Take time to read the cover story in this week’s issue of TIME magazine, written by Steven Brill and available online here, which begins with this question:
How did the world’s greatest democracy become a land of crumbling roads, galloping income inequality, bitter polarization and dysfunctional government?
It’s a good question, and one that Brill has boldly attempted to answer in his new book, Tailspin, from which the TIME piece was adapted. I read an advance copy of the book, as well as the adaptation, and can attest Brill tells a compelling tale about how the meritocratic class that grew up successfully after World War II, and to which Brill and most readers of this newsletter belong, has used its power to create a new protected elite. “In a way unprecedented in history,” he argues, the new elite was able to “consolidate their winnings, outsmart and co-opt the forces that might have reined them in, and pull up the ladder so more could not share in their success or challenge their primacy.”
The Atlantic has a somewhat different take on the same subject in the cover story of its new issue, with the title: “The Birth of a New American Aristocracy.” Brill is a lawyer by training, and an astute observer of government, and his tale tends to focus on the legal and political causes of the problem. The Atlantic piece takes a more sociological approach, looking at assortative mating, geographical self-sorting, and educational legacy and privilege. Neither of them, in my view, pays sufficient attention to the economic causes of the great American divide—how globalization and digitization are driving winner-take-most dynamics. But I’d recommend reading both articles, when you have the time. They are serious attempts to deal with the most important issue facing American society—which has not only endangered the American dream, but is driving the resentment that has become a major threat to our economic system.
By the way, you’ll note Brill begins his treatise with a reference to crumbling infrastructure. This morning, Business Roundtable Chair Jamie Dimon and Bechtel CEO Brendan Bechtel are hosting an event to push for bipartisan action on infrastructure—to address the need for more funding and less red tape. That’s an issue that bridges the great divide, because it creates hard hat jobs even as it makes U.S. business more competitive. With mid-term elections approaching, there is little to no chance anything substantial will happen on that front this year. But the BRT has made it one of its big three issues in hopes of paving the way for action soon after the election.
I’m in Washington myself this morning, for meetings with business leaders, and will have more results from our CEO poll tomorrow. In the meantime, news below.
The U.S. Senate voted yesterday to stop the FCC from repealing the country’s Obama-era net neutrality mandate. The FCC has announced that the rollback will go through next month. If the Senate measure survives the House and President Donald Trump, then FCC chair Ajit Pai’s big pro-broadband-provider move will be scrapped. That’s an unlikely scenario. But that said, the Senate’s measure passed 52-47, with three Republicans siding with 49 Democrats. Fortune
The Japanese government is reportedly considering imposing big tariffs on U.S. exports in retaliation for America’s steel and aluminum tariffs. According to Japan’s state broadcaster, the government is preparing to inform the World Trade Organization about its plans for tariffs on U.S. exports worth $409 million—equivalent to the U.S. tariffs on Japan. The government, however, says nothing has been decided yet. CNBC
Tencent released blockbuster Q1 results that sent its market value soaring by up to $34 billion, making it briefly more valuable than Alibaba. Shares climbed 7.1% (finishing 5.1% up) after the Chinese tech giant beat analyst expectations with a profit rise of 61% and a gross margin of 50.4%. A lot of Tencent’s performance boost came from its numerous investments. Reuters
After a female user of the Didi Hitch carpooling service was murdered earlier this month, Chinese ride-hailing giant Didi Chuxing has stopped giving passengers’ personal data to drivers. The company is also considering making voice recordings in all rides. The victim, a 21-year-old flight attendant, was killed in Zhengzhou on May 6. The body of the driver, who police suspect was her killer, was found in a river after he jumped in. Bloomberg
Around the Water Cooler
The French energy giant Total says it will withdraw from the South Pars gas venture in Iran unless it gets a waiver from the U.S., which last week reimposed sanctions on the Islamic Republic. Denmark’s Maersk and Germany’s Allianz are also winding down their Iranian operations. EU leaders are keen to protect European countries’ investments in Iran, but things aren’t looking good for them. “It’s a bad sign. The EU can’t compel or really protect the private sector,” Chatham House associate fellow Sanam Vakil told Reuters. Reuters
Still on the Iran issue, the U.S. and EU are likely set to clash over the Belgium-based Swift cross-border payments network, which the U.S. will probably want to sever its ties with Iran. Here’s what Columbia University’s Richard Nephew told the Financial Times: “I absolutely see this as a flashpoint between both sides. Swift has maintained it will only do what it is instructed to do from Brussels and there is no indication that the EU will bend on this point for the Trump administration.” FT
Lachlan Murdoch will take over the empire of his father, Rupert. Once 21st Century Fox sells some of its holdings to Disney, the new news-and-sports company it forms will have Lachlan Murdoch as CEO and chairman, and Rupert Murdoch as co-chairman. The son is currently Fox’s executive chairman. The Disney deal still isn’t a sure thing, though, due to a rival Comcast bid. BBC
How did Saudi Crown Prince Mohammed bin Salman get so rich? The Wall Street Journal has an interesting piece breaking this down—it’s a matter of connections and brokering big deals, such as the one between Airbus and Saudia Airlines. From the piece: “The story of the Airbus deal suggests this mixing of business and government remains a staple of the Saudi economy, despite the crown prince’s highly publicized crackdown on many other royals who the prince said abused their power to get rich.” WSJ