Freeing Progressives From Their Deficit-Fear Shackles

Since the federal deficit was a central (and, in my view, misguided) focus of both of the two recent political conventions, it seems like a good time to revisit the Modern Monetary Theory (MMT) perspective on the deficit (in what will be my first post since finishing up a two-month project that left me with no time for blogging).

The timing is also good (and my job a lot easier) because I can refer to several very good blog posts that have addressed this issue in the past few days.

In a post at New Economic Perspectives (NEP), J.D. Alt critiques a key premise underlying today’s economic conventional wisdom, the acceptance of which he claims is “the principal dilemma of the progressive cause.”

In Alt’s view, progressives have seriously weakened the power and public embrace of their arguments by “allow[ing] a bedrock conservative premise to go so long unchallenged.” In fact, he says, “progressives themselves have either overtly or implicitly agreed with the premise, making it virtually impossible for them to effectively advocate their goals.”

The faulty premise, says Alt (and other MMT advocates) is that “The money for federal government spending must come from the Private Sector, either through the collection of taxes and fees, or government borrowing.”

Alt points out that this premise, a foundation of today’s dominant “economic Common Sense,” ignores a key piece of economic reality:

Where does the money come from that the people earn in the first place? Continue reading

Posted in Economics, Modern Monetary Theory | 4 Comments

Minimizing Competition, Maximizing Extraction

A few things I read recently strike me as good (make that “painful”) examples of how the dominant incumbent ISPs are continuing their quest to minimize competition and thereby maximize financial extraction.

The first relates to anti-competitive developments in the political and legislative sphere.  The second relates to the ongoing trend among dominant ISPs to either merge or cooperate in ways that reduce competition and maximize financial extraction.  The third relates to the integration of “content” and “distribution,” as exemplified by Comcast’s recent acquisition of NBC Universal.

Taken together, these three developments highlight a multifaceted trend toward consolidation of market power in the communication sector, and how this trend is threatening the health of an Internet ecosystem that has been a vehicle for massive innovation, entrepreneurial activity and economic growth, and has enhanced the ability of citizens to exercise their First Amendment rights and engage in voluntary association and self-organization. Continue reading

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My Broadband Pipe Dream, Part II: How might we get there from here?

Having set the conceptual stage for a “generative” Internet access strategy in Part I of this two-part post, I’d like dig a little deeper here into the “what” and “how.”

As I said in Part I, and as suggested by this post’s title, the following is not intended to provide a specific and fully-formed proposal but, rather, to point in new directions, suggest some possibilities, and encourage creative and constructive discussion and debate.

To get started, here’s an outline of what I see as key components of a generative Internet access strategy that would be supported (financially and otherwise) at the national level, while being planned and managed at the local community level.

Together, these elements are intended to maximize the economic benefits predicted by New Growth Theory, by leveraging the federal government’s role as sovereign issuer of currency and the strengths of “generative” (vs. “extractive”) Internet access ownership models. Continue reading

Posted in Communication Policy, Community Broadband, Economics, Human Evolution, Modern Monetary Theory, New Economy Movement, New Growth Theory, Political Reform | Tagged , , , , | 2 Comments

My Broadband Pipe Dream, Part I: Review & Stage-Setting

In this post I hope to tie to together some threads of  analysis explored in earlier posts, with the goal of setting the stage for a follow-up post that will outline what I’ll call my “broadband pipe dream.”

So let’s review….

In a previous post I provided a conceptual overview of how a combination of New Growth Theory (NGT) and Modern Monetary Theory (MMT) provides a policy rationale for federal investment in broadband infrastructure and related development of value-generating network usage, skills and applications development.

This investment would support accelerated Internet-driven economic growth, as explained by New Growth Theory and its analysis of “the economics of ideas.”

It would do so by leveraging the U.S.government’s ability to deploy its sovereign currency in ways that (contrary to economic conventional wisdom), would not trigger deficit-driven problems related to the solvency of the U.S.government or inflation, as explained by Modern Monetary Theory.

In several other recent posts I considered issues related to the industry’s migration of Internet access to vertically-integrated and unregulated monopoly or duopoly structures, and the impact of this trend on the Internet’s “openness.”  (see here, herehere, here, here and here).  As I noted, these issues have been explored in depth by law professor Susan Crawford, in several papers and an upcoming book entitled “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.

In another post I considered different models of ownership and control of Internet access networks, applying an analytical framework developed by Marjorie Kelly in her new book, Owning our Future.  This framework focuses on differences between ownership structures with a purpose of maximizing “financial extraction,” and ownership models that have what Kelly refers to as a “generative” purpose and structure.

In that post I argued that publicly-traded cablecos and telcos typically approach local networks with a primary purpose of financial extraction (e.g., maximizing stock price, free cash flow, shareholder dividends, etc.).  In contrast, community-owned networks tend to have a “generative” purpose along the lines of:

 …to provide households, businesses and public service organizations (e.g., schools, healthcare providers, public safety, etc.) with affordable, reliable, symmetrical, high-capacity broadband connectivity and related services, to support their ability to prosper and thrive in an increasingly competitive and knowledge-based global economy.

It seems to me that this kind of “generative” purpose and ownership structure is very much in harmony with the growth-promoting role of the Internet, as suggested by New Growth Theory.  That’s because such an ownership model will tend to maximize the free flow and “combinatorial explosion” of ideas by maximizing Internet availability, affordability, symmetrical capacity, and the ability of end-users to freely leverage these capabilities to generate and exchange value–without control or censorship of this exchange of ideas and value by a centralized authority, whether it be a public or private entity. Continue reading

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Wireline Access Tends Toward Monopoly

When we consider questions related to Internet access policy (as I’ve been doing lately on this blog), it’s useful to have a sense of both the economics and historical trends in this key sector of the economy.  In this post I’m going to provide some of this, using excerpts from a paper I wrote awhile back.  Some of it may be a bit wonky, but I hope it will be useful for anyone wanting some additional background.

One of the key implications of this post’s analysis is that facilities-based wireline competition tends to be economically inefficient and, over time, wireline (and, to a somewhat lesser degree, wireless) access markets tend toward increasingly monopolistic industry structures (often referred to as “natural monopoly.”)

And even when there are already two wireline network operators in place (as in much of the U.S.), the same migration-to-monopoly economics are at work.

For example, AT&T and Verizon, the nation’s two largest telcos, have been experiencing accelerating customer losses in the markets in which they offer only DSL broadband (which account for roughly half of their holdings, if you include mainly-DSL markets recently sold off by Verizon).  Yet, in spite of these accelerating competitive losses, they have decided not to upgrade these markets with fiber optics, which would allow them to compete much more effectively with cable.

The primary reasons for this are:

1) telco DSL networks are fundamentally inferior to cable networks in terms of broadband capabilities, but are expensive to upgrade to the kind of fiber optic-based network that can compete with cable (as Verizon’s is doing quite successfully in the areas where it has upgraded to a fiber-to-the-home network.)

2) the two giant telcos don’t see enough financial payback from upgrading their remaining DSL-only (or dial-up only) markets and, instead, are focusing mainly on wireless, where they are the ones with dominant market power, but which does not provide real competition for cable-delivered broadband (due to speed, reliability, price and other factors).

Thus, as Susan Crawford has pointed out, in much of the nation, high-speed Internet access is migrating to an unregulated “cable monopoly.”  

If we’re serious about Internet policy, we need to understand and deal with this reality.   Hopefully the following will help a little with that understanding:

Continue reading

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From Extraction to Empowerment: A Tiny Tax with Big (Broadband) Benefits

The other day I read a post by economist Dean Baker that got me thinking about an intriguing “what if.”

Baker made the point that “[a] very small tax on trades of stocks, options, credit default swaps and other derivative instruments could raise a vast amount of money.”  More specifically:

The Joint Tax Committee of Congress estimated that a tax of just 0.03 percent on each trade…would raise more than $350 billion over the first nine years that it is in place. 

“The great thing about this sort of tax, said Baker, “is that it would be born almost exclusively by the Wall Street crew,” or as I’d call them, “the great extractors” of wealth from the productive economy.  And it might also slow or even reverse the growth of some of Wall Street’s more pathological practices, including the ultra-high frequency trading that generates profits on thin margins applied to huge trading volumes, and tends to destabilize markets and accelerate the pace of wealth extraction.

As it turns out….the $350 billion figure cited by Baker is roughly what it might cost to bring extremely high-speed all-fiber networks to all or at least the vast majority of American homes and businesses, and to supplement the network deployment with training and application support to help maximize the networks’ economic benefits.

What this means is that a tiny .03 percent financial transaction tax, in addition to  tapping on the brakes of Wall Street’s out-of-control financial extraction machine, could turbocharge REAL economic growth by linking and empowering all Americans via ultra-fast symmetrical broadband networks.

A tiny tax with big, broad-based, broadband-powered benefits.  Makes a lot of sense to me….

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Wireless carriers: “the biggest threat to innovation”

As it’s title suggests, the central theme of Nilay Patel’s post at The Verge is that “Five years after the iPhone, carriers are the biggest threat to innovation.”  In concluding the post, Patel describes the wireless market as “a market that is driving players big and small away from mobile broadband as the carriers tighten their grip.”  

I’d highly recommend reading the full post, whose sobering message reminds me of my post yesterday.  In it, I briefly responded to Verizon’s recent FCC filing claiming broadband networks are carriers’ “modern-day microphones” by which they “engage in First Amendment speech.”

Patel’s post provides a sense of how Verizon’s “it’s my microphone” perspective is impacting end-users and device-makers, and the original vision of the Internet as an “open mic” platform empowering free speech for ALL of us, not just the giant carriers that have an exclusive lock on most of the nation’s usable spectrum (and/or wield unregulated and near-monopolistic control over our wired connections).

Here are some excerpts from Patel’s post, which I’d strongly recommend reading  in its entirety, since it fleshes out the picture much more fully than I do here, and with reference to and quotes from specific companies (bolding is mine). Continue reading

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Is the Internet Verizon’s microphone?

In a recent filing with the DC Circuit Court of Appeals, Verizon claimed that the FCC’s network neutrality rules violate its First Amendment rights and those of other Internet access providers.

As reported by Timothy Lee at Ars Technica, Verizon argued that “Broadband Networks are the modern-day microphone by which their owners [e.g., Verizon] engage in First Amendment speech.”  The company also claimed that the FCC’s rules are violations of the Fifth Amendment, since they amount to “government compulsion to turn over [network owners’] private property for use by others without compensation.”

Verizon’s argument, especially the First Amendment component, is a clear expression of one side of the fundamental conflict between the “cable TV” and “Internet” models, which I discussed in a recent post.

If you combine Verizon’s legal argument with the reality that dominant ISPs are spending lots of money to push for state legislation banning community broadband networks (or at least to ensure they’re not economically viable), it’s hard not to understand the dominant ISPs’ message to the rest of us as “we intend to control how you get access to and use the Internet, and we’re going to use our political and financial muscle to make sure you can’t build your own open-access, higher-quality Internet access network.”

Hearing about Verizon’s legal filing brings to mind the questions I asked in two earlier posts:  “Which kind of Internet do ‘we the people’ want?” and “Do we want an unregulated monopolist with a conflict of interest to meter our web use?

Or, as I put it in another post, do we want Internet access in American communities to be controlled by entities whose primary purpose is maximizing “financial extraction” from these communities?  Or would we instead like our Internet access to be available from entities with a “generative” purpose, such as providing households, businesses and public service organizations (e.g., schools, healthcare providers, public safety, etc.) with affordable, reliable, high-capacity broadband connectivity and related services, to support their ability to prosper and thrive in an increasingly competitive and knowledge-based global economy?

It seems pretty clear what Verizon and the other dominant publicly-traded ISPs want from the Internet.  They want to control it as much as possible, and eliminate the threat of real competition as much as possible, so they can extract as much profit from that control as possible.

As Verizon stated quite clearly in its legal filing, it views Internet access networks as its “microphone.”

After roughly 80 years in which large corporations (e.g., broadcasters, cable companies and now broadband network operators) have controlled our nation’s most powerful First Amendment microphones, I think it’s time that the rest of us get a chance to also have a robust First Amendment microphone, rather than rely on the good graces of financially-extractive ISPs to rent us limited access to their microphone, in the form of closely-monitored bitstreams on terms they set for us as vertically-integrated monopolists or duopolists.

Thanks to the Internet, this “open-mic” communication environment is possible, as long as the Internet continues to operate on the model that’s worked so well up to this point, not the “cable TV model” that makes financial extraction so much easier and more lucrative for the dominant ISPs.

So, my request to Verizon and other large ISPs is, if you’re not willing to accept the Internet as a First Amendment “open mic” we all get to use, then at least stop using your financial and political muscle to buy legislation and/or costly litigation-driven delays to stop us, as citizens, from building our own high-capacity open mic platform.

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Owning our Networks: Applying Generative Ownership Design to Internet Access

In an earlier post I discussed Marjorie Kelly’s new book “Owning our Future,” which contrasts “extractive” ownership with “generative” ownership. I want to follow up on that post here, with a focus on Internet access, which I’ve been discussing in a series of recent posts (see here, here, here and here).

In an email exchange the other day, I asked Kelly about her perspective on community-owned broadband networks. Her response was (bolding is mine):

As for my thoughts on community owned broadband: I’m for it. It’s an important piece of locally controlled ownership, where we can begin to have more control over the necessities of our economy. Much better to own it than to try to regulate it, which is usually thwarted.

I agree with her, and in this post I’m going to take an initial stab at applying the analytical framework in Kelly’s book to Internet access. Specifically, I’m going to compare community-owned broadband networks to networks owned by incumbent cablecos and telcos, in particular the large, publicly-traded companies that serve the majority of American homes and businesses.

To do this, I’m going to refer to the five key elements of generative ownership, as described by Kelly in “Owning our Future.” Continue reading

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From “Extractive” to “Generative” Ownership

I recently read a new book by Marjorie Kelly entitled “Owning Our Future: The Emerging Ownership Revolution.  As it’s extended title indicates, the book allows readers to join Kelly on what she describes as  Journeys to a Generative Economy.  I’d highly recommend it to anyone interested in solutions to the growing imbalances and distortions in our increasingly crisis-prone economy.  You can start with an extended excerpt here.

To a large extent, Kelly’s new book builds on her first book, “The Divine Right of Capital: Dethroning the Corporate Aristocracy,” which was published roughly a decade ago (you can purchase it here and/or read its introduction here).

Drawing an apt and powerful parallel to the divine right of kings, Kelly’s first book does a masterful job of opening readers’ minds to the arbitrary and distorting nature of the ownership model embodied in today’s publicly-traded corporations.  In Owning our Future,  she does an equally impressive job helping readers understand the range of alternative ownership structures emerging across the economy.  

But she doesn’t just describe these alternative ownership designs.  She also:

1)  identifies the core underlying components that make them “a family of generative ownership designs;”

2)  explains how “generative” ownership addresses problems associated with the overly-financialized and “extractive” model of capitalism that remains dominant today,  and is increasingly associated with global-scale problems, including the 2008 financial crisis (and its still-unresolved aftermath) and global warming.

In future posts I hope to discuss Kelly’s new book in more detail, including how the principles of generative ownership relate to Internet policy and some of the other conceptual threads I’ve been trying to develop on this blog.

But for now, let me share a few excerpts from a May 17 speech Kelly made at the 2012 annual conference of the Business Alliance for Local Living Economies (BALLE), held in Ann Arbor, MI. Continue reading

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