheerlessbog 7y ago
> still don’t understand how a single missile “costs” more than a million dollars, even with absurd mark up I assume the part that isn't profit is development. The actual unit cost of manufacture is quite small. This is why military contracts should be fixed price payable on achieving deliverables. Let the vendor own the risk and price it in. The military picks the lowest credible price.
- olliej 7y ago
  Back in the days of the nuke programs the companies were not permitted to charge more than the per device cost. It was recognized that the tech that they developed depended on a lot of resources they got from the us gov - r&d, testing facilities, etc. In exchange for only chargin actual cost, they were allowed to monetize technology and equipment that was developed in conjunction with the government. That’s why they weren’t allowed to charge more than the cost of production: they didn’t pay for all of the r&d, they didn’t have to pay for cleanup (hence superfund sites). Their profit came from selling products using government funded research to non-gov entities

tsunamifury 7y ago

The American economic tournament is incentivizing the wrong north star metrics, and people are beginning to finally realize it. However most seem to not know what to do about it. Quality of life, on many dimensions, is any communities North Star, and the current metrics of employment and market size have detached themselves from that. I think things like Libra and other attempts will be the beginning of individuals experimenting with post Dow national metrics, and hopefully one of them will discover a better tournament for human growth and value.

taxicabjesus 7y ago

Overall I think this is an excellent article. But it misses a few points, mainly in how much of the United States' resources have been squandered in fighting pointless wars. In January 2017 Chinese CEO Jack Ma (Alibaba) commented on the United States' gifts to China [0]: "Ma says blaming China for any economic issues in the U.S. is misguided. If America is looking to blame anyone, Ma said, it should blame itself. "'It’s not that other countries steal jobs from you guys,' Ma said. 'It’s your strategy. Distribute the money and things in a proper way.'” "He said the U.S. has wasted over $14 trillion in fighting wars over the past 30 years rather than investing in infrastructure at home. "To be sure, Ma is not the only critic of the costly U.S. policies of waging war against terrorism and other enemies outside the homeland. Still, Ma said this was the reason America’s economic growth had weakened, not China’s supposed theft of jobs." Another Jack Ma quote from the same time period [1]: "'The past 30 years, companies like IBM, Cisco and Microsoft made tons of money.' "The question is: where did that money go? It was wasted, Ma explained. "'In the past 30 years, America has had 13 wars at a cost of $14.2 trillion. That’s where the money went.' He also questioned America’s decision to bankroll Wall Street after the 2008 financial crash, arguing the money would have been better spent in other areas. "'What if they had spent part of that money on building up their infrastructure, helping white-collar and blue-collar workers? You’re supposed to spend money on your own people.'" [0] Chinese billionaire Jack Ma says the US wasted trillions on warfare instead of investing in infrastructure - https://www.cnbc.com/2017/01/18/chinese-billionaire-jack-ma-says-the-us-wasted-trillions-on-warfare-instead-of-investing-in-infrastructure.html https://www.cnbc.com/2017/01/18/chinese-billionaire-jack-ma-... [1] Jack Ma: America has wasted its wealth - https://www.weforum.org/agenda/2017/01/jack-ma-america-has-wasted-its-wealth/ https://www.weforum.org/agenda/2017/01/jack-ma-america-has-w... Over the past 50 or 100 years, US Presidents from both parties have tended to be 'useful idiots'. Maybe Kennedy would've figured things out, but a loan gunman took him out before he could stand up to the "military-industrial complex" his predecessor had warned about. The peanut farmer (Carter) wasn't so bad, but he didn't seem to have a big-picture understanding of what he was up against. Reagan might've been effective, then he got shot by a loan gunman early in his first term [2], and was kind of useless after that. GHW Bush was indoctrinated in the dark arts due to his stint at the CIA. Clinton picked up Bush's "globalization" policies (NAFTA, WTO) and ran with them. GW Bush was a dyslexic useful idiot extraordinaire. Obama meant well, but he didn't have any life experience other than community organizing, academics, and politicking. [2] https://en.wikipedia.org/wiki/Attempted_assassination_of_Ronald_Reagan https://en.wikipedia.org/wiki/Attempted_assassination_of_Ron... Humanity's traditional problem was scarcity. The onward march of technology has allowed our species to achieve liftoff. Our problem is now in figuring out how to share the abundance.

jdhn 7y ago

As someone who leans conservative, it's interesting to see anti-monopoly ideas starting to come back in from the cold. However, as we all know, talk is cheap and action isn't. I guess I'll start believing that this isn't just a fad once a Republican Justice Department goes after existing monopolies.

AstralStorm 7y ago
Unfortunately, potentially well indoctrinated to give rich a break. And rich have stakes elsewhere, in short term status quo.
sandworm101 7y ago
It is a common problem among right-wing/conservative thinkers. There is an inevitable conflict between the concepts of "freedom of property" and "competition". If people (corporations) are to be given freedom over their property they might choose to put all that property under one leadership, creating a monopoly. The standard conservative reaction to such issues is a "market based" incentive against monopolies, such as what is being done with SpaceX/ULA. The government buys from two people, ensuring that at least two market actors survive. But the advantages of monopoly are extraordinary. Eventually the government has to step in and deny a merger (like they just did with photomultiplier tubes) or bail out a failed business. So conservative principals are inevitably sacrificed. The more mature option is to encourage a healthy market through regulation long before the market boils down to two, but that is definitely not a conservative ideal.
- ernst_klim 7y ago
  >There is an inevitable conflict between the concepts of "freedom of property" and "competition". There is no such thing. All the american monopolies are due to protection policies defending them from the competition, i.e. due to the government's interventions. FCC, FDA, FAA are all run by corps' shills. US is a one big blatant example of regulatory capture and crony capitalism at its worse.
  - andrekandre 7y ago

tanderson92 7y ago

More from this author on monopolies (and politics): https://www.theatlantic.com/politics/archive/2016/10/how-democrats-killed-their-populist-soul/504710/ https://www.theatlantic.com/politics/archive/2016/10/how-dem...

dredmorbius 7y ago
Matt Stoller (the author), along with Lina Kahn (see her "Amazon's Antitrust Paradox" https://www.yalelawjournal.org/note/amazons-antitrust-paradox https://www.yalelawjournal.org/note/amazons-antitrust-parado...) are probably the two leading scholars of anti-trust and monopoly in the United States. Both are strongly recommended.

dctoedt 7y ago

FTA: "Policymakers must recognize that industrial capacity is a public good and short-term actors on Wall Street have become a serious national security vulnerability. While private businesses are essential to our common defense, the public sector must once again structure how we organize our national defense and protect our defense industrial base from predatory finance. For several decades, Wall Street has been organizing not just the financing of defense contractors, but the capabilities of our very defense posture. That experiment has been a failure. It is time to wake up, before it’s too late."

andrekandre 7y ago
that “experiment” being neoliberalism perpetrate by both parties, to the detriment of us all... a slight-of-hand to bring back the old days of rule by financiers and basically “cancel the future‘

sandworm101 7y ago

>> top market share because its equipment—espionage vulnerabilities aside—is the best value on the market. It is horrible. It is full of stupid security flaws, something that may or may not be linked to the NS concerns. It is "best value" because it ticks all the performance boxes, but is total junk in every other area. To cite Clarkson, it is like a kid with a turbo on his honda civic. It may be as fast off the line as a Ferrari, but in no other way is is anything like a Ferrari.

bilbo0s 7y ago
Except in this case, there is no Ferrari. That's the crux of the issue that the article kind of touches on, but not really. Are Ericsson and Nokia free of EU surveillance facilities? Is any American equipment free of surveillance facilities? This is the real problem, lack of open hardware that we can readily validate as "better" or "worse". With a Honda and a Ferrari, we're free to pop the respective hoods and look into what we find. Heck, we can go way further than that if we know our OBD equipment well enough. But not so with, say, your average router. So people out in the non American parts of the world say, "Meh, one's just as good as the other. They're all spying. May as well get the cheapest equipment I can." And right there, market share is won.
- sandworm101 7y ago
  There is some good stuff out there. It ain't cheap, but it is possible to purchase and maintain secure networks. https://en.wikipedia.org/wiki/TACLANE https://en.wikipedia.org/wiki/TACLANE (just an example, one of the few publicly-available descriptions of such networking products.)
  - bilbo0s 7y ago
    The point is that no one outside the US is going to accept that such equipment is completely free of American surveillance facilities. So why pay the premium? Buy the cheap stuff, and just let the big guys spy on you. Since they will do so whether you spend a lot, or a little. That's how the Chinese are winning market share. Because in a world where everything is compromised, well, price all of a sudden is the dominant consideration.

ex3xu 7y ago

It's refreshing for me to see an article from a modern conservative outfit that actually seems to understand the adversarial relationship between the finance sector and the principles of economic conservatism. I particularly liked the section talking about historical precedents and bipartisan support for initiatives: > Believe it or not, America has been here before. In the 1920s and 1930s, the American defense industrial base was being similarly manipulated by domestic financiers for their own purposes, retarding innovation and damaging the nation’s ability to defend itself. And American military readiness was ebbing in the midst of an increasingly dangerous world full of rising autocracies. > Within the defense base itself, every example—from TransDigm to L3 to Chinese infiltration of American business—has drawn the attention of members of Congress. Representatives Ted Budd and Paul Cook are Republicans and Representatives Jackie Speier and Ro Khanna are Democrats. They are not alone. Democratic Senator Elizabeth Warren and Representative Tim Ryan have joined Khanna’s demand for a TransDigm investigation. Outside of this article, the best writing I've seen on this topic of short-term incentives is from British economist John Kay's book "Other People's Money", for example when he compares the annual reports from chemical company ICI in 1987 and 1994. 1987: ICI aims to be the world's leading chemical company, servicing customers internationally through the innovative and responsible application of chemistry and related science... 1994: Our objective is to maximise value for our shareholders by focusing on businesses where we have market leadership, a technological edge and a world competitive cost base. Kay goes on to explain how ICI, a leading British chemical company since its founding in the 1920s, attracted a short term flurry of investment activity but ultimately sold in 2007 just about a decade after their change of priorities. Kay primarily blames an over-expansion of the finance sector and the revolving-door culture on Wall Street, fairly consistent with the premises of this article.

Theodores 7y ago
Agreed, this was a truly refreshing article. Not least due to the 'conservative' perspective and the view of the finance sector. The finance sector is the enemy! Globalisation has been a big thing in the arms trade for the last twenty years. Obviously sales have always gone on but what happens if you end up with one monopoly defence contractor that sells to both sides in every conflict in every corner of the globe? In the UK the government used to make its own stuff. The shipyards were state owned and the Royal Navy really did rule the waves. The bullets and shells were made in state owned factories. This provided an anchor to the rest of the industry that needed and went through a lot of consolidation in the post war years. Projects and costs did over-run but a project could be put out to tender with 3-4 competing concerns submitting proposals. If the proposals were no good the government could do it in house. But then when everything gets sold off to private finance and then resold to giant trans-national mega corporations, the giant mega corporations get to be bigger and more powerful than the governments. They then become in charge so democracy isn't for the people and by the people. A similar thing has happened with property in the UK. The government and local councils used to own a large part of the housing estate. This provided an anchor in the marketplace so people could afford to rent affordable housing. When this was sold off it meant that prices skyrocketed and nowadays the government has to give a lot of tax revenue to private property owners to put up benefit claimants. Again the speculators and the interests of finance capital get to be in charge. I will take up your John Kay recommendation. Anyway, the article was most interesting as normally it is a left-wing anti-militarist, anti-capitalist viewpoint that sees finance capital as the enemy, not any view with 'conservative' in the name.

chewz 7y ago

War or no war China will be always happy to sell material to US. It had happened before with British buying Zeiss binoculars from Germany in exchange for rubber during WWI. https://en.m.wikipedia.org/wiki/First_World_War_glass–rubber_exchange https://en.m.wikipedia.org/wiki/First_World_War_glass–rubber...

cheerlessbog 7y ago
The cynicism in that negotiation is startling. Essentially they are both agreeing they want the war to be extended. Unless both sides considered the other was over estimating the benefit to themselves.
jonathankoren 7y ago
I had no idea that happened. Yet another fact to become infuriated about when thinking about the stupidity of the WWI.

mNovak 7y ago

Having a small business that works in defense, I can tell you the upper tiers of military recognize and are worried about diverse production and innovation. But, there's an issue called the "Frozen Middle", where the middle managers, decision makers, and contract officers will still pick the mega-primes because they're perceived as safe, in an environment were compliance and liability is extreme. So, it's hard for (very) small businesses to get a secure foothold, and god forbid they start winning bigger contracts, because the Primes will come muscle them out. Not mentioned in the article is the issue of blatant technology theft by the Primes from small business. This is very well known in the industry, and a huge issue because typically the Primes are the gatekeepers to integration on a weapons platform.

nickpsecurity 7y ago
You totally left off corruption at military level. The "Revolving Door" of the Pentagon where the big ones keep hiring the very people that issue them contracts and letting them go back. They get cozy six-figure jobs or other perks for issuing contracts starting in the millions. Last write-up with lots of detail I saw here was this one on SAIC: https://www.vanityfair.com/news/2007/03/spyagency200703 https://www.vanityfair.com/news/2007/03/spyagency200703 There's also the Congress side where the contracts they're pushing bring jobs to their districts. One joke, which might be true, about the B2 was that the ridiculously-expensive project kept getting support since part of it is made in every state. I never confirmed if that one was true, though. Just remembered it as a funding strategy. ;)
- mjbmitch 7y ago
  In case anyone hasn't heard about SAIC in a while, they now go by Leidos.
  - nickpsecurity 7y ago
    Thanks! Just made a few headlines make more sense to me.
robertAngst 7y ago

Aloha 7y ago

This covers most everything I wanted to say - From the comments in the article: "Very good article. I worked at Bell Labs from 1975-77 after my undergraduate degree. Today, young Scientists don't even know that Bell Labs existed or what it accomplished. I have worked in R&D since 1983 and have watched this process from that vantage point. People used to say, we are just moving the production but we will keep the R&D. That doesn't work. It may take some time, but the R&D eventually follows the shop floor."

SkyMarshal 7y ago
Andy Grove spent the last decade or so of his life campaigning about exactly that problem. R&D is not separate from production. Lose the latter and you lose the former. https://www.nytimes.com/2016/03/26/opinion/andy-groves-warning-to-silicon-valley.html https://www.nytimes.com/2016/03/26/opinion/andy-groves-warni...
- rstuart4133 7y ago
  > R&D is not separate from production. Lose the latter and you lose the former. It's fortunate it doesn't apply to software, isn't it? Otherwise the West would be screwed. As it is Google / Apple et al don't make much at all, it's all done in China. But there is literally zero chance of their expertise all toddling off to China. Trump's Huawei ban has a better chance of leading to China developing it's on inhouse software expertise than Apple making stuff there.
  - SkyMarshal 7y ago
    They won't lose their software expertise, but China is gaining it, especially in some areas like AI. And b/c of that I'm not sure how much of a moat software-only expertise is as. It's hard to spin up a rich supply chain of industrial production, or re-spin it up in this case, but much easier to spin up software production and compete in that domain.

georgeburdell 7y ago

I reject some of the premise of the article. Just because we can't build mega structures doesn't mean we can't effectively project power and defend ourselves. There hasn't been a conventional war in years; no amount of fighter jets or tanks will cause the Taliban to submit. That said, my opinion is that equally to blame as Wall Street is the schism between the military and the coasts, which house most of the country's intellectual power. It's hard to imagine today that the Bay Area was the center of defense R&D two generations ago. Today there is largely the perception that the U.S. military is acting in a manner counter to what we perceive ourselves to be as a liberal democracy. Evidenced by the recent Google and Amazon protests, knowledge workers bristle at the possibility of their work being used for purposes that aren't entirely positive. As far as I'm aware, the Chinese have no such hang-ups. Is it the fault of the military for appearing too evil, or is it the fault of progressives singing the siren song of non-aggression in a hostile world, who knows. Now, the part I agree with is the supply chain issues. I go out of my way to buy American and local whenever possible, even if it means a higher price, because I realize the importance of domestic production will play in a future where the U.S. isn't the undisputed leader of the world.

paganel 7y ago
> Today there is largely the perception that the U.S. military is acting in a manner counter to what we perceive ourselves to be as a liberal democracy. This is a direct consequence of starting the Iraq war on very false premises (even lies) and then continuing to wreak havoc in the entire Middle East for the the sole interest of a few people and corporations. Eventually lies do get to you.

kneel 7y ago

>Americans invented the telephone business and until recently dominated production and research. But in the last 20 years, every single American producer of key telecommunication equipment sectors is gone. So qualcomm doesn't exist?

georgeburdell 7y ago
Qualcomm is largely modems. The actual base stations with which the modems communicate are not made by them to my knowledge. Nor the fiber optic infrastructure, switches, etc. Their statement is accurate. You can't build an all-American telecomm network today.

Dowwie 7y ago

>>> One of the most ardent opponents of consolidation in the 1990s is current presidential candidate Bernie Sanders, who in 1996 passed an amendment to block Pentagon subsidies for defense mergers, or what he called “Payoffs for Layoffs.”

asni 7y ago

I can't speak to other services, but the Air Force is pushing hard (relatively speaking) into investing in startups. Naturally, since the minds behind this are rather technologically inept the results are mixed. (3d printers and virtual reality for everyone!) but they have implemented some programs to provide funding and contracts for startups that fill a critical role - afwerx being an example. https://www.afwerx.af.mil/ https://www.afwerx.af.mil/

dctoedt 7y ago

Apropos of Wall Street's dominance: I've read that the "greed is good" [0] obsession with money started to catch on in the 1980s, after the Reagan tax cuts. Plus, corporate executives use their financial compensation as a way of keeping score in the career game, while compensation committees look to consultants to tell them what the average comp is for executives — which means that the average comp keeps drifting up (because we certainly wouldn't want to pay our CxO less than the average, would we?). The problem, of course, is that this obsession makes for a bad combination with a focus on the short term, which is practically Wall Street's middle name. I'm intrigued by the notion that the best long-term fix for short-term financial thinking is to go back to a 70% top marginal tax rate, for that portion of incomes that exceed some multiple of the median (maybe 10X?). That'd still be less than the 91% top rate in 1960 [1] — and it would reduce the competitive incentive for executives and investors to scratch and claw for more and more money as a proxy for [anatomy] measuring. [0] https://www.wikiwand.com/en/Gordon_Gekko https://www.wikiwand.com/en/Gordon_Gekko [1] https://taxfoundation.org/some-historical-tax-stats/ https://taxfoundation.org/some-historical-tax-stats/

microcolonel 7y ago
The tax code is completely different today from what it was when there were considerably higher marginal tax rates. The actual ratio of tax to GDP has not changed considerably since then. Try to actually understand the totality of the circumstances you're talking about. Too many people think they have just-so solutions to a problem they can't even characterize in any useful way. Please don't add fuel to the fire. The problems facing America can not be reduced to a misunderstood slogan or the name of a president or a street name or a single policy strategy. "Fight for fifteen"-ism and "the one per cent!"-ism do not magically make ordinary Americans richer. The catchier it is, the more likely there is a hidden beneficiary you aren't considering.
- dctoedt 7y ago
  > Try to actually understand the totality of the circumstances you're talking about. Please enlighten us. > The tax code is completely different today from what it was when there were considerably higher marginal tax rates. I'm aware. (I was in law school taking a couple of tax-law courses during the 1980 election debates about Reagan's proposed tax cuts.) > The actual ratio of tax to GDP has not changed considerably since then. Please explain how this is relevant to individual incentives and the "emergent behavior" that they create.

solidsnack9000 7y ago

Yet, TransDigm's stock price thrives because Wall Street loves monopolies, regardless of who they are taking advantage of. Implicit in this passage is a judgment of Wall Street, a laying of blame, but that is misplaced, because while investors may be in a good place to assess the national security implications of the company's strategies, they are not in a position to address them. Failing to maintain critical supply chains and human capital is not their mistake to make. If the government (or governments, the 50 states matter just as much) allows or encourages certain mergers, permits off-shoring of critical industries and does little to ensure the technical capability of a new generation of Americans, investors are basically stuck with that. They can choose to buy or sell; they aren't policy makers.

rossdavidh 7y ago
Absolutely. The problem is not that Wall Street loves monopolies, but that every other part of the American society that was supposed to _not_ love monopolies, has been asleep at the switch in this regard for decades.
- nickpsecurity 7y ago
  It's both. You can always invest in companies that make money and do less evil. Even better, mandate that they form as public-benefit companies or non-profits chartered to act like a profit-seeking business but minimize known forms of harm. Can get us some of the way. On buyer side, buy from ethical suppliers or just more ethical ones. My easy example is getting stuff from Costco vs Amazon if available at both. AFAIK, Costco isn't putting anyone in ambulances to avoid air conditioning or other major evils.

gumby 7y ago

Instead of worrying about domestic production, how about entangling the two economies such that they can't afford to attack each other. Canada, USA, and Mexcio aren't going to start shooting at each other because any attack would ruin the attacker's supply chain -- and customer base. This is similar to the NATO principle: entangle the countries' military objectives together but don't make it worthwhile for them to invest in actual military power -- essentials bribing them to not be able fight wars (this is why complaining that they don't pay "enough" is potentially destabilizing and could cost more later).

rb808 7y ago

I agree the loss of manufacturing & production skill in the US is a problem. I dont think you can blame Wall Street directly for "short termism". Monopolies aside, investment flows to the most efficient ways of doing things. Right now in a globalized world that really is to produce in China. If you want the most strategic and adversarial way that is a different problem. Globalization has been a drive for American governments the last half a century, was it wrong? You can't blame the investment community for globalization.

mensetmanusman 7y ago

I honestly don’t see America surviving the next century. There is no simple way to describe the inefficiencies, but one thrust follows the fact that it is in essence a ‘bad thing’ that our politicians are held in such contempt. I see our brightest minds instead going into finance to work to enrich themselves with no clear moral framework. Our best problem solvers in science and engineering fields, who we need in positions of government at this moment, are horrified at the prospect of how they would be treated by our media and shy away.

jackcosgrove 7y ago
I agree that good people avoid politics because of the media exposure, but that happens everywhere. I disagree that the brightest minds go into finance. That may have been true in the 80s and 90s but since the dot com era the brightest minds have gone into tech (as distinct from science and industry).

solotronics 7y ago

Many (most?) American corporations have already been subverted on a level where they make major decisions against US long term interests in favor of short term profits and working for China. Working for China I say!? how outrageous! A board member, middle manager, CTO, etc. can literally be bought by the Chinese government and NOTHING will ever happen. The Chinese have looked at our corporate system and found the weakness in decision makers. Without strong laws in place preventing this we will suffer a death of a thousand cuts as our companies sell out secrets and markets to the Chinese government. Edit: If you are a Chinese business man and make decisions perceived by the PRC as selling out your people to America you would probably disappear in the night. In the US you can do this with impunity. How to succeed without becoming totalitarian ourselves?

api 7y ago
Marx once quipped that capitalists would sell the rope used to hang them. The Chinese are really only nominally Communist (and barely even that) but that statement remains as true as ever. Finance has zero foresight.
- SkyMarshal 7y ago
  The CCP may be nominally communist, but it’s scarily authoritarian.

fourthark 7y ago

It's good to see a successful think tank (Open Markets Institute) devoted to the anti-monopoly cause. I guess this means that there is a faction of the moneyed class which thinks monopolies aren't such a good idea. Edit: some background on OMI: https://www.wired.com/story/freedom-from-facebook-open-markets-institute/ https://www.wired.com/story/freedom-from-facebook-open-marke...

pergadad 7y ago

The author makes.many excellent points but one very big mistake: the assumption of evil intentions on the part of China (and Nazi Germany for that matter). They are not so much concerned with pushing the US into a dependency, but rather mich more with 1) building up key economic sectors and 2) assuring their own independence of US suppliers. That US capacity shrinks at the same time might be a side effect but is not the first priority any other country aims for. Its actually the US which has long and intentionally cultivated dependence of other countries in defense and these others do resent this situation the same way the author sees.it from the US perspective. Just look at the embarrassing Eurohawk project, which takes outdated US drone technology and adds a mild update, but to produce it the consortium first has to buy full drones from US suppliers. Totally ridiculous and immense >bn€ waste of funds, but initiated in a mutual understanding that there is a defense partnership and interreliance between the US and EU partner countries.

SkyMarshal 7y ago

It's incredible how much damage the financial industry has done to America over the past two or so decades. GFC, healthcare financialization/rent-seeking/price-gouging, and decimation of our industrial base. How much more of this can we take.