22 Nov

Lina Khan

Matt Stoller writes about the challenges facing Lina Khan. The Bork doctrine is about to be challenged. Bork wrote in The Antitrust Paradox that allowing monopolies to develop could be good for consumers. I haven’t read the book, but I’ve read a few summaries. The argument seems to revolve around the relative importance of competition and economies of scale. For example, Amazon has destroyed a lot of its competition, but at the scale it operates it can deploy masses of capital on automation and IT, in a way that a million mom and pop stores could never do, which ends up making retail purchases cheaper. You can see the logic, but ultimately this has to end in economic rents for Amazon, which will be very difficult to tax away.

Anyway, Lina Khan it onto this, and might actually be able to force some sort of mega-tech breakup. Given the huge problems of passing the ‘bipartisan’ ‘Build Back Better Act’ this is long shot.

China’s catch-up is running out of road

This is an interesting post on how China’s catch-up with the developed world is doing, with some comparisons with Japan’s position in 1950 and it’s subsequent catch-up with the West.

China suddenly has a lot of headwinds. A credit crunch, triggered by over-valued real estate, a megalomaniac in charge, a policy that is crushing the high-tech sector, and a new variant of Covid that seems to be designed to undermine the effectiveness of lockdowns. This is not to mention an already-ageing population.

The conclusion of economic analysis is that the degree of catch-up is a function of the quality of institutions, and in particular the degree to which public goods are prioritized over private benefits. Well, it’s clear that China is a kleptocracy, and a few speeches by Xi about “common prosperity” will not undo that. My take is that China has crooks in charge, and that in the long-run it’ll go down the path of Russia, into economic irrelevance as capital is squirrelled away in UK and US assets by the offspring of officials who much prefer to live in (vaguely) democratic societies.

Wrap

J Powell is given a second term as chair of the Fed. Nasdaq and bonds fall. Presumably, the market believes that Project Zimbabwe is alive and well. Global Macro report from StoneX argues that inflation really is different this time (compared to 2008):

• people are better off, particularly they have more equity in their homes, so don’t have to respond to rising prices by cutting spending,
• the Tea Party is over, and all parties now are determined to “spend, spend, spend!” because there is simply no electoral downside in doing so,
• energy prices are rising. Shale is dead, or at least will not be produced at a loss any longer,
• the willingness and ability of China to subsidize the rest of the world by manipulating its currency down has evaporated,
• the FAANG are no longer giving away products for free, but are starting to monetize them heavily, resulting in a slump in (measured) productivity.

The dollar went up, depressing commodity prices.