business

Subway Surpasses McDonald’s

by Kathryn Ciano on March 10, 2011

in Economy

It’s a new era in fast food. Last decade everyone was asking which food was the healthiest. Now growth is global, and it all comes down to dominance. The bigger they are, the bigger they’ll get.

According to the Wall Street Journal, Subway has trumped McDonald’s in the US and abroad, though McDo continues to rule in sales dollars:

At the end of last year, Subway had 33,749 restaurants worldwide, compared to McDonald’s 32,737. The burger giant disclosed its year-end store count in a Securities and Exchange Commission filing late last month.

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Subway has achieved its rapid growth, in part, by opening outlets in non-traditional locations such as an automobile showroom in California, an appliance store in Brazil, a ferry terminal in Seattle, a riverboat in Germany, a zoo in Taiwan, a Goodwill store in South Carolina, a high school in Detroit and a church in Buffalo, New York.

“We’re continually looking at just about any opportunity for someone to buy a sandwich, wherever that might be. The closer we can get to the customer, the better,” Mr. Fertman says, explaining that it now has almost 8,000 Subways in unusual locations. “The non-traditional is becoming traditional.”

[click to continue…]

New York Times Repeatedly Makes False Claims About Supreme Court and Court Rulings

by Hans Bader on February 14, 2011 · 1 comment

in Labor, Legal, Personal Liberty, Politics as Usual, Zeitgeist

In The Atlantic, former ACLU board member Wendy Kaminer discusses the New York Times’ refusal to correct repeated falsehoods in its editorials about the Supreme Court’s Citizens United decision, and its decision to repeat those false claims even after their falsity was pointed out by attorneys and a constitutional law professor. The Times has repeatedly insinuated that the Supreme Court overturned a 1907 federal law banning corporate contributions to political campaigns when it actually did no such thing.

The Citizens United ruling allowed corporations and unions to pay for their own political ads attacking politicians, but it did not allow them to make campaign donations to congressmen, or strike down the Tillman Act, a 1907 law barring such donations. The Times also falsely implied that the Supreme Court had struck down “disclosure requirements“ for campaign donations.

Earlier, law professors wrote at The Volokh Conspiracy about the New York Times’ refusal to print a letter to the editor pointing out a mistake in a recent Times editorial about federal appeals court rulings dealing with business and arbitration of legal disputes. The law professors also argued that the Times persistently misstated whether it is permissible to detain enemy combatants.

I have previously written about the New York Times’ failure to correct repeated falsehoods it printed in its “news” coverage of the Supreme Court’s 2007 Ledbetter v. Goodyear decision, which you can find at this link. Times reporters such as Linda Greenhouse made it sound like the plaintiff in that case, Lilly Ledbetter, had been arbitrarily prevented by the Supreme Court from suing despite only recently learning of the pay discrimination around the time she retired. Actually, as lawyers have repeatedly pointed out, Ledbetter knew by 1992, if not earlier, that she was being paid less than the male employees she claimed should have been paid the same as her. No wonder the Supreme Court’s 2007 ruling in Ledbetter v. Goodyear dismissed her lawsuit as untimely.

As the National Journal’s Stuart Taylor noted, Ledbetter brought her discrimination claim only after the supervisor she accused of discrimination had died, and shortly before she retired, and she knew of the pay disparity she later complained about for at least five years before filing an EEOC complaint. Thus, she was unable to qualify for an extension of the 180-day deadline for suing based on lack of awareness of the pay disparity.

The New York Times editorials repeatedly makes false claims about court rulings to try to depict the Supreme Court as “pro-business.” But it is not in fact pro-business, as I previously explained here.

Indeed, the Supreme Court is more hostile to business than most of the lower federal courts, and is generally hostile to employers in discrimination cases.

The Supreme Court is NOT Pro-Business

by Hans Bader on January 27, 2011

in Economy, Employment, Labor, Legal, Regulation

Once again ruling against America’s employers, the Supreme Court Monday broadened the reach of the 1964 Civil Rights Act’s ban on retaliation. It overturned a federal appeals court ruling against a worker who claimed he suffered unlawful retaliation for complaining about discrimination, when a business allegedly fired his fiancée.

As Ed Whelan notes, the Supreme Court’s unanimous decision in Thompson v. North American Stainless abrogated “all four” of the federal appeals court rulings on the subject, all of which had ruled in favor of the employer in similar cases. Indeed, the Supreme Court took a more expansive view of workers’ ability to sue businesses than 18 “of the 25 appellate judges to address the issue,” including even “Carter and Clinton appointees” like Judge Diana Murphy, who “decided it in favor of the employer.”

This is part of a long line of rulings against employers by the Supreme Court, which is not pro-business at all, contrary to the false claims of many liberal reporters who cover the Supreme Court. Many of these rulings against employers, like Lewis v. Chicago (2010), have been unanimous reversals of lower court decisions.

Slate’s Dahlia Lithwick falsely claimed in 2009 that in the Supreme Court, “big business always prevails, environmentalists are always buried, female and elderly workers go unprotected, death row inmates get the needle, and criminal defendants are shown the door.”

That false claim contradicts reality. Over the last dozen years, the death penalty has been dramatically cut back in cases like Roper v. Simmons (2005), as the Supreme Court has invalidated the death penalty when imposed on the “retarded” (even the mildly retarded) or juveniles (even 16 to 18 year-olds), or when imposed by judges rather than juries (as state laws long provided).

The Supreme Court tossed out thousands of sentences given to criminal defendants through decisions like U.S. v. Booker (2005) and Blakely v. Washington, based not on defendants’ innocence, but rather on the mere fact that judges, rather than juries, had made findings related to their sentences. The supposedly “right-wing” justices Roberts, Scalia, and Thomas joined in these decisions.

Environmentalists have won many cases, including one of the most economically-significant decisions ever — Massachusetts v. EPA (2007) — which arguably opened the door to EPA regulation of virtually every human activity, on the grounds that virtually all activity (from industrial production to farming to cars) emits carbon dioxide. That decision also created a special rule of standing to allow state attorneys general to bring lawsuits that would otherwise be thrown out as meritless for lack of standing.

The Supreme Court allowed businesses to be sued even for products the FDA deems to be safe and effective, in Wyeth v. Levine (2009), in a ruling that legal commentator Ted Frank called the most anti-business decision in 43 years.

The Supreme Court has repeatedly broadened employers’ liability for discrimination against women. It continuously expanded the definition of sexual harassment: it overturned earlier limits on vicarious liability (in Faragher v. Boca Raton (1998)), allowed institutions to be sued based on the acts of non-employees (in Davis v. Monroe County (1999)), and rejected limits on lawsuits where there is no economic or psychological harm (Harris v. Forklift Systems (1993)). All these rulings overturned lower court judgments against plaintiffs. The Supreme Court also made it easier for older workers to sue over unintentional discrimination, even after settling with their employer.

Thus, Dahlia Lithwick’s depiction of the Supreme Court bore no relation to reality. But similarly false depictions are peddled by court reporters at publications like the New York Times, the Washington Post, and the Los Angeles Times, fostering a misleading image of the Supreme Court.

The Problem With Public-Private Partnerships

by Fred Smith on November 5, 2010

in Economy, Odds & Ends, Politics as Usual

In our half-political, half-private world, there are a growing number of public-private partnerships.  Almost nothing in the current world can be done without implicit or explicit permission by local, state, federal or (increasingly) global regulators.  But the term, public-private is normally used to denote the joint funding and, sometimes, joint management of some “public” facility — streets, water systems, and so forth.

The rationale for “public” investments is that they are “public” goods, whose benefits are not adequately captured by the provider.  There are many problems with this concept – in practice, it means that someone wants something and nobody seems to be providing it.  Note, from a Coasian/Schumpeterian free market perspective, these are exactly the “lures” that lead mankind to pursue the unexplored entrepreneurial paths to the future.  Rushing in with government assistance distorts and preempts those creative forces.

Sometimes, public-private partnerships can be a transitional step toward privatization.  The concept of “corporatization” that is, reorganizing an activity now performed by some political agency so that its inherent economic realities become more understandable and transparent, may be a useful step in privatizing the activity.

In most cases, however, public-private partnerships are simply a means of using tax breaks, regulatory easing, taxpayer support and so forth to subsidize some private activity: stadia, light and heavy rail — mass transit generally, sometimes (for God’s sake) hotels and malls, downtown development districts.  Where I live in Washington, D.C., businesses are allowed to add a “special tax” to pay for services the city supposedly pays for with normal tax revenues.  Such public-private partnerships suffer from the full array of government failures:

  • Log-rolling and pork-barrel politics: I’ll vote for your PPP if you vote for my PPP.
  • Weakened market tests: resources are devoted to a project not because it benefits the citizenry but rather because it benefits a powerful interest group and/or because a creative referendum entices a majority of voters to support their special interests.
  • Weaker Management: Absent market tests, managers are less motivated to find that mix of services and creative array of financing tools to ensure that it proves “profitable” (that is, a rational allocation of capital). Roads, even charter schools, etc all have suffered here immensely.
  • Lack of innovation: No institution in the private world can allow itself to stagnate – the creative forces of destruction will soon make it obsolete. PPP managers face much weaker innovative forces – if things go wrong, they can always appeal to their “public” nature for taxpayer bailouts.
  • Corruption: Crony capitalism abounds in the PPP world.
  • Faddism: Markets sometimes go on kicks – the tech boom, for example – but these soon collapse. Governments go on kicks for many decades – “renewable energy” and “mass transit” being perhaps the best examples but “magnet” investments in downtown malls, stadia and convention centers are perhaps even more persistent ones. Before Walmart became a PPP, it did more for consumers than all the PPP malls in the world.
  • Crowding Out: Capitalism plays a critical role in allocating capital – planting the seeds for our future. That is a very difficult task, one made much more difficult by the existence of PPPs. Government already seizes a disproportionate amount of our wealth and the PPP concept allows it to further distort the allocation by market forces. I’ve argued that the genius of the Progressives in the late 19th century was to preempt or push large sectors of the emerging future (the environment, schools, electromagnetic spectrum, infrastructure, welfare, the medical world) into the political world. The PPP concept simply exacerbates this tendency.

Our challenge is to find ways to expand the private sector and only very rarely does the PPP concept do that.  It allows people to be sloppy — “That would never pay for itself but it obviously has value, thus, we need some government help.  Let’s not make it an honest government function, let’s make it a Public-Private partnership and get the best of all possible outcomes!!”

This Mixed Economy model is less honest than true socialism (government acting directly) for many reasons.  If as is often the case, things go wrong, it will be capitalism — not government — that will be blamed.  PPP activities are less subject to consumer sovereignty (look at airports or schools).  The true costs of the activity don’t appear on government budgets — making it appear that PPP arrangements are “bargains.”

Can Businessmen (and Women) Make Good Politicians

by Fred Smith on June 29, 2010 · 1 comment

in Culture, Odds & Ends, Politics as Usual, Zeitgeist

Mickey Edwards, former congressman from Oklahoma and guest lecturer at the Harvard School of Government, has written an interesting blog on the case for business leaders moving into politics. To Edwards, operational skills acquired in the private world are not easily translated to the political world:

I do have a problem, however, with the continued promotion of business success as a qualifier for public office. Success in the market is not an automatic disqualifier for public service, but it is a far different undertaking with different purposes and different values.

On this point, Edwards is absolutely correct, but I disagree with his conclusion that:

The business of business is business and the goal of business is to earn a profit in the provision of goods and services.

The goal of business is not merely to profit, but to create value for its shareholders. A firm must balance short and long term goals to produce wealth in both equity appreciation and dividends. How this is achieved depends on the interests of the shareholders. More importantly, the goal is not “profits” but “sustainable profits.” Firms that invest in productivity and new product development do so because they recognize that they live in the Schumpeterian world of creative destruction. Nothing they’re doing today will remain profitable in a decade. The firms who fail to acknowledge this fact do not survive, witnessed in the high turnover of the Fortune 500. The simple profit motive is a short-term, unsustainable notion of business practices.

To be sustainable, corporations must develop and maintain a good reputation with their customers, their employees, their suppliers, their shareholders, and any other group with whom they are economically-linked. The views of these groups can (and do) affect the ability of the firm to remain profitable over time. Moreover, a good reputation is hard to acquire, easy to lose. Considering these motivations, businesses are far more “political” than Edwards recognizes.

Business, however, is not guided by the benevolence Edwards attributes government:

The business of government is service- well managed, one hopes, and not wasteful, but never at a profit. There is no such thing as government money. Governments have no money; they have only what they take from their citizens, either in taxes or by inflation. And if government accrues profit, it can only have done so by taxing too much or eroding the value of the citizens’ income and savings — in either case doing harm, not good, to the people who have created it for the advantages such a common effort is presumed to bestow.

As a former congressman, Edwards certainly knows the appetite of government is infinite. Surplus revenues are never rebated to the taxpayers but spent without oversight on marginal projects. Increased cost of living allowances, earlier retirement programs, pork barrel spending to benefit local special interests. If government actually sought to advance the “public good”, the record would be far different.

Businesses seek maximum efficiency; governments seek sufficient efficiency. We might well save a considerable amount of money by delegating our national security to mercenary armies drawn from other countries (as opposed to keeping a high-cost standing army and paying U.S. wages to private combat zone contractors), thus erasing the need to maintain a perpetual and costly military infrastructure. We could assign the processing of Social Security checks and welfare payments to low-wage workers in Madras or Oaxaca. State governments could close welfare offices and require that all transactions with government be conducted electronically, with no recourse to potentially sympathetic human beings. These are choices governments make reluctantly and businesses make routinely.

This understates the problem. The concept of efficiency requires a metric. For business, it’s “sustainable profitability” whereas government is a grab bag of special programs, each administered by a siloed agency with a “mission” but no responsibility for the general public good.

Business cannot make utopian promises as government frequently does- social security, universal health care, generous cost-of-living increases, a cure for cancer, energy independence, zero pollution. And that lack of a metric can lead nations-and certainly firms- to bankruptcy. The plights of Greece and Illinois, to mention but two, are examples of the need for the “sustainability” virtue that business can offer to politics.

Even agencies with a clear mission- say the Department of Defense – are hindered by the political process and the 435 congressional districts continually second guessing their actions.

Yet, he is right. Those who’ve entered government from business have no great track record. Mitt Romney created a non-sustainable “universal” health care plan in Massachusetts allowing Obama his success at an even less sutainable plan at the federal level. Business doesn’t understand that the competitive forces that disciplined him in the private world are less present and much weaker in politics. Edwards argues that political leaders should ensure that government doesn’t impede profit-making unduly. But they do – and former business leaders freed of the sustainability restraints that made them successful in the private world may exacerbate the problems already extant.

So, in the end, I do find points of agreement with Edwards. The key role of a businessman turned politico would be to reform the institutions – the laws, the regulations, the legal structure – to remove all possible impediments to economic growth. Too few business leaders have ever sought to push for that role in the private sphere when the benefits would have been direct and immediate. Why should we expect them to do so in a world where the benefits would be privatized, the costs political?

MD doesn’t stand in Casino’s way

by Michelle Minton on December 9, 2009 · 2 comments

in Odds & Ends

While it is certainly is good news that the state of Maryland hasn’t denied permission to developers hoping to install slots in a new casino planned in the Anne Arundel Mall, the rationale on which the decision was based and the fact that they require permission at all is deplorable.

The amount of tax revenue and number of jobs that a new casino could generate for the state should not be the basis for government getting out of the way of private business owners. The government should not be in the way in the first place.

The Maryland state lottery has been drawing money from residents since 1973 and it is sheer hypocrisy and protection of the state’s monopoly for politicians to limit the amount and types of gambling offered by private operators.

Beyond hypocrisy, the real issue is individual liberty and the proper role of the government. The question is, should governments limit the choices of individual consumers and business owners if their actions do not violate the rights of any other individuals? Certainly not. The government shouldn’t be in the business of determining if gambling should be allowed, what kinds, how much, or where it should be allowed. These rights should be left to individual property and business owners.

Biased Press Coverage of the Supreme Court Fuels Leftist Resurgence

by Hans Bader on September 26, 2009

in Employment, Environment, Global Warming, Legal, Odds & Ends, Politics as Usual

American law has moved in a leftward direction over the last 20 years, steadily restricting use of the death penalty and criminal sentencing, and expanding lawsuits against businesses, thanks largely to the Supreme Court.

But to some left-leaning journalists who write about the Supreme Court, none of this has ever happened, and the Supreme Court, which is responsible for many of these liberal changes, remains a conservative boogeyman.

Slate‘s Dahlia Lithwick, America’s most famous Supreme Court reporter, writes today that in the Supreme Court, “big business always prevails, environmentalists are always buried, female and elderly workers go unprotected, death row inmates get the needle, and criminal defendants are shown the door.”

This is breathtakingly inconsistent with reality. Over the last dozen years, the death penalty has been dramatically cut back in cases like Roper v. Simmons (2005), as the Supreme Court has invalidated the death penalty when imposed on the “retarded” (even the mildly retarded) or juveniles (even 16 to 18 year-olds), or when imposed by judges rather than juries (as state laws long provided).

The Supreme Court overturned thousands of sentences given to criminal defendants in cases like U.S. v. Booker (2005), based not on their guilt or innocence, but on the fact that judges, rather than juries, had made findings related to those sentences (the so-called Booker/Apprendi line of cases). The supposedly “right-wing” justices Roberts, Scalia, and Thomas joined in these decisions.

Environmentalists won many cases, including perhaps the most economically-significant decision ever — Massachusetts v. EPA (2003) — which potentially opened the door to EPA regulation of virtually every human activity, on the grounds that virtually all activity (from industrial production to farming to cars) emits carbon dioxide and thus allegedly causes global warming. That decision also created a special rule of standing to allow state attorneys general to bring lawsuits that would otherwise be thrown out as meritless for lack of standing.

The Supreme Court recently allowed businesses to be sued even for products the FDA deems to be safe and effective, in Wyeth v. Levine (2009).

The Supreme Court progressively expanded businesses’ liability for discrimination against female and elderly workers. It continuously expanded the definition of sexual harassment, overturning earlier limits on vicarious liability (in Faragher v. Boca Raton (1998)), allowing institutions to be sued based on the acts of non-employees (in Davis v. Monroe County (1999)), and rejecting longstanding lower-court limits on lawsuits where there is no economic or psychological harm (in Harris v. Forklift Systems (1993)). It also allowed businesses to be sued for discrimination against elderly workers even absent any showing of discriminatory intent or differential treatment (in Smith v. Jackson (2005)). All of these decisions reversed lower court rulings in favor of businesses.

In short, Dahlia Lithwick’s perception of the Supreme Court bears no relation to reality. But it is shared by most of the nation’s leading court reporters, at publications like the New York Times, the Washington Post, USA Today, and the Los Angeles Times, who promote a similar caricature of the Supreme Court.

As a result of such reporters ceaselessly peddling this perspective to their readers, it is also the perception of much of the newspaper-reading public, especially in the so-called Blue States, many of whom view the Supreme Court as “too conservative.”

For example, factually inaccurate and dishonest reporting on recent Supreme Court decisions also contributed to recent election results.

A classic example is the Supreme Court’s recent Ledbetter decision, which many reporters wrongly claimed required discrimination plaintiffs to sue within a rigid 180-day deadline — when in fact, most pay discrimination cases could legally be brought for at least 3 years after the discrimination allegedly occurred, under laws unaffected by the Supreme Court’s decision (like the Equal Pay Act), and the 180-day deadline, even when applicable, had lots of common-sense exceptions to keep employers from escaping justice (such as tolling to protect hoodwinked employees)

(Regardless of whether the death penalty is good or bad, it is very clear that it is not unconstitutional).

UBS agrees to deal with the devil

by Gary Howard on February 19, 2009

in International, Legal, Nanny State, Personal Liberty, Regulation, Trade

I revoke my previous apology to the Swiss, and reiterate my previous disapproval.  As evidenced by the latest outcome in the U.S. tax case involving UBS, we have moved beyond troubling and into something much worse.

...the world’s largest wealth manager in terms of assets, agreed to pay a $780 million fine and disclose information about some of its clients to settle a landmark U.S. tax case.

As I said in my older post: “In direct contradiction to their own legal view of tax evasion.  Even though some may argue that this is moot because the U.S. does not consider a financial transaction as something beholden to privacy rights, the Swiss do–and besides, the U.S. view is wrong.  A person’s financial records should be considered as sacred as their medical records.”

And with an eye toward history, let us not forget:

One issue of the time that reinforced the passage of this law [Swiss Banking Secrecy Act] came during the era of Hitler when a German law stated that any German with foreign capital was to be punished by death. Swiss banks were watched closely by the German Gestapo. It was after Germans began being put to death for holding Swiss accounts that the Swiss government was even more convinced of the need for bank secrecy.

Reading the comments on left-leaning blogs, you hear cheers and a tinge of jealousy about the whole thing.  No matter if UBS did or did not help people avoid U.S. taxes, I cannot read this without envisioning a slippery slope argument.  If the current climate continues, it won’t be too far-fetched to imagine laws like that of WWII Germany criminalizing and imprisoning people for choosing where to put their own money.  And I won’t even mention the new Treasury Secretary. Oops

LibertyWeek 14: Conviction Spooktacular

by Richard Morrison on October 29, 2008 · 1 comment

in Podcast

Prepare yourself for the latest episode of the best free market podcast around, LibertyWeek.

Your hosts Richard Morrison and Cord Blomquist discuss the looming presidential election, Halloween, the conviction of Alaska Sen. Ted Stevens, the continuing economic unease, tough times for the U.S. Postal Service, American companies react to Internet censorship abroad, Cox’s new wireless service, Microsoft’s new web-based OS Azure, and all the finest Olympic News.

Listen now!

Are There No Workhouses?

by Richard Morrison on September 17, 2008

in Culture, Economy

Some people seem to think that having a mind for business and profit means you must be some kind of money-grubbing miser. Far from it, according to new research featured at the Insider Online. It seems that entrepreneurs give more generously to charitable causes, at every level of income, than non-entrepreneurs. Go figure.


Read the whole paper here.