On the first night of the 2024 Democratic National Convention (DNC), speakers assembled to make the case for Vice President Kamala Harris to be America's next president and to provide a glimpse of what policies she might pursue. Unfortunately, it's clear that industrial policy is likely to survive and thrive in a Harris administration, despite clear examples that giving public money to private companies carries significant risk.

Some speakers took shots at former President Donald Trump, with Shawn Fain, president of the United Auto Workers (UAW), invoking the closure of a General Motors (G.M.) plant in Lordstown, Ohio. G.M. shuttered the factory in March 2019 amid slowing sales; in July 2017, Trump had told supporters in Youngstown, "Don't move. Don't sell your house," because lost factory jobs would come back.

"Trump lied, and abandoned Lordstown," intoned the announcer of a video that played before Fain took the stage. "The G.M. factory in Lordstown did close, putting thousands of people out of work, because Donald Trump doesn't care about our communities."

"In 2023, who helped bring jobs back to Lordstown, Ohio?" Fain asked during his speech. "Kamala Harris!"

But it's worth noting that G.M. closed the factory just a decade after it received $60 million from the state of Ohio to operate the facility until at least 2039. When G.M. reneged on the deal barely 10 years later, Ohio chose to let the company keep $20 million.

Then between 2019 and 2023, the factory had another occupant: Lordstown Motors, an automaker that planned to build electric pickup trucks. The brand new company purchased the factory for $20 million after borrowing $40 million from G.M. Ohio officials, having not learned a lesson from the experience with G.M., gave Lordstown Motors $24.5 million in grants and tax credits.

And yet despite all the financial assistance, Lordstown Motors entered bankruptcy in June 2023.

"Today, tens of thousands of auto jobs are returning to the United States, thanks to the policies of the Biden-Harris administration," Fain said in a UAW video released last week. "That includes jobs in Lordstown, Ohio, where auto workers at Ultium Cells are now building batteries for General Motors."

Ultium is G.M.'s electric vehicle battery cell technology. "Ultium's Lordstown plant could qualify for tax credits worth more than $1 billion a year," according to a 2023 UAW report. And in 2022, the U.S. Department of Energy announced that it would loan the company $2.5 billion to build three factories, including the one in Ohio.

Ultium is also building a $2.6-billion factory in nearby Michigan, for which that state's government agreed to give the company $666 million. And Ultium was not the only company singled out at the convention.

"Trump talked big about bringing back manufacturing jobs, but you know who actually did it? President Joe Biden and Vice President Kamala Harris," New York Gov. Kathy Hochul said, moments after Fain spoke. "Look no further than the city of Syracuse, where a company called Micron is building a $100-billion microchip factory with union labor."

In October 2022, Micron pledged to spend $20 billion by the end of the decade to build what it deemed "the largest semiconductor fabrication facility in the history of the United States," signifying "the largest private investment in New York state history." The company further noted that it "intends to invest up to $100 billion over the next 20-plus years."

But the Biden administration agreed to award that company $6.1 billion in federal handouts for its Syracuse factory and one near Boise, Idaho. New York promised another $5.5 billion in state incentives.

Of course, it's entirely likely that these deals will be every bit as lucrative as promised: Micron alone promises that its Syracuse factory will "create nearly 50,000 New York jobs, including approximately 9,000 high paying Micron jobs." But at the time of this writing, Micron has a market cap of $118 billion, suggesting that it could've made the initial $20-billion investment without state and federal taxpayers picking up so much of the tab. Similarly, even though G.M. currently has a market cap of $52 billion and it has reneged on an economic development deal in the very recent past, it still continues to benefit from public cash.

With three more nights to go, the DNC will likely feature more policy proposals for a potential Harris administration. Unfortunately, the first night indicated that industrial policy is alive and well in the Democratic Party.

The post Industrial Policy Is Alive and Well at the Democratic National Convention appeared first on Reason.com.

It's OK to calm down about the economy. Yes, Friday's unemployment news was bad. Yes, the NASDAQ and Dow Jones neared correction territory on Friday morning. And yes, the Sahm Rule Recession Indicator has now been triggered. Odds are, though, a recession is not imminent. 

Here are three reasons why, in descending order of optimism. One, recent growth has been strong. Two, the economy has been near full employment for a while, and some kind of job growth slowdown is almost inevitable. Three, we're past the window where Federal Reserve actions can influence the election, though its recent behavior is still worrying.

Last week, the media's manic mood swing was on the exuberant side from news of a strong 2.8 percent gross domestic product (GDP) growth in the second quarter of 2024, which ended on June 30. This was a surprise improvement on the previous quarter's 1.4 percent growth. A normal reading is around 2 percent. Better, most of that growth was in the private sector, especially in consumer spending and inventory investment.

The current quarter's GDP growth estimate will come out on October 30. It would take a drastic swing to move from 2.8 percent to negative in just one quarter, though it has happened before. It typically takes two consecutive quarters of negative growth for the National Bureau of Economic Research to declare a recession, though its official standard is to call it as they see it.

The unemployment rate went up from 4.1 percent in June to 4.3 percent in July. June's reading snapped a 30-month streak of unemployment at or under 4 percent. This was the longest such streak since the 1960s.

For context, anything under 5 percent is considered pretty good. The eurozone's unemployment rate is currently 6 percent and often tops 10 percent, even in good times.

When an economy is essentially at full employment, a slowdown in job growth isn't necessarily cause for worry. The economy still has 8 million job openings, and the labor force still grew by 114,000 jobs. That annualizes to more than a million more jobs per year. 

That is slower than population growth, which isn't ideal. The labor force participation rate is also still below prepandemic levels. But a sane immigration policy combined with labor reforms like loosening occupational licensing requirements would fill more of those job openings while creating more opportunities for workers who are still outside the labor force.

The Federal Reserve's recent actions spark some worry. The Fed has spent the last two-and-a-half years walking back its panicked overreaction to COVID-19, which caused high inflation in the first place, along with a bipartisan deficit spending explosion. Inflation is finally slowing and getting back close to its 2 percent target, down from its 9.2 percent peak.

The trouble is that Fed Chairman Jerome Powell indicated that the Fed will stop focusing solely on inflation and will now pay attention to the labor market as well. The Fed has a dual mandate that tasks it with both keeping inflation low and keeping employment high. These can contradict each other, as Powell might soon find out.

If unemployment continues to worsen, look for the Fed to counteract that with stimulus in the form of interest rate cuts and monetary expansion. The tradeoff to this stimulus is higher inflation—exactly what the Fed has been fighting.

While an expected interest rate cut in September isn't a big deal by itself, if it's the start of a larger stimulus campaign, any short-term economic boost will come at the cost of a slowdown later.

The Fed's actions have lag times ranging from about six months to 18 months, so anything it does now will not impact the election. This is good news for the Fed's independence, but it does not inspire faith in Powell's commitment to fighting inflation. It would be better for the Fed to stay focused on inflation. Monetary policy is a poor tool for job creation. Entrepreneurs have a much better track record.

As usual, the big picture is a mix of short-term pessimism and long-term optimism. Whether or not the current recession doommongering comes true, the long-term trend of increasing superabundance will hold. That's as good a reason for calm as any.

The post Recession Is Not Inevitable, Despite Stock Market Slump appeared first on Reason.com.

"All you need, besides the cocaine, is a lighter, water, baking soda, some Q-Tips, high-proof alcohol, a ceramic mug, and a piece of cheesecloth or an old T-shirt," writes Glenn Loury in his riveting Late Admissions: Confessions of a Black Conservative. The book is surely the only memoir by an Ivy League economist that includes a recipe for crack cocaine along with technical discussions of Karl Marx, Ludwig von Mises, Friedrich Hayek, and Albert O. Hirschman.

Born in 1948 and raised working class on Chicago's predominantly black South Side, Loury tells a story of self-invention, ambition, hard work, addiction, and redemption that channels Benjamin Franklin's Autobiography, Richard Wright's Native Son, Saul Bellow's The Adventures of Augie March, and Milton Friedman's Capitalism & Freedom. An alternative title might have been "Rise Above It!," the slogan of a pyramid-scheme cosmetics company on which he squandered his savings as a young man in Chicago.

Now a chaired professor at Brown University and the host of The Glenn Show, a wildly popular YouTube offering, Loury worked his way through community college, Northwestern, and a Massachusetts Institute of Technology Ph.D., became the first tenured black economist at Harvard, emerged as a ubiquitous commenter on race and class in the pages of The New Republic and The Atlantic, was offered a post in the Ronald Reagan administration, and was then publicly humiliated after affairs, arrests, and addiction all became public, threatening the end of his professional and personal life. With the support of his wife, Linda Datcher Loury (herself a highly regarded economist), Alcoholics Anonymous (A.A.), and colleagues, Loury managed to rise above it and not just rebuild his academic reputation and relationships with his children, but also gain a unique perspective on economics, individualism, and community.

Reason: When you say you are a black conservative, what does that mean?

Glenn Loury: Well, I think of a few things. One of them is thinking that markets get it right in terms of the resource allocation problem and that the planning instinct and centralized, politically controlled interference in theeconomy is suspect. Of course, there are exceptions. The general predisposition is that I like prices. I like laissez faire. AndI think the first and second fundamental theorems of welfare economics are true, that we get efficient resource allocation when we allow the interplay of self-interest. You know, classical liberal stuff.

That makes you a libertarian, not a conservative.

Well, I was going to go the Edmund Burke route. I was going to say not discarding everything that's been handed to me from the past generations. Respect for tradition, reverence for some of these things that we've been handed down. So when people can't define who's a man and who's a woman, I hold my wallet. I'm a little bit skeptical about this nouveau thing.

But the "black conservative" comes out of I think a reflex or reaction to the dilemma that we African Americans face as the descendants of slaves, a marginal population disadvantaged in various ways and struggling for equality, dignity, inclusion, freedom.

I think there's a trap in that situation: the trap of falling into a status of victim and of looking to the other, the white man, the system to raise our children and deliver us from the challenge which everybody faces of living life in good faith, of, as Jordan Peterson puts it, standing up straight with your shoulders back. Of confronting the reality that there's some stuff that nobody can do for you. This posture of dependence, these arguments for reparations, this invocation of structural and systemic [racism], when the real questions are of responsibility and role.

In your book you cover your education in economics, but it's also a memoir that traffics a lot with addiction, both with drugs and sex. Can economics explain addictive behavior and self-destructive behavior?

Well, I think of the late Gary Becker. He has a paper on addiction. And I think of George Stigler and Becker's classic paper "De Gustibus Non Est Disputandum"—about taste there can be no dispute. They do it all in terms of intertemporal preferences, where you build up a taste for certain kinds of pleasures, and you invest in them.

Did they get it right?

No, I don't think they got it right. I thought it was reductive, closed off. [It's an] "everything's going to be optimization; we just have to find the right objective function" way of looking at the world. I much prefer [game theorist and Nobel laureate] Tom Schelling's engagement with the problems of self-command, as he called it, and addiction, which was understanding the conflict within the single individual who at one point in time would want not to smoke or to use cocaine, but at another point in time would find themselves, notwithstanding their understanding that this is not good for them, being compelled to do it nonetheless, and the strategic interaction between those two types within the same person.

Some critics of capitalism say that drug addiction is the apotheosis of capitalism, that it creates a bunch of things that enslave people. But your story, in one way, is about learning self-command and control over self-destructive behaviors. Is there a larger lesson from your struggles with addiction and your ultimate triumph over it?

Yeah, A.A. saved my life. That therapeutic community, that halfway house I lived in for five months in 1988: They saved my life. I went to meetings faithfully for years. And I abstained. I was clean and sober for five years. But I eventually drifted away from the A.A. abstinence philosophy.

I did have a period where I was very religious. I was born again. This initiated during the period when I was struggling to recover from drug addiction but persisted long after I was out of the woods. It changed my perspective. The hope, the whole experience of going through rehab and what they did, it quieted me down. I started reading the Bible even before I was professing genuine religious conviction. I started memorizing passages after I began to confess some belief, going to meetings, living within myself, a kind of humility. I'm not in control. Let go and let God.

What is the work that you're most proud of as an economist?

I think my best technical paper was published in Econometrica in 1981. It's called "Intergenerational Transfers and the Distribution of Earnings." It applied what at the time were state-of-the-art technical methods in dynamic optimization and the behavior of dynamic stochastic systems to the problem of inequality. It formalized the idea that young people depend on the resources available to their parents, in part, to realize their productive potential as workers and economic agents. Investments made early in life by parents in children affect the productivity of children later in life. That productivity is also dependent on other factors beyond parental control that are random, but it depends on the resources that are available. There cannot be perfect markets to allow for borrowing forward against future earnings potential, so as to realize the investment possibilities. If a parent doesn't have the resources to fund the investment themselves, there's no place to go to borrow to get piano lessons for a kid who might develop into a virtuoso pianist.

As a consequence, inequality has resource allocation consequences. Some parents have a lot of resources; others have very little. But the kids all have comparable potential, and there's diminishing returns to investing in kids. The net result is that if you could move money from rich parents to poor parents and indirectly move investment in kids from rich families to poor families, the loss in the former would outweigh the gain in the latter.

Is that a rebuttal to the idea that you can rise above it on your own? Throughout your work you make a case that if we want a more equitable society, we have to do something to help kids whose parents don't have any resources.

I see them as two different realms of argument about human experience. On the one hand, I'm talking about how there can be market failures and incompleteness and informational impact. Illness and externalities and property rights are unclear, and things like that. And you can make arguments about a minimal role for government intervention to deal with public goods problems and environmental externality problems and perhaps market failures.

On the other hand, if I'm talking to an individual about how to live their life, about whether or not to delegate responsibility for their life to outside forces or to live in good faith, to take responsibility for what you do, that's existential, almost spiritual. It's how to be in the world as opposed to how the world works.

You're on college campuses now, and campuses are more fraught than they ever have been. Do you feel like that message has disappeared?

I think so, especially with the debate that's going on presently about the war in Gaza and the campus protests occupying spaces and setting up tents on the campus green and canceling graduations and seizing buildings and engaging in civil disobedience and whatnot.

But that all comes in the aftermath of the culture war that we've been fighting about critical race theory and diversity, equity, and inclusion. These arguments have been around for a while, and I've tended to be on the side of suspicion of the so-called progressive sentiment. There's too much focus on race and sex and sexuality as identities in the context of the university environment, where our main goal is to acquaint our students with the cultural inheritance of civilization. Their narrow focus on being this particular thing and chopping up the curriculum to make sure that it gets representative treatment feels stifling to me, especially if you let that spill over into what can be said.

The therapeutic sentiment. The kids have these sensibilities. We have to be mindful of them. We don't want to offend. We don't want anyone to be uncomfortable. No, the whole point is to make you uncomfortable. You came thinking something that was really a very superficial and undeveloped framework for thinking; I'm going to expose you to some ideas that run against that grain, and you're going to have to learn how to grapple with them. And in your maturity, you may well return to some of these, but you will do so with a much firmer sense of exactly what it is that you're affirming. I want to educate you. I don't want to placate you. I'm not here to make you feel better.

I do think there's too much reliance on system-based accounts and much less of an embrace of responsibilities that we as individuals have in our education, our politics, our social and economic lives.

What is the case against affirmative action?

The case against affirmative action: It's unfair to people who are disfavored. They didn't do anything to be in the group that you decided you wanted to put your thumb on the scale for. It has concerning incentive problems. If you belong to the favorite group, it's OK to have a B average and be in the 70th percentile of test takers. And you can get into UCLA or Stanford or Yale if you're black. But if you're white, you better have an A-minus average. And you'd better be at the 90th percentile of the test takers.

The systematic implementation of affirmative action amplifies the concerns that one might have about stigmatizing African Americans who would be presumed to be beneficiaries. This is the classic complaint of [Supreme Court Justice] Clarence Thomas, that his Yale law degree isn't worth anything because it's got an asterisk on it because of affirmative action.

There's something undignified about not being held to the same standard as other people and everybody assuming that because of the sufferings of your ancestors you're somehow in need of a special dispensation.I don't regard that as equality. You're not standing on equal ground when you're dependent upon such a dispensation. In the case of affirmative action, it's a Band-Aid. You're treating a symptom and not the underlying cause. The underlying reality is there are population differences in the express[ed] productivity of the agents in question. The African Americans, on average, are producing fewer people in relative numbers who are exhibiting these kinds of skills that your instruments of assessment are intended to measure. And if you don't remedy that problem, you're never going to get truly to equality.

Where are these population differences coming from? Is it primarily an effect of cultural change? Is it inherited differences in economic status and opportunity? Is it genetic?

I don't think it's genetic, though I can't rule out that genetics could have an effect. I'm just not persuaded by the evidence of the early childhood developmental stuff. I don't underestimate the differences in the effectiveness of primary and secondary education. This is not just race. This is race and class and geography and whatnot. I think we'd do ourselves as a society a lot of good if we were to follow the sort of wholesale reform movement in K-12, including charter schools and more competition to the union-dominated public provision sector of that part of our social economy.

But culture is a tough one. I give a lot of evidence indirectly in my memoir about the effects of culture on life experience. The culture that nurtured me coming up in Chicago had its positives. It also had its norms, values, ideals, what a community affirms as being a life well lived, how people spend their time, about parenting, things of this kind.

I read this book by two Asian sociologists, Min Zhou and Jennifer Lee, called The Asian American Achievement Paradox, and it attempts to explain, based on interview data from a couple hundred families in Southern California, how it is that these Asian communities are able to send their youngsters to places like Harvard and Stanford in such large numbers. And it basically makes a cultural argument. One of the chapters is entitled "The Asian F." It turns out that the Asian F is an A-minus, according to some of their respondents. I don't think you can discount the importance of that kind of cultural reinforcement, because at the end of the day what matters is how people spend their time.

You're a critic of race-based policies, but you also get kind of pissed when people dismiss the black experience. You say being a black American is a part of your identity. Is there a way for us to bring our individual cultural and ethnic heritage to the conversation that doesn't divide us or put us in one group or another?

We all have a story. We all have a narrative and a cultural inheritance. And yet underneath we are kind of all the same. Our struggles are comprehensible to each other, and our triumphs and our failures are things that we can relate to as human beings. And that's how we should be relating to each other.

I'm in my 70s now, and I've just written a book about my life. So who am I? What does it amount to? I'm the kid that really did grow up immersed in an almost exclusively black community on the South Side of Chicago. The music that I listened to, the food that I ate, the stories that I was told and that I told to my own children in turn. These things are related to the history, the struggles and triumphs, the dreams and hopes of African-American people. That's a part of who I am. And it annoys me when people attempt to say "get over it" to me. They're not respecting me when they tell me that race is not a deep thing about people.

It's a superficial thing, I grant you that. I grant you the melanin in the skin, the genetic markers that are manifest in my physical presentation, don't add up to very much. But the dreams of my fathers and others, the lore, the narrative about who "we" are, that's not arbitrary and it's not trivial. And it seems to me sociologically naive in the extreme to just want to move past that. That's a part of who people actually are.

But I struggle with this, because I also want to tell my students not to wear that too heavily, not to let it blinker them and prevent them from being able to engage with, for example, the inheritance of European civilization in which we are embedded. That's also your inheritance. Tolstoy is mine. Einstein is mine. And yours. I want to say to youngsters of whatever persuasion: Don't be blinkered. Don't be so parochial that you miss out on the best of what's been written and thought and said in human culture.

This interview has been condensed and edited for style and clarity.

The post Glenn Loury on Economics, Black Conservatism, and Crack Cocaine appeared first on Reason.com.

VinFast, a Vietnamese automaker that builds electric vehicles, announced in July that it would not begin production at its North Carolina plant for another four years. While the news is certainly a setback, the disappointment is compounded by the fact that the state is trying to bulldoze a number of private homes, and a church, to make the project happen.

In March 2022, North Carolina Gov. Roy Cooper announced that VinFast would build its first North American plant in Chatham County. The company would spend $4 billion and create 7,500 jobs, with production from the completed factory set to begin in July 2024. At its peak, the facility would be capable of producing 150,000 vehicles per year.

In exchange, North Carolina lawmakers agreed to give the company $1.25 billion in incentives, including $450 million for infrastructure, including "roadway improvements" and building out the water and sewer capacity; $400 million from the county; and a $316 million state grant paid out over 32 years, linked to the company's job creation promises. In effect, North Carolina taxpayers would be financing over 30 percent of the project.

President Joe Biden called the project "the latest example of my economic strategy at work." CNBC lauded the state's Democratic governor and Republican Legislature for "managing to put aside their very deep political divisions to boost business and the economy" when it named North Carolina America's Top State for Business.

But within two years, the deal was on shaky ground. The company announced in March 2023 that it would not be able to begin production at the factory until at least 2025 "because we need more time to complete administrative procedures," according to a company spokesperson.

Then in July 2024, in a press release about manufacturing output in the previous quarter, VinFast announced that it had "made the strategic decision to adjust the timeline for the launch of its North Carolina manufacturing facility, which is now expected to begin production in 2028," in order to "optimize its capital allocation and manage its short-term spending more effectively."

While this is disappointing news for many—company executives, shareholders, North Carolina state officials—it's worse for residents in the area.

Many of the state and county incentives are dependent upon VinFast meeting certain metrics: While the state doled out $125 million to reimburse the company for site preparation costs, it can claw back that entire amount if VinFast fails to hire at least 3,875 people—just over 50 percent of the required total. There are further clawback provisions if it doesn't hire at least 6,000 people and doesn't invest at least $2 billion into the project.

But even if the deal falls apart and the state gets its money back, some things can't be undone. As part of the deal, the North Carolina Department of Transportation (NCDOT) would conduct "roadway improvements" at the future site of the facility. As detailed in an August 2022 project overview, "private property is needed to construct the improvements proposed by the roadway project." And while the NCDOT "works to minimize impacts such as the number of homes and businesses displaced by a road project, some impacts are unavoidable."

In total, the state expected that the roadwork would "impact" five businesses, 27 homes, and Merry Oaks Baptist Church, which had stood since 1888. This meant the state was authorized to purchase the properties from the owners—or if the owners refused to sell, the state could simply take the properties through eminent domain.

Eminent domain, authorized by the Takings Clause of the Fifth Amendment, allows government entities to seize private property for public use, as long as the owner receives "just compensation." Of course, the only thing that separates this from a normal real estate transaction is that the use of eminent domain implies that the property owner did not want to sell but was forced to anyway.

While an electric car factory does not qualify as a "public use," the state is planning to bulldoze the houses, businesses, and church to make way for a new roadway interchange that will accommodate traffic to and from the site. Of course, under the U.S. Supreme Court's 2005 decision in Kelo v. New London, the state would also have been justified to seize property to give to a purely private party, with Justice John Paul Stevens writing that "there is no basis for exempting economic development from our traditionally broad understanding of public purpose."

In fact, that seems to be just what happened: In July, after VinFast announced its latest delay, the Raleigh News & Observer reported that so far the state had spent $96 million—nearly all of it on site preparation and infrastructure—and purchased four homes, with negotiations ongoing with other homeowners and two businesses. And sadly, "North Carolina has acquired two businesses and Merry Oaks Baptist Church through eminent domain, meaning negotiations fell short and the state took over the land after paying the previous owners fair market values assessed by a state-approved appraiser."

In July 2023, VinFast offered to donate up to three acres of land from its 2,000-acre parcel to Merry Oaks Baptist Church so the congregation could relocate. But a better solution would have been for VinFast to simply shoulder the burden of development in the first place, first by footing the bill for the project itself and then by obtaining land where the government did not forcibly remove any obstacles in the way.

The post VinFast Delays Production After North Carolina Seizes Property for Factory Site appeared first on Reason.com.

Nicolás Maduro is the authoritarian leader of Venezuela. Last weekend, he declared himself the winner of that country's presidential election—an outcome that is highly disputed; the Carter Center lambasted the Maduro regime's lack of transparency and said the process "cannot be considered democratic."

Thousands of Venezuelans have taken to the streets in protest. In response, the government has implemented a crackdown, killing at least 16 people and detaining a thousand more. Such behavior is entirely characteristic of Maduro, an outlaw who has faced credible accusations of drug trafficking, public corruption, and crimes against humanity. His unscrupulous leadership has plunged the country into depression and poverty. As Reason's Katarina Hall wrote, "Almost 8 million Venezuelans have fled the country amid hyperinflation, shortages of essential goods, and rampant corruption. Many more have expressed their desire to leave if Maduro remains in power."

Maduro's governing ideology is not a secret: He is a socialist. He is the successor to the leftist tyrant Hugo Chávez. He heads Venezuela's ruling Socialist Party. His policy prescriptions are in line with socialism: His government has instituted price controls, seized assets from private companies, and contributed to the country's hyperinflation problem. If it walks like a duck, quacks like a duck, and wrecks the economy with a mixture of centralized planning, repression, and pure theft—well, it's a socialist duck.

So it came as something of a shock when a recent New York Times article that correctly described Venezuela's overall problems—and Maduro's perfidy in particular—nevertheless identified the government's economic policy as "brutal capitalism" rather than socialism. Here was The Times:

If the election decision holds and Mr. Maduro remains in power, he will carry Chavismo, the country's socialist-inspired movement, into its third decade in Venezuela. Founded by former President Hugo Chávez, Mr. Maduro's mentor, the movement initially promised to lift millions out of poverty.

For a time it did. But in recent years, the socialist model has given way to brutal capitalism, economists say, with a small state-connected minority controlling much of the nation's wealth.

Economists say what now? These economists are not identified by The Times; the given hyperlink redirects to a Times article about improvements in the Venezuelan economy. These improvements were due to the introduction of some market reforms, according to economists with actual names.

"Lifting some controls does not make Venezuela a capitalist country," writes George Mason University economist Tyler Cowen. "Moreover, the lifting of controls led to improvements."

When a small state-connected minority controls much of the nation's wealth—and maintains its grip on power by outlawing dissent and cheating in elections—then the ruling ideology is socialism, almost by definition. Maduro, it bears repeating, makes no secret of this: He is the leader of the United Socialist Party of Venezuela.

Socialists will complain, as they often do, that various socialist governments are not practicing actual socialism. Under their idealized system, socialists claim, the government's centralized redistribution of resources will be fair, equal, and democratic. Yet it certainly says something about such a system that it collapses into outright tyranny every time it is attempted. Socialist governance seems to require concentrating an extraordinary amount of power in elite government decision makers; this tends to produce a new ruling class, the widespread deprivation of political rights for everyone else, and crippling poverty.

Socialism is brutal, as the people of Venezuela know perfectly well. They understand that better than The New York Times.

This Week on Free Media

Amber Duke and I discuss MSNBC's confusion over what Sen. J.D. Vance (R–Ohio) really wants, President Joe Biden's plan to pack the Supreme Court, and weird affinity groups supporting Vice President Kamala Harris. (Apologies for my hoarse voice; I had too much fun at a Green Day/The Smashing Pumpkins concert the night before we filmed.)

Worth Watching

Like most fans of the Marvel Cinematic Universe (MCU), I am of the opinion that things have mostly gone awry since Avengers: Endgame concluded "The Infinity Saga." (Though I enjoyed several of the post-Endgame television shows on Disney+: WandaVision, Loki, Hawkeye, and What If…?) I was thus incredibly pleased to learn that the Russo brothers—who were responsible for many of the MCU's best films, including Endgame and Infinity War—are returning to rescue the franchise. Most notably, they have enlisted a familiar face: Robert Downey Jr., who famously portrayed Tony Stark/Iron Man, the original MCU superhero who gave his life to save the universe.

Downey Jr. will not be playing Stark again, thank goodness. While there are all sorts of ways to revive the character—alternate universes, time travel, etc.—doing so would cheapen his sacrifice at the conclusion of Endgame. Instead, Downey Jr. will play Victor von Doom, a beloved villain from the Marvel comics. It seems likely that this version of Doctor Doom will have some connection to Stark; as previously mentioned, the MCU has made use (some would say overuse) of alternate realities.

In any case, the recent reveal of Downey Jr. at Comic-Con in San Diego, California, was something to behold.

The post <em>The New York Times</em> Thinks 'Brutal Capitalism,' Not Socialism, Ruined Venezuela appeared first on Reason.com.

The Road to Freedom: Economics and the Good Society, by Joseph E. Stiglitz, W.W. Norton & Company, 384 pages, $29.99

Joseph Stiglitz, a former chief economist of the World Bank, thinks that taxation is a precondition for freedom, not a threat to it. The current political problem, he argues in The Road to Freedom, is that the right (which for Stiglitz includes libertarians as well as conservatives) rejects the Founding Fathers' idea of no taxation without representation in favor of opposing any taxation at all. This is a problem, he continues, because market failures are more extensive and severe than the "neoliberals"—people like Stiglitz's fellow Nobel laureates Friedrich Hayek and Milton Friedman—would admit. For Stiglitz, redistribution and regulation are the real road to freedom.

Much of the book is devoted to criticizing neoliberals, who Stiglitz defines as proponents of "unregulated, unfettered markets." In Stiglitz's view, "a free-market, competitive, neoliberal economy combined with a liberal democracy" isn't enough—for "a stable equilibrium," we need "strong guardrails and a broad societal consensus on the need to curb wealth inequality and money's role in politics."

This book is written as though the regulatory state has not expanded since the end of World War II and as though the welfare state was dismantled in the 1980s. It is written as if liberal democracies' economic policies were all written by someone with the worldview of President Javier Milei of Argentina or the Brazilian MMA fighter Renato Moicano, who at UFC 300 proclaimed that everyone who cares about freedom should be reading the libertarian economist Ludwig von Mises. It is written as though we were still in the Lochner era, when the Supreme Court regularly struck down economic regulations.

But that is not the era we live in. Instead, the state has kept growing because neoliberalism has never reached the level of influence its adherents wanted. A more coherent argument—though still not a good one—would be that the modern state is big but should be bigger.

Nor is this book a good guide to the views of "neoliberals" like Friedman, Hayek, and Mises. No reasonable reading of these writers would suggest that they do not believe in market failures, yet Stiglitz claims that neoliberals think "markets on their own were efficient and stable."

Stiglitz also claims that "Unfettered markets designed along neoliberal principles have effectively robbed [the U.S. and U.K.] of their political freedom." One would expect an economist of Stiglitz's stature to make an effort to support this claim, yet his book offers no evidence for it. The available empirical evidence suggests that Stiglitz has it backward: It is state control of the economy that suppresses democratic freedom. There are other inconvenient empirical studies, including ones showing that the neoliberal "Washington Consensus" works fairly well and that there is no clear evidence that economic freedom leads to more inequality. (There is, however, abundant evidence that economic freedom makes us richer.)

The book does contain many reasonable ideas. Stiglitz is certainly right that the challenges associated with global fisheries, pandemics, and climate change are a fertile opportunity for more economic analysis. And the notion that market failures are both more complex and more common in an increasingly interconnected world should be a starting point for economists and policy makers.

Unfortunately, Stiglitz is too comfortable claiming that the solution to these problems is "regulation," without adding much explanation of how regulation should address such issues. Here he should have engaged more deeply with the insights of another Nobel laureate in economics, Elinor Ostrom. Stiglitz does mention Ostrom's research on the regulation of the commons—that is, of shared resources that anyone can use (and overuse, in the absence of rules governing how people can draw on them). But he sees her work as a defense of "regulation" and a critique of private property.

That wasn't what Ostrom was arguing. Rather than rail against private property, Ostrom argued that it is an empirical question as to whether private property, communal arrangements outside the state, or government control is the most appropriate way to manage the commons. And nothing in Ostrom's work implies a wide-ranging critique of private property. Her work is fully within the same classical liberal tradition that includes Hayek and Friedman.

Public goods, Ostrom argued, are not provided solely by the government. She also stressed the importance of polycentricity—of multiple levels of governance that offer opportunities for citizens and nonprofits to provide public goods, with each level able to cooperate with the others and also to act independently. This is especially useful for thinking about how to address the kinds of complex externalities Stiglitz sees as pervasive. Ostrom even developed a polycentric approach to climate change.

The call for regulation is less fundamental than asking what political arrangements give rise to the most appropriate rules, be they public, private, or communal. Elinor Ostrom and her husband, Vincent Ostrom, highlighted federalism's value as a laboratory of democracy because, like Hayek, they recognized that we do not know how to solve many pressing problems. This book would have been more convincing if instead of devoting so much time to criticizing the neoliberals (and overstating their influence), Stiglitz had spent more time exploring such insights.

Stiglitz's polemics are unlikely to change anyone's mind, but they will probably find an audience among people already predisposed to agree with them. His ideological fellow-travelers will probably like his full-throated defense of "progressive capitalism" (basically contemporary Sweden, with its combination of a generous welfare state, pro-labor policies, and a market economy). But Stiglitz does not explain why the U.S. is not like Sweden, nor how to get to Sweden from where we are now. Nor does Stiglitz note that Sweden, which ranks highly in the Heritage Foundation's Index of Economic Freedom, is rather open to policies promoted by neoliberals.

If you're interested in understanding market liberalism, there are better recent books to read, such as Peter Boettke's The Struggle for a Better World or Deirdre McCloskey and Art Carden's Leave Me Alone and I'll Make You Rich, each of which explains what classical liberals mean by freedom. If you are tempted to accept the notion that neoliberals lack a moral sense, you would especially benefit from Humanomics—by Bart Wilson and another Nobel laureate, Vernon Smith—which articulates the rich moral framework of Adam Smith's tradition. And if you want a more compelling empirical critique of capitalism, Daniel Bromley's Possessive Individualism explains how modern capitalism differs from the capitalism of even half a century ago, let alone Adam Smith's time.

But even our current, heavily regulated variety of capitalism is better than countless real-world alternatives. After all, if the situation in the U.S. were as bad as Stiglitz suggests, one would not expect so many people to want to move here. The border "crisis," which is really a problem with excessive regulation, suggests that the U.S. has pretty good institutions. Or at the very least, that people think those institutions are better than what they are leaving. And what they are leaving is less economic and political freedom.

The post Stiglitz's <i>The Road to Freedom</i> Under Scrutiny appeared first on Reason.com.

In May 2023, OpenAI founder Sam Altman testified before the Senate Judiciary Committee about ChatGPT. Altman demonstrated how his company's tool could massively reduce the cost of retrieving, processing, conveying, and perhaps even modifying the collective knowledge of mankind as stored in computer memories worldwide. A user with no special equipment or access can request a research report, story, poem, or visual presentation and receive in a matter of seconds a written response.

Because of ChatGPT's seemingly vast powers, Altman called for government regulation to "mitigate the risks of increasingly powerful AI systems" and recommended that U.S. or global leaders form an agency that would license AI systems and have the authority to "take that license away and ensure compliance with safety standards." Major AI players around the world quickly roared approval of Altman's "I want to be regulated" clarion call.

Welcome to the brave new world of AI and cozy crony capitalism, where industry players, interest groups, and government agents meet continuously to monitor and manage investor-owned firms.

Bootleggers and Baptists Have a 'Printing Press Moment'

ChatGPT has about 100 million weekly users worldwide, according to Altman. Some claim it had the most successful launch of a consumer product in history, and Altman anticipates far more future users. He's now seeking U.S. government approval to raise billions from United States, Middle East, and Asian investors to build a massive AI-chip manufacturing facility.

In his testimony, Altman referred to Johannes Gutenberg's printing press, which enabled the Enlightenment, revolutionized communication, and—following the dictum "knowledge is power"—destabilized political and religious regimes worldwide. Altman suggested that, once again, the world faces a "printing press moment": another time of profound change that could bring untold benefits as well as unimaginable disturbances to human well-being. A related letter signed by Altman, other AI industry executives, and scores of other leaders in the field, underlined their profound concern and said: "Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war."

Altman's call for regulation also has a parallel in the early history of printing. Something similar to the licensing control suggested by Altman was used by Queen Elizabeth I in 16th century England. She assigned transferable printing rights to a particular printing guild member in a frustrated effort to regulate and censor printing.

Altman's moral appeal rests on the notion of preserving a nation of people or their way of life. In that way, it satisfies the "Baptist" component of the bootleggers and Baptists theory of regulation, which I developed decades ago and which explains why calls to "regulate me" may be seen as just about businesses earning extra profits.

An especially durable form of government regulation takes hold when there are at least two interest groups supporting it, but for decidedly different reasons. One supports the pending regulation for widely held moral reasons (like old-school Baptists who want to bar legal Sunday liquor sales). The other is in it for the money (like the bootleggers who see opportunity in a day without any legal competition).

Altman's "Baptist" altar call may well be altruistic—who can know?—but it shows his hand as a potential bootlegger, too. After all, a government-sheltered AI market could provide a first-mover advantage as his entity helps to determine the appropriate standards that will be applied to everyone else. It could yield a newer, cozier crony capitalism that has not previously existed in quite the same form.

Apparently, some other potential bootleggers heard the altar call too and liked the idea of being in a cozy cartel. Soon, Microsoft insisted that thoroughgoing government regulation of AI would be necessary. In another Baptist-like appeal, Microsoft President Brad Smith said:"A licensing regime is fundamentally about ensuring a certain baseline of safety, of capability. We have to prove that we can drive before we get a license. If we drive recklessly, we can lose it. You can apply those same concepts, especially to AI uses that will implicate safety."

Google felt the call as well and provided a statement recommending AI regulation on a global and cross-agency basis. Google CEO Sundar Pichai emphasized, "AI is too important not to regulate and too important not to regulate well." Another February 2024 policy statement from Google contains a litany of plans to cooperate with competitors and government agencies to advance a safe and effective generative AI environment.

How AI Will Regulate AI

In a December 2023 report on U.S. government agency activity for FY 2022, the Government Accountability Office indicated that 20 of the 23 agencies surveyed reported some 1,200 AI activities, including everything from analyzing data from cameras and radar to preparing for planetary explorations.

Bootlegger and Baptist–inspired regulatory episodes in the past typically involved in-depth studies and hearings and ended up with lasting rules. That was the case through most of the 20th century, when the Interstate Commerce Commission regulated prices, entry, and service in specific industries, and in the 1970s, when the Environmental Protection Agency was equipped with command-and-control regulations in an alleged attempt to correct market failures.

Sometimes it took years to develop regulations to address a particular environmental problem. By the time the final rules were announced and frozen in time, the situation to be resolved may have changed fundamentally.

Cheap information enabled by generative AI changes all this. By using AI, the generative AI regulatory process—pending at the level of California, the federal government, and other governments worldwide—so far favors ongoing, never-ending governance processes. These will focus on major generative AI producers but involve collaboration among industry leaders, consumer and citizen groups, scientists, and government officials all engaged in a newly blossomed cozy cronyism.Under the European Union's AI Act, an AI Office will preside over processes that continually steer and affect generative AI outcomes.

If more traditional command-and-control or public utility regulation were used, which raises its own challenges, AI producers would be allowed to operate within a set of regulatory guardrails while responding to market incentives and opportunities. They would not be required to engage in cooperative engagement with regulators, their own competitors, and other supposed stakeholders in this larger enterprise. In this AI world, bootleggers and Baptists now sit together in the open.

Specifically, this burgeoning approach to AI regulation requires the implementation of "sandboxes," where regulated parties join with regulators and advisers in exploring new algorithms and other AI products. While sandboxes have some beneficial things to offer industries in new or uncertain regulatory environments, members of the unusually collaborative AI industry are poised to learn what competitors are developing as government referees look on.

The risk, should this environment persist, is that radically new products and approaches in the arena never get a chance to be developed and benefit consumers. The incentives to discover new AI products and profit from them will be blunted by cartel-like behavior in a new bootleggers and Baptists world. Countries and firms that refuse to play by these rules would likely become the only fountainhead for major new AI developments.

The End of the AI Wild West

No matter what form of regulation holds sway, generative AI is out of the box and will not go away. Already, computer capacity requirements for processing the software are falling, and already, generative AI's applications to new information challenges are exploding. At the same time, government agents' ability to regulate is improving and the payoff to the regulated for working hand-in-hand with government and organized interest groups is growing.

Generative AI's Wild West days may be drawing to a close. This is when invention, expansion, and growth can occur unconstrained by regulation while within the bounds of local courts, judges, property rights, and common law. Novel developments will still occur, but at a slower pace. The generative AI printing press moment may expand to become an era. But just as the Gutenberg invention led initially to the regulation and even outlawing of the printing press across many major countries, new information technologies emerged anyway and effective regulation of real knowledge became impossible.

A renaissance was set in motion despite official attempts to stymie the technology. Freer presses emerged, and eventually the telegraph, telephones, typewriters, mimeograph, Xerox, fax, and the internet itself. Knowledge flows cannot be stopped. We moderns may learn again that the human spirit cannot be forever bottled up, and over the long run market competition will be allowed, if not encouraged, to move mankind closer to a more prosperous era.

America's Founders were enlightened and well aware of Europe's troublesome efforts to regulate Gutenberg's printing press. They insisted on freedom of speech and a free press. We may eventually see similar wisdom applied to generative AI control—but don't hold your breath.

The post AI's Cozy Crony Capitalism appeared first on Reason.com.

In a special edition of Just Asking Questions recorded before a live audience on the Honduran island of Roatán, Reason's Zach Weissmueller and Liz Wolfe talk with Mark Lutter, founder of the Charter Cities Institute, and Patri Friedman, founder and board member of Pronomos Capital, a venture capital firm that invests in charter cities.

The conversation took place at the Alternative Visions for Governance conference sponsored by the Reason Foundation, which publishes Reason. The conference happened within the jurisdiction of Próspera, an autonomous zone for economic development—known as a ZEDE—made possible by a 2013 law passed by the Honduran National Congress. 

They discussed lessons learned from the launch of Próspera, which has expanded despite a hostile presidential administration, the proliferation of biohacking and medical procedures within the zone, the history of self-governing cities, the relationship between charter cities and democracy, and where in the world prospects are best for future experiments in privatized governance. 

Watch the full conversation on Reason's YouTube channel or on the Just Asking Questions podcast feed on Apple, Spotify, or your preferred podcatcher.

The post Patri Friedman and Mark Lutter: Does a City Need a State? appeared first on Reason.com.

Voters in California went to the polls this week for a primary election that's the first step towards picking a permanent replacement for the late Sen. Dianne Feinstein, who died nearly six months ago.

In Washington, meanwhile, Feinstein is still wielding influence from beyond the grave. Her name is attached to 256 different earmarks included in the budget bill working its way through Congress this week. Those pork projects will cost taxpayers about $1.1 billion if the bill passes in its current form, the Washington Examiner reported Tuesday.

And that only scratches the surface. The partial budget deal—which contains six of the 12 appropriations bills that make up the discretionary portion of the annual federal budget—is overflowing with earmarks to fund lawmakers' pet projects. All told, there are more than 6,000 earmarks in the bill, costing taxpayers more than $12.7 billion, according to Sen. Mike Lee (R–Utah), who has urged Republicans to vote against the package.

Many of the earmarks in the package seem like things that would be better funded by local or state taxpayers, who at least might stand to benefit from projects like new sewer systems, new runways and other upgrades for tiny rural airports, and a plethora of highway projects. Some are truly head-scratching, like Sen. Tammy Baldwin's (D–Wis.) $1.4 million earmark for a solar energy project in Wisconsin, one of the places in America least well suited for a solar farm.

Plenty of others make no sense for the public to be funding at all. Like a $3.5 million earmark secured by Sen. Debbie Stabenow (D–Mich.) for The Parade Company, which runs Detroit's annual Thanksgiving Day parade. Or the $2.5 million earmark that will help build a new kayaking facility in Franklin, New Hampshire, curtsey of Sen. Jeanne Shaheen (D–N.H.), as well as $2.7 million line item to help build a bike park in White Sulfur Springs, West Virginia, a town with a population of less than 2,300 people.

For that amount of money, "you could buy EVERY resident a $1,200+ bike" Sen. Rick Scott (R–Fla.), who has become a vocal critic of the earmarks in the bill, posted on X (formerly Twitter). "There's no way they need this much of YOUR money for this."

The same could be said for several Republican-based earmarks too. Sen. Lindsey Graham (R–S.C.) has inserted at least eight earmarks into the bill, forcing federal taxpayers to put up more than $33 million for things most will never use, like a new trail at Coastal Carolina University and an ROTC facility at the University of South Carolina. Among the dozens of earmarks inserted by Sen. Lisa Murkowski (R–Alaska), perhaps the strangest is the $4 million grant for the "Alaska King Crab Enhancement Project."

Wait, you might be thinking, didn't Congress ban the use of earmarks when tea party-era Republicans controlled the government? Yep, they did. But like fiscal responsibility and concern about America's ballooning entitlement costs, those efforts to limit pork barrel spending are now distant memories. Democrats voted to reinstate earmarks in 2021, and Republicans soon followed suit.

To Congress' credit, earmarks are now handled more transparently than they used to be—which is why you can view the full list of earmarks included in the budget bills here.

Still, some things never change. Earmarks remain expensive, wasteful exercises in cronyism—and with the country $34 trillion in debt, Congress should not be putting taxpayers on the hook for frivolous handouts to politically connected friends.

The post The Budget Deal Is Overflowing With $12 Billion of Earmarks appeared first on Reason.com.

Our overruling principle is to always maximize shareholder value in any given situation.

-Embracer Group, Calendar Q4 2023 Financial Report

This past week the train wreck that is the once ominously (and now tragically) named Embracer Group declared that sure, they were laying off staff and cancelling almost every project they had going, but it was because their “overruling principle is to always maximize shareholder value in any given situation,” which is such an astonishing lie that I combed Swedish police blotter entries for reports of individuals whose pants were literally on fire.

Embrace This… Comic Sans font used on purpose to register my disdain

Embracer Group has been the victim of tragicly incompentent management of the company, studios, and brands they own.  Remember, these are the people who own all of Tolkien and declared that they were going to fix their issues by exploiting Middle-earth to the maximum.

If there were any justice in the world the senior execs at Embracer as a whole, and CEO Lars Wingefors in particular, would be run out of town on a rail, then face lawsuits and possible criminal charges for their overtly deceptive behavior at the helm of the enterprise.

Instead of reprecussions however, those execs are trying to claim they are very concerned about shareholder value while being shocked and surprised that their gamble with shareholder money did not play out.

The thing is, when you’ve screwed things up so badly and so deliberately, if you start spending your Saudi blood investment money before you’ve closed the deal and you don’t have the good sense to have a plan, then you have already blown your fiduciary responsibility to the investors, you have already proven that you do not, in fact, in any way, have the maximization of shareholder value in mind in the operation of your business.

You cannot fuck everything up and then claim to be a champion of the shareholders.

There is a lot to hate about that quote at the top of the post.  Certainly at the top of the list would be equating short term stock price with shareholder value.  Shareholder value is a lot more than that, or should be.  I am keenly aware of the perverse incentives that reward short term thinking, that only what is happening in the current fiscal quarter matters, and how captial management groups and Wall Street in general hold  companies accountable only on that dynamic.

All of this late stage capitalism where gambling on stock prices and demanding that the line must always go up is very bad and will always end in tears.

Tom Toro cartoon from The New Yorker

(You can read a bit about Tom Toro here.)

It is easy to get mad about that, and more people should be mad about that.

But Embracer isn’t even in that league.  These fuckwits screwed things up in patently predictable and obvious ways, during which time they were clearly not considering shareholder value with any more depth than if they had gone to Vegas and put all of their money on red.

It was only after screwing things up and getting the company in a bind that they decided it was time to come out and make an empty declaration about shareholder value.

I am reminded of a Dennis Miller quote about nobody finding Christ on prom night.  It is only when you’ve fucked everything up that seeking salvation seems like a good plan.

For once I am on the side of Wall Street.  Or I would be if I had any hope that they would see through this bald face lie and vote the rascals out at the earliest possible opportunity.  Again, justice would be the executive staff finishing their lives working at an off-brand fast food restaurant where their shift leader asked them at least once a week how the shareholder value thing was going.  Hey Lars, how is the shareholder value today?  Did that customer get any shareholder value with their lutefiske Lars?  What are you doing at the deep fryer that is maximizng shareholder value Lars?

A man can dream.

Alas, it won’t come to pass.  If there is one thing I have learned in life is that the rich take care of the rich.  As a CEO you only face actual reprecussions if you betray your class.  Even if they drive the whole thing into the ground, which they could still do given the business accumen they have shown so far, they’ll still get positions of responsibility, serve on boards, and prosper in all the little ways that show how the rich take care of their own.

Related:

• Game Developer – Embracer says it’s looking out for shareholders after cutting almost 1,400 jobs
• Massively OP – Embracer confirms layoffs of nearly 1400 people were part of efforts to ‘always maximize shareholder value’
• Kotaku – Embracer Cancelled Nearly 30 Games In Just 6 Months
• IGN – Embracer Warns of More Layoffs Despite Already Letting Go 1,387 Staff
• Games Radar – Embracer Group quietly cancelled 29 unannounced games and shut 7 studios within six months last year
• PC Gamer – Embracer reveals it laid off around 1,400 people in 6 months last year, but don’t be a bellyacher—this is all about ‘maximising shareholder value’
• Fandom Wire – “always maximize shareholder value”: Embracer Group Shows Its True Colours After Sacking More Employees
• Gamesindustry.biz – Embracer CEO says layoffs are “something that everyone needs to get through”

Our overruling principle is to always maximize shareholder value in any given situation.

-Embracer Group, Calendar Q4 2023 Financial Report

This past week the train wreck that is the once ominously (and now tragically) named Embracer Group declared that sure, they were laying off staff and cancelling almost every project they had going, but it was because their “overruling principle is to always maximize shareholder value in any given situation,” which is such an astonishing lie that I combed Swedish police blotter entries for reports of individuals whose pants were literally on fire.

Embrace This… Comic Sans font used on purpose to register my disdain

Embracer Group has been the victim of tragicly incompentent management of the company, studios, and brands they own.  Remember, these are the people who own all of Tolkien and declared that they were going to fix their issues by exploiting Middle-earth to the maximum.

If there were any justice in the world the senior execs at Embracer as a whole, and CEO Lars Wingefors in particular, would be run out of town on a rail, then face lawsuits and possible criminal charges for their overtly deceptive behavior at the helm of the enterprise.

Instead of reprecussions however, those execs are trying to claim they are very concerned about shareholder value while being shocked and surprised that their gamble with shareholder money did not play out.

The thing is, when you’ve screwed things up so badly and so deliberately, if you start spending your Saudi blood investment money before you’ve closed the deal and you don’t have the good sense to have a plan, then you have already blown your fiduciary responsibility to the investors, you have already proven that you do not, in fact, in any way, have the maximization of shareholder value in mind in the operation of your business.

You cannot fuck everything up and then claim to be a champion of the shareholders.

There is a lot to hate about that quote at the top of the post.  Certainly at the top of the list would be equating short term stock price with shareholder value.  Shareholder value is a lot more than that, or should be.  I am keenly aware of the perverse incentives that reward short term thinking, that only what is happening in the current fiscal quarter matters, and how captial management groups and Wall Street in general hold  companies accountable only on that dynamic.

All of this late stage capitalism where gambling on stock prices and demanding that the line must always go up is very bad and will always end in tears.

Tom Toro cartoon from The New Yorker

(You can read a bit about Tom Toro here.)

It is easy to get mad about that, and more people should be mad about that.

But Embracer isn’t even in that league.  These fuckwits screwed things up in patently predictable and obvious ways, during which time they were clearly not considering shareholder value with any more depth than if they had gone to Vegas and put all of their money on red.

It was only after screwing things up and getting the company in a bind that they decided it was time to come out and make an empty declaration about shareholder value.

I am reminded of a Dennis Miller quote about nobody finding Christ on prom night.  It is only when you’ve fucked everything up that seeking salvation seems like a good plan.

For once I am on the side of Wall Street.  Or I would be if I had any hope that they would see through this bald face lie and vote the rascals out at the earliest possible opportunity.  Again, justice would be the executive staff finishing their lives working at an off-brand fast food restaurant where their shift leader asked them at least once a week how the shareholder value thing was going.  Hey Lars, how is the shareholder value today?  Did that customer get any shareholder value with their lutefiske Lars?  What are you doing at the deep fryer that is maximizng shareholder value Lars?

A man can dream.

Alas, it won’t come to pass.  If there is one thing I have learned in life is that the rich take care of the rich.  As a CEO you only face actual reprecussions if you betray your class.  Even if they drive the whole thing into the ground, which they could still do given the business accumen they have shown so far, they’ll still get positions of responsibility, serve on boards, and prosper in all the little ways that show how the rich take care of their own.

Related:

• Game Developer – Embracer says it’s looking out for shareholders after cutting almost 1,400 jobs
• Massively OP – Embracer confirms layoffs of nearly 1400 people were part of efforts to ‘always maximize shareholder value’
• Kotaku – Embracer Cancelled Nearly 30 Games In Just 6 Months
• IGN – Embracer Warns of More Layoffs Despite Already Letting Go 1,387 Staff
• Games Radar – Embracer Group quietly cancelled 29 unannounced games and shut 7 studios within six months last year
• PC Gamer – Embracer reveals it laid off around 1,400 people in 6 months last year, but don’t be a bellyacher—this is all about ‘maximising shareholder value’
• Fandom Wire – “always maximize shareholder value”: Embracer Group Shows Its True Colours After Sacking More Employees
• Gamesindustry.biz – Embracer CEO says layoffs are “something that everyone needs to get through”

The White House this month announced plans for how it will direct billions of dollars in funding toward semiconductors, marking a new phase in the implementation of the CHIPS and Science Act.

The $280 billion legislation, signed into law in 2022, aims to bolster semiconductor production in the U.S. President Joe Biden's administration said Monday that it will funnel $1.5 billion to GlobalFoundries, a semiconductor manufacturing and design company, to increase its domestic output. Perhaps more significant, however, was Biden's dispatch earlier this month announcing the administration will use at least $5 billion to establish a National Semiconductor Technology Center (NSTC), which will, among other things, support "the design, prototyping, and piloting of the latest semiconductor technologies," according to the White House. 

This latest effort is part of the government's expensive and protectionist public-private partnership meant to address concerns over a reliance on foreign countries, like China, for chips.

"Semiconductors were invented in America and serve as the backbone of the modern economy," the White House said in a statement. "But today, the United States produces less than 10 percent of global supply and none of the most advanced chips."

The NSTC will supposedly also play a crucial role in expanding the semiconductor workforce to manufacture computing chips that can complement advances in artificial intelligence and related industries. Semiconductors are projected to become a $1 trillion industry by 2030, according to McKinsey & Company.

The CHIPS and Science Act has several eyebrow-raising elements, including $81 billion for the National Science Foundation—doubling the agency's budget over five years. Another $24 billion will go toward tax credits meant to subsidize and incentivize private companies to invest in semiconductors.

While the legislation was likely well-intentioned, it was doomed to have protectionist ramifications. "To defeat China, the argument goes, the U.S. must adopt the tactics of the Chinese Communist Party, at least when it comes to high-end manufacturing," Reason's Eric Boehm wrote in January 2023. But that ham-handed approach to industrial policy and corporate welfare drives up the deficit and hampers economic growth at very little benefit to the taxpayer, who are forced to fund these initiatives. 

It's likely unsurprising that many large corporations lobbied for the CHIPS and Science Act, including Meta, Microsoft, Google, Amazon, Apple, Northrop Grumman, Carrier, Trane, and General Dynamics, as well as labor unions like the American Federation of Labor and Congress of Industrial Organizations and the Communications Workers of America. "Big government means big lobbying," wrote David Boaz, a senior fellow at the Cato Institute. "When you lay out a picnic, you get ants. And today's federal budget is the biggest picnic in history."

The CHIPS and Science Act passed with bipartisan support. But its detractors were also made up of strange bedfellows. Sen. Bernie Sanders (I–Vt.) and then-Rep. Kevin McCarthy (R–Calif.) both referred to the law as "corporate welfare" and a "blank check." Sanders went as far as to call it a "bribe."

"When the government adopts an industrial policy that socializes all the risk and privatizes all the profits, that is crony capitalism," Sanders said.

He's not wrong. The law "is another episode of politicians granting favors to their friends in the semiconductor industry," Veronique de Rugy, a contributing editor at Reason and a senior research fellow at the Mercatus Center, wrote last year. Such an approach "punishes those who aren't elite or can't organize to extract favors from politicians."

Michelle Nuzzo-Kelly is an apt example. She was among the residents of Burnet Road near Syracuse, New York, who received several offers to purchase her home. But those offers didn't come from private buyers: They came from the government, as Onondaga County sought to expand a plot of land so it could attract a developer. Micron, one of the world's largest semiconductor manufacturing firms, is now set to build a facility there, thanks to lucrative taxpayer-funded subsidies from the state and federal government.

"The offers to buy Nuzzo-Kelly's home were never really just offers," Boehm wrote when covering the case in November 2022. "They were demands backed by a threat to use government power to force her to sell."

The post Biden Pours Out Another $6.5 Billion for the CHIPS Act's Costly Protectionism appeared first on Reason.com.

Our overruling principle is to always maximize shareholder value in any given situation.

-Embracer Group, Calendar Q4 2023 Financial Report

This past week the train wreck that is the once ominously (and now tragically) named Embracer Group declared that sure, they were laying off staff and cancelling almost every project they had going, but it was because their “overruling principle is to always maximize shareholder value in any given situation,” which is such an astonishing lie that I combed Swedish police blotter entries for reports of individuals whose pants were literally on fire.

Embrace This… Comic Sans font used on purpose to register my disdain

Embracer Group has been the victim of tragicly incompentent management of the company, studios, and brands they own.  Remember, these are the people who own all of Tolkien and declared that they were going to fix their issues by exploiting Middle-earth to the maximum.

If there were any justice in the world the senior execs at Embracer as a whole, and CEO Lars Wingefors in particular, would be run out of town on a rail, then face lawsuits and possible criminal charges for their overtly deceptive behavior at the helm of the enterprise.

Instead of reprecussions however, those execs are trying to claim they are very concerned about shareholder value while being shocked and surprised that their gamble with shareholder money did not play out.

The thing is, when you’ve screwed things up so badly and so deliberately, if you start spending your Saudi blood investment money before you’ve closed the deal and you don’t have the good sense to have a plan, then you have already blown your fiduciary responsibility to the investors, you have already proven that you do not, in fact, in any way, have the maximization of shareholder value in mind in the operation of your business.

You cannot fuck everything up and then claim to be a champion of the shareholders.

There is a lot to hate about that quote at the top of the post.  Certainly at the top of the list would be equating short term stock price with shareholder value.  Shareholder value is a lot more than that, or should be.  I am keenly aware of the perverse incentives that reward short term thinking, that only what is happening in the current fiscal quarter matters, and how captial management groups and Wall Street in general hold  companies accountable only on that dynamic.

All of this late stage capitalism where gambling on stock prices and demanding that the line must always go up is very bad and will always end in tears.

Tom Toro cartoon from The New Yorker

(You can read a bit about Tom Toro here.)

It is easy to get mad about that, and more people should be mad about that.

But Embracer isn’t even in that league.  These fuckwits screwed things up in patently predictable and obvious ways, during which time they were clearly not considering shareholder value with any more depth than if they had gone to Vegas and put all of their money on red.

It was only after screwing things up and getting the company in a bind that they decided it was time to come out and make an empty declaration about shareholder value.

I am reminded of a Dennis Miller quote about nobody finding Christ on prom night.  It is only when you’ve fucked everything up that seeking salvation seems like a good plan.

For once I am on the side of Wall Street.  Or I would be if I had any hope that they would see through this bald face lie and vote the rascals out at the earliest possible opportunity.  Again, justice would be the executive staff finishing their lives working at an off-brand fast food restaurant where their shift leader asked them at least once a week how the shareholder value thing was going.  Hey Lars, how is the shareholder value today?  Did that customer get any shareholder value with their lutefiske Lars?  What are you doing at the deep fryer that is maximizng shareholder value Lars?

A man can dream.

Alas, it won’t come to pass.  If there is one thing I have learned in life is that the rich take care of the rich.  As a CEO you only face actual reprecussions if you betray your class.  Even if they drive the whole thing into the ground, which they could still do given the business accumen they have shown so far, they’ll still get positions of responsibility, serve on boards, and prosper in all the little ways that show how the rich take care of their own.

Related:

• Game Developer – Embracer says it’s looking out for shareholders after cutting almost 1,400 jobs
• Massively OP – Embracer confirms layoffs of nearly 1400 people were part of efforts to ‘always maximize shareholder value’
• Kotaku – Embracer Cancelled Nearly 30 Games In Just 6 Months
• IGN – Embracer Warns of More Layoffs Despite Already Letting Go 1,387 Staff
• Games Radar – Embracer Group quietly cancelled 29 unannounced games and shut 7 studios within six months last year
• PC Gamer – Embracer reveals it laid off around 1,400 people in 6 months last year, but don’t be a bellyacher—this is all about ‘maximising shareholder value’
• Fandom Wire – “always maximize shareholder value”: Embracer Group Shows Its True Colours After Sacking More Employees
• Gamesindustry.biz – Embracer CEO says layoffs are “something that everyone needs to get through”