Quote:
|
Originally Posted by dc_dux
I still dont see the sellout. I would describe more as a trade-off...such is politics. (The FISA bill with retroactive immunity for the telecomms was a sellout - no public good at all comes out of that concession.).
|
There are a few truisms that can be taken from Phillip Morris situation and generally applied to other situations like the FISA bill with retroactive immunity for telecoms.
1) On a macro level over the long-term corporations will pass increased costs to consumers and maintain a fair profit margin commiserate with market risk as long as there is demand for their product.
2) When competition is restricted profit margins will grow and become excessive relative to market risk.
3) Corporations will cooperate with government to restrict competition.
In the case of Phillip Morris smoking litigation and settlement costs were passed on to consumers. If there is litigation against telecoms for cooperating with the Bush administration those costs will be passed on to consumers. In the case of the telecom industry in this country compared to some Asian and European nations we are behind. Excessive litigation against telecoms will require them to set aside billions of dollars for settlements and incur hundreds of millions in legal costs. This redirection of capital will put our nation further behind in the telecom industry compared to some other countries. The only true winners will be trial attorneys. Consumers will lose because of increased cost and less innovation.
In the case of Phillip Morris, they cooperated with government to restrict competition to protect market share. In the case of the telecom industry, market entry is already greatly restricted. If the companies that cooperated with government by releasing communication records are put at financial risk where survival is at question, competition in the telecom industry will be reduced. Profit margins of the remaining companies will go up, potentially becoming excessive relative to market risk. The winners here will be investors, the rich will get richer.
In the case of Phillip Morris, they negotiated settlements with government. Individuals actually damaged did not benefit. The settlements were a in reality a tax increase on the company and on the industry. A form of misdirection on the part of our government. In the FISA situation Bush is stating clearly that government and his Administration is responsible for any violation of the FISA law and that the Telecoms acted in good faith. This form of honesty is refreshing in my opinion.