Thursday, March 4, 2010

Politics is business as usual

... and war by other means.

This morning's journal has a couple of interesting articles for those of us who believe that the structure of institutions is more decisive than the individual clicks and grunts of the apes that compose them.

First, we have a distinction between a political and a market entrepreneur.

Market entrepreneurs like Rockefeller, Vanderbilt and Hill built businesses on product and price. Hill was the railroad magnate who finished his transcontinental line without a public land grant. Rockefeller took on and beat the world's dominant oil power at the time, Russia. Rockefeller innovated his way to energy primacy for the U.S.

Political entrepreneurs, by contrast, made money back then by gaming the political system. Steamship builder Robert Fulton acquired a 30-year monopoly on Hudson River steamship traffic from, no surprise, the New York legislature. Cornelius Vanderbilt, with the slogan "New Jersey must be free," broke Fulton's government-granted monopoly.

I don't actually know enough about the history of the era to agree or disagree with the classification of the individuals here, but I do think the distinction is worthwhile because I see it as similar to one I have been trying to make between different types of monopolies

Basically, it's a question of innovation.  I'm skeptical that Rockefeller was super innovative, but I don't really know.  I do know that the US has been uniquely fertile ground for things that are in some sense, "good monopolies", like Google and the early Microsoft or Oracle.  Certainly, these companies that invent a new industry and disrupt things so dramatically may later slide into merely defending their turf and manipulating the political process to this end.  But that should only make us more keen to see the next disruptor come along; it's perverse to try and strangle the innovator in the crib because you're worried that he'll be a bully later.

So while I find his smug recommendation that the little people should eat the cake off Larry Ellison's yacht disgusting (this guy's about as "grossed out" as Bukowski in a whorehouse) I do kinda agree that big government can be used as a big lever to replace the necessity of competing in the market.  We should applaud the winners when they won by competing to give us what we want.  Of course, we should continue to hold them to that standard.  They should have to keep winning, instead of being allowed to capture the rules of the game.  The game has to have clear rules or we just go around hitting each other on the head (or blowing up each other's oil fields, which is why I'm skeptical that Rockefeller qualifies as a market entrepreneur in a sense I'm willing to defend) but equally, the rules have to get written somehow and by someone, and the more complicated they are, the more you risk their becoming another piece of business strategy at the disposal of political entrepreneurs like ... Dick Cheney, for example.  More government almost inevitably gives the political entrepreneurs more leverage.

Which brings me to the second story of the day.  The eminent and execrable Karl Rove and his weekly soapbox that would make Machiavelli blush.  This week he opines about redistricting.  Remember, this is the guy who wrote Dick Cheney's business plan: 

First, target the emerging markets because that's where the growth is at:

Some 18 state legislatures could have an additional task. As many as 10 states will have to combine districts as they lose House seats. Eight states are expected to gain at least one seat each.

Seats will almost certainly move out of Democratic states (such as Michigan, New York and Massachusetts) and into Republican-leaning, faster-growing states (such as Arizona, Georgia, Texas and Utah). Battleground states such as Iowa and Ohio might also lose seats. This process will be marked by a historic event: For the first time since joining the union in 1850, California will probably not get any additional seat in Congress.

Next, use your first mover advantage in those markets as leverage to keep out competitors:

There are 18 state legislative chambers that have four or fewer seats separating the two parties that are important for redistricting. Seven of these are controlled by Republicans and the other 11 are controlled by Democrats, including the lower houses in Ohio, Wisconsin, Indiana and Pennsylvania.

Republican strategists are focused on 107 seats in 16 states. Winning these seats would give them control of drawing district lines for nearly 190 congressional seats. Six of these states are projected to pick up a total of nine seats, and five are expected to lose a combined six seats.

Finally, attempt to set in motion a feedback loop that gives you a permanent competitive advantage by enshrine your ability to change the rules at will so as to squash any new competition.

Control of redistricting also has huge financial implications. The average winner of a competitive House race in 2008 spent $2 million, while a noncompetitive seat can be defended for far less than half that amount. Moving, say, 20 districts from competitive to out-of-reach could save a party $100 million or more over the course of a decade.

It's a great strategy for becoming the permanently low cost outsourced political provider, allowing your clients to lobby at the lowest cost with the greatest effect, hence maximizing their return on investment.  It stacks one bottleneck on top of another in a structural way that makes them all line up.  This is the true meaning of the conservative movement -- resisting any change that the dominant powers disapprove of. 

But notice how when the final strategy is in place, it doesn't really matter how big the government is.  You can start with a big government that sticks its fingers into everything and continually tilts the playing field and then, as the winners emerge and reinforce themselves, you can throw this crutch away and claim that the "market" regulates itself.  The only real threats to the model are deep, disruptive technological changes that fall outside of the existing rules, and your only response to them is obvious -- regulate as much and as soon as possible, and corral these currents within the rule system you already control. 

Now you can see why I earlier qualified my stance on small government.  At any given point in time, you could have big corrupt government or small corrupt government that equally completed the feedback circuit where money buys rules.  Conversely, if this circuit doesn't close, it doesn't really matter whether the government is big or small.  Reasonable people could disagree on how it should be engineered.  Different circumstances (particularly the size of the country) would lend themselves to different rule regimes. 

The real argument against big government is a more subtle, evolutionary one.  Big government that stays clean and stable is very close to being an untenable argument at this point in human history.

PS.  Ignore the meta-meta-meta part about how Rove is using the WSJ to throw his little molotov in the face of democracy -- a fact which would make the unibomber's head spin.

No comments: