Opinion

The Great Debate

Why airline mergers are inevitable

The American Airlines/US Airways merger talks are on hold due to the ongoing antitrust trial led by the Department of Justice. The D.O.J. is concerned, from the perspective of protecting consumers’ interests, that the resulting airline would have too much market power in many of its locations. Though this is true (assuming nothing about the airlines’ business was changed and no assets were divested), the underlying issues are broader than that.

This is an inevitable story of consolidation and creative destruction and the cyclicality of the two. This proposed merger — or one like it – will happen. It’s just a matter of time. But let’s compare an American Airlines/US Airways pairing with two, comparable, big-headline mergers.

Back in 2012, the music industry consolidated from four big players to three as EMI was split up. Its music business went to Vivendi’s Universal Music Group and its publishing business to Sony/ATV. In this deal, similar concerns of market power led the European Commission to stipulate that Universal had to sell a third of EMI’s assets. And that deal went through.

Meantime, ending in a different fate in 2011, AT&T finally admitted defeat in its attempted bid for T-Mobile. It would have consolidated the cohort of this nation’s cellular operators from four to three. In this latter case, the firms were up against both the D.O.J. and the Federal Communications Commission.

So why are airline mergers inevitable? It’s because, in many ways, the passenger airline industry is more like the music industry than the wireless-operator industry.

from The Great Debate UK:

Science’s innovators are to be prized

--Juha Ylä-Jääski (D.Tech.) is President and CEO of Technology Academy Finland. The opinions expressed are his own.--

The 2013 Nobel season is once again gorging on a Grand Cru vintage of scientific achievement. Today, the Nobel Prize for Chemistry was awarded to three scientists, Levitt, Karplus and Warshel, whose multinational collaboration laid the foundation for the computer models crucial for most advances in chemistry today. Yesterday, Peter Higgs and Francois Englert won the Nobel Prize for physics for conceiving the so-called "God particle" which explains why the Universe has mass. Another trio were recognised on Monday when the Nobel Prize in physiology or medicine was awarded to Rothman, Schekman and Südhof for solving the mystery of how the cell transports crucial cargo.

The Nobel Prize once stood alone commanding the attention of the world’s media.  Though it remains pre-eminent, as shown by the media hordes that have descended on Oslo, the trophy cabinet of international prizes has been stuffed full in recent years. There is the brand new Queen Elizabeth Prize for Engineering in the UK, the AM Turing Award, the Abel Prize, the Asahi and the Kyoto prize. The Russian billionaire Yuri Milner recently endowed the Fundamental Physics Prize by offering $3 million to each winner – three times the prize money given out by the Nobel Foundation. Perhaps most star-studded of all is the Breakthrough Prize in Life Sciences  - a joint enterprise by tech superstars including Sergey Brin, co-founder of Google and Mark Zuckerberg, founder of Facebook.

Ending the debt limit crisis: Dear Ben Bernanke

Warren Buffett calls the debt ceiling a “nuclear weapon, too horrible to use.” Obama administration official Jason Furman says the consequence of a default on U.S. government debt is “too terrible to think about.” When asked about a default, Wells Fargo strategist James Kochan simply commented, “Holy cripes.”

With this crisis, America is risking financial Armageddon. The default of Lehman Brothers on its $613 billion of debt ignited a chain reaction in the financial system, nearly destroying the U.S. economy. A default by the U.S. government on $17 trillion of debt — debt that has been considered the safest in the world — could be far worse.

But at heart, this is not a debt problem. It is an accounting problem. The Treasury Department issues U.S. debt, and lots of it. So you would think that America is deeply indebted to its bondholders. Yet increasingly, it is the U.S. monetary authority, the Federal Reserve, and not private investors, who buys this debt.

Time to block gun violence against women

If October is like every other month, 46 women in the United States will be murdered with a gun by an intimate partner.

Public attention was gripped by the most recent mass shooting, at the Navy Yard in Washington, but during Domestic Violence Awareness month, we need to focus on the fact that women face a heightened risk of gun violence.

Women are more than three-and-a-half times as likely to be killed by an intimate partner as men. A gun in a household with a history of domestic violence increases by 20 times the risk that a woman will be killed there, compared to households without guns. Similarly, more than 75 percent of stalking victims are women — and stalkers use weapons to harm or threaten their victims in 1 out of 5 cases. The statistics show: Guns plus a history of domestic violence or stalking equals increased risk of death to women.

An unstable global economic system that is being ignored

Today, the International Monetary Fund announced yet another a reduction in its global growth projections for 2014, with its estimate of U.S. growth also reduced (citing reduced government spending, but not the present U.S. government shutdown — or the heretofore unthinkable notion of the U.S. government defaulting on its obligations). Despite the seeming urgency of global economic slowdown, when world leaders attended their annual fall confabulation at the United Nations in New York last month, they focused on the diplomacy of physical security (Syria, Iran, etc.). Thus another year has passed in which global economic security issues were on no one’s reported agenda.

Policy makers continue to fail to appreciate that the most formidable economic challenge today lies in the area outside the borders of any one nation or region — and that multilateral action to address this challenge is arguably more important than efforts at increasingly less-effective internal stimulus.

Present-day economic imbalances — particularly those stemming from the rapid emergence of the post-socialist nations over the past 15 years, with their associated supply of excess labor, productive capacity and global capital, relative to demand — have hamstrung the economies of the advanced nations. Such economic dislocation can no longer be resolved by any one power, or even by two or three. Indeed, there is enormous risk today of unilateral or bilateral actions being viewed by players left out of such actions as economically threatening or even hostile, leading to economic countermeasures. The issue is compounded by the complexity of the relationships among and between developed nations on the one hand and emerging ones on the other. It is hard to imagine moving beyond a global economy that is just getting by, and therefore at material risk of new and deeper crisis, without a more open dialogue among the Group of 20 (G20) nations and proactive steps toward mutual accommodation.

New Zealand’s bold experiment with regulating recreational drugs

It’s been nearly a century since the United States began its experiment in prohibiting recreational drugs besides alcohol, caffeine and tobacco — and virtually no one sees the trillion dollar policy as a success. A recent study [PDF] shows that drug prices have dropped more than 80 percent in the last two decades alone; purity and availability has risen; and overall addiction and death rates haven’t been cut, despite an exponential increase in incarceration since the 1980s.

Even the hardline U.N. drug czar admitted in the annual World Narcotics Report [PDF] that “the international drug control system is floundering,” citing specifically its inability to match the speed and creativity of Internet-enabled chemists who create and distribute new legal highs like “bath salts” and “fake marijuana” faster than governments can ban them.

But one country is trying a new approach. For the first time in history, New Zealand has created a regulatory body to oversee recreational drugs. Passed by parliament this summer on a vote of 119 to 1, the legislation has already granted interim approval to over 50 products with names like “Dr. Feelgood,” “4:20,” and “Everest Tibetan Toot.”

Roberts: The ‘swing’ justice of election law

Tuesday’s oral argument in McCutcheon v. FEC, the latest high-profile campaign finance case, will likely generate familiar storylines about a fiercely ideological Supreme Court, where one justice drives the outcome of a close 5-4 decision. Public perception of the Supreme Court is that there are four conservatives, four liberals and Justice Anthony Kennedy in the middle — as the “swing” vote.

But that’s wrong — at least where voting rights and campaign finance cases are concerned. Though Kennedy’s vote dictates some outcomes when the court is split 5-4 along ideological lines, another justice has been the driving force behind current election law jurisprudence. In this matter, it is truly Chief Justice John Roberts’s court.

Since Roberts became chief justice in 2005, the court has issued 23 written opinions involving voting rights, redistricting or campaign finance. Roberts is the only justice who has been in the majority every time. In addition, he has written twice as many majority opinions in this field as any other justice — six, as compared to Kennedy’s three. Roberts has now written more than 25 percent of the election law decisions handed down since he joined the court.

Why “sustainability” should be more than a meaningless buzzword

The term “sustainability” crept into the business lexicon slowly, by way of the environmental movement. It no longer means covering operating costs with profits, the definition I learned at Harvard Business School six years ago. Instead, it’s morphed into a blurry term that fits into whatever suitcase you want it to — a catchall for everything “socially good,” whatever that means.

The term has been used by various groups — with various meanings — for three decades. The Sierra Club first introduced it in the 1970s, during the dawn of the environmental movement. At the time, activists were speaking out against mining, water pollution, and other environmental threats. They defined “sustainability” as an approach to preserving natural resources by creating national parks and enacting legislation that would penalize polluters. In the 1980s, companies like The Body Shop used sustainability to describe their commitment to environmental and human rights, and a corporate focus that expanded beyond profits. For the next 20 years, the term was used by a small group of companies, like Ben and Jerry’s and Eileen Fisher, whose founders tried to incorporate their social values into their business models.

Over the past five years, sustainability has become even more popular, as multinational corporations open new sustainability divisions and chief executive officers at the World Economic Forum wax poetic about its importance. The term has been co-opted, perhaps because Americans, especially Millennials, not only want to buy products that do the job, but also align with their values (like soap that can clean a car without harming the environment). Today 2,500 multinational corporations from 58 sectors participate in the Dow Jones Sustainability Index, which assesses each corporation’s sustainability using variables such as labor and environmental practices. This index is one of over 25 sustainability indices worldwide, each one with a unique set of criteria — measuring governments’, multilateral organizations’ and non-governmental organizations’ level of sustainability, or their so-called social good.

Shutdown scenarios for a no-budget blockbuster

What will a shutdown of the federal government ultimately look like?

One well-known scenario suggests that roaming bands of survivalists will be plundering stockpiles of abandoned weapons; the last vials of deadly diseases are cracking under the unsupervised mechanisms at the Centers for Disease Control and Prevention, and all communications and travel are frozen — airports shut down, highways unpatrolled, bridges collapsing.

No, wait…that’s The Walking Dead. A zombie menace has shut down any federal authority, and local groups form nomadic associations to survive.

In another scenario, self-appointed militias are in control, and rebellion is brewing. Cities have been abandoned. There is no federal authority. Communities are isolated and terrified.

Why this shutdown isn’t like 1995

The political battlefield of the current government shutdown looks a lot like the last big shutdown of 1995. But major changes within the Republican Party in Congress — a weaker leadership, the demise of moderates and two decades of gerrymandering — could make this year’s endgame far harder.

Then as now, a rebellious Republican Congress used a budget bill to set up a deliberate confrontation with a Democratic president over spending priorities. GOP militants and radicals in the House – today’s wing nuts — bet that gridlock, disarray and the embarrassment of a shutdown would force the White House to give in.

Then, as now, the president defied the Republican brinksmanship and took the political risk of a government shutdown rather than bowing to the GOP’s surrender terms. Former President Bill Clinton enjoyed the sport of sparring with Congress and President Barack Obama, after giving in so many times in the past three years, has finally decided to dig in his heels.

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