July 24, 2012

If its economy is powered by solidarity, cemented by common fears, and self-interest, urged on by individual greed, society in fine rests on fairness. Children instinctively know when to shout "unfair" well before the age of reason. Hence Jon Hunstman's warning. The vision of the United States as a country "that empowers free markets and creates a level playing field for all citizens is being replaced by a form of crony capitalism" (*).

This former "candidate for the 2012 presidential nomination" is himself being unfair. Far more advanced than a corruption based on friends and family, pronaocracy itself in the United States functions as a free market, on which elected offices are auctioned out to the highest campaign contributors. Why else would he call for "sensible campaign finance reform"?

It is therefore unfair to criticize the European Commission for being an unelected body. But free from the favors tied to electoral debt, the EU's competition commissioner has a special duty to ensure level playing fields. In this regard his recent actions raise a basic question of fairness.

Alex Barker and Richard Waters report that Joaquín Almunia is "threaten[ing] [Microsoft] with "severe" penalties for flouting a 2009 antitrust settlement that required it to offer consumers a choice of Web browsers" (**). "In addition, the commission is examining claims that Microsoft stifles competition by only allowing Internet Explorer [...] on tablet devices running its version of Windows 8 on low power ARM processors".

Europe is certainly justified in defending the integrity of the diabolo effect. A company which has used openness to impose a choking point, its operating system in the instance, should not later renege on its approach and censor application providers.

In itself, a diabolo is a fair deal. While its very success suppresses market freedom at its own level, it increases market freedom below and above as the de facto standard it creates levels new playing fields. Suppress openness however and you tilt these fields in your favor, rendering the deal unfair.

Yet "Apple, which dominates the tablet market with the iPad, also blocks third-party browsers". It is totally unfair for Europe to let Apple free to enjoy what it forbids Microsoft to do. Since dropping the charges against the latter would remain unfair, the only consistent position is for Europe to enjoin Apple to stop discriminating among software providers for its own benefit.

True, Apple never claimed to be open. It has followed instead the Palantír model, promising product perfection if all decisions devolve from a single dominion. However success has its duties. No doubt EDF's integrated production, transport and distribution of electricity, provided France after the Second World War with abundant, cheap and secure supplies. Yet hasn't Europe now broken its Palantír into pieces in the name of competition?

Alex Barker and Richard Waters further reports that "Mr Almunia is worried about how Google favours its own products in search results" and otherwise tries to shutdown competition (***). Google deserves its grilling. Yet this compounds Europe's current inaction over Apple (1).

The fairness of playing fields thus demands consistent policies, a lesson which reaches well beyond business models and competition.

Take social solidarity. It evolved in the West from XIXth century insurance schemes which pooled risks among workers engaged in similar activities. This origin made the participation of employers a natural development. But in a global economy, such an approach has been gradually undermined by the reach of non state world actors, free to relocate where labor related costs are the lowest and thus free from caring for people's welfare.

Meanwhile society itself has weakened the link between work and solidarity. Can people be left out for the sole reason they do not work, if not enough jobs are available for them to find one? But if not by the employed and their employers, how can solidarity be financed? Through a national scheme funded by taxes which must be paid or through private insurance programs funded with the taxes individual citizens must no longer pay?

When Paul Ryan writes that Americans "must restructure the 20th-century entitlement state so important programmes can succeed well into the 21st century", he is not being partisan (****). As to the particular solution to adopt, a debate is inevitable, healthy and outside of the scope of my fillips.

What is relevant is to insist on logical consistency. The financial crisis has led some to castigate investment banking as a casino operation. But the world is a casino. Each time individual citizens take personal responsibility for their social protection, they too take a gamble. This is well illustrated by Mary M. Chapman's article on the switch by General Motors from its own pension plan to either "an annuity provided by Prudential Insurance" or a lump sum buy out (*****). To a bet on one's own life expectation, add a complex bet on the yields of sundry securities given future tax laws.

In the care of their personal data, private citizens should at least expect the same rights and duties. How is it then that Paul Ryan, who advocates privatizing social coverage, is not also a champion of eprivacy? When "[his proposed] reforms empower senior citizens to control their healthcare decisions", how can he buy the argument of Big Data, i.e. that the benefits of its superior insights far outweigh the loss of personal confidentiality?

Individuals should not be shielded from responsibilities. Big Data's insights nor bank casinos are evil. What is wrong is to let them operate markets where they routinely rig the roulette to favor themselves over the players and blackmail society into bearing the risks while pocketing the gains.

On the other hand, when the young tend to dismiss privacy as a long term concern not worth the aggravation, will they not dismiss privatized social protection in the same way? Both healthcare and personal data care are in bubble mode and by their attitude individuals too add to the risks.

Ultimately, when crowds of citizens act in damaging unison, be it like bulls or ostriches, can a democratic government abandon its own duty to break any unsustainable herd behavior? Shouldn't it balance the interests of human and corporate persons even against their own short term perception?

As Jesse Eisenger writes, "a proper market would want an organization what was impartial, regulated, transparent and open to appeal" (******). When it comes to the scale of Apple's Palantír and the domination of Big Data, inaction and silence contradict all claims to a level playing field.

Those who can muster the means and do what they want operate far above the level of those who want the means and only do what they can.

Philippe Coueignoux

• (*) ........... True conservatives despise America's crony capitalism, by Jon Hunstman (Financial Times) - July 19, 2012
• (**) ......... Brussels probes Window 8, by Alex Barker and Richard Waters (Financial Times) - July 18, 2012
• (***) ....... EU targets Google's mobile services in antitrust talks, by Alex Barker and Richard Waters (Financial Times) - July 20, 2012
• (****) ..... Republicans must return to free-market principles, by Paul Ryan (Financial Times) - July 20, 2012
• (*****) ... Uncomfortable Accounting, by Mary M. Chapman (New York Times) - July 19, 2012
• (******) . Behind Credit-Default Swaps, a Cartel Open to Collusion, by Jesse Eisenger (New York Times) - July 19, 2012
• (1) Apple may be subject to an antitrust action over its collusion with book publishers, but this is peripheral to its Palantír