‘Common Good’ Conservatism’s Catholic Roots

The antimarket right should remember that political liberty proceeds from economic freedom.

By Alexander William Salter

     Sen. Marco Rubio and G.K. Chesterton. / PHOTO: GETTY IMAGES


It’s no secret that U.S. conservatives and big business are falling out. 

Skepticism on the right toward corporations is at an all-time high. 

Many within the GOP regard woke capital as the greatest threat to American liberties. 

In fact, conservatives are rethinking the social role of markets in general. 

If free enterprise has lost the power to inspire the U.S. right, what’s the alternative?

Sen. Marco Rubio, in a 2019 address at the Catholic University of America, drew on Catholic social teaching to condemn the excesses of free-market capitalism and managerial-state socialism. 

“What we need to do,” Mr. Rubio asserted, “is to restore common-good capitalism—a system of free enterprise in which workers fulfill their obligations to work and enjoy the benefits of their work, and where businesses enjoy their right to make a profit and reinvest enough of those profits to create dignified work for Americans.”

Especially among Catholic intellectuals, there’s a growing enthusiasm for common-good politics and economics. 

According to the Catechism of the Catholic Church, “By common good is to be understood ‘the sum total of social conditions which allow people, either as groups or as individuals, to reach their fulfillment more fully and more easily.” 

Common-good thinkers are comfortable with government interventions into the economy to achieve these ends.

Defenders of free markets, including me, took for granted the supremacy of laissez-faire. 

That many allies have embraced market skepticism shows we must double our efforts to engage and persuade. 

A natural place to start is the attempt within the Catholic intellectual tradition to embody common-good principles in political and economic institutions: the philosophy known as distributism.

Distributism flourished during the early 20th century, when Catholic intellectuals such as Hilaire Belloc and G.K. Chesterton wrote about the moral challenges of industrial capitalism. 

Property ownership is central to distributism. 

In fact, distributists claim the chief problem with property is that there isn’t enough of it: Property tends toward concentration, resulting in a proletarianized society with no stake in the social order. 

To uphold the common good, private property must be dispersed.

Few economists, Catholic economists included, think highly of distributism. 

They regard it as a utopian scheme permeated with economic fallacies. 

Indeed, the classic works of Belloc and Chesterton are full of dubious economic claims. 

Nevertheless, it’s a mistake to dismiss distributism. 

What matters is the social vision and its relevance to common-good capitalism. 

John Neville Keynes, father of John Maynard Keynes, distinguished the “science of economics” from the “art of political economy.” 

The former is analytic and precise; the latter imaginative and humane. 

Distributism isn’t scientific, but it is artful, and it offers much to learn about both liberty and the common good.

Economic freedom is generally thought of as downstream from political freedom. 

The first task is setting up good “rules of the game” for politics. 

This protects the rights of citizens, including the freedom to produce and consume. 

Belloc and Chesterton asked: Where did political freedom come from? 

Free institutions of the West didn’t arise in a vacuum. 

Events dating to the fall of the Roman Empire produced conditions that protected laborers against the capriciousness of aristocrats. 

Over centuries, slaves became serfs, serfs became peasants, and peasants became free yeomen. 

Economic independence, meaning control of productive resources, gave rise to political liberty.

For those who dream of restoring and keeping liberty, the distributists show the insufficiency of legal reforms and policy analyses. 

Free institutions can be sustained only by a society of propertied households. 

Why would a worker who owns nothing but his labor consent to a system that protects property rights and due process, important as those institutions are?

Political ideology isn’t reducible to self-interest, but protecting freedom requires giving ordinary families a stake in self-governance. 

As any economist will tell you, that which nobody owns, nobody cares for. 

You can’t “own” a political system, but you can certainly create buy-in for one. 

In a democracy, all citizens are supposed to be the shareholders of the realm. 

The distributist insight is that this is more than a slogan. 

It is a prerequisite for government by discussion among free and dignified equals.

Distributism offers a way of thinking about businesses, markets and the common good that cuts across traditional political divides. 

On inequality, distributism aligns more closely with progressivism. 

On the administrative state, distributism aligns more closely with conservatism. 

But both are for the same reason: a commitment to government by citizens, not technocrats. 

The “democratic faith is this,” Chesterton wrote: “that the most terribly important things must be left to ordinary men themselves,” including “the laws of the state.”

Common-good capitalism tries to revive Jeffersonian-Jacksonian economic populism without the morally troublesome aspects of these traditions. 

Distributism fits well with this political turn on the American right. 

The common good is worth taking seriously, and the distributist perspective deserves a hearing.


Mr. Salter is an associate professor of economics in the Rawls College of Business at Texas Tech University and a fellow at Texas Tech’s Free Market Institute.

100 days of aptitude

Joe Biden was a boring candidate. He now draws comparisons to FDR

Are they justified?



“I’m sick and tired of reading how we’re planning another ‘hundred days’ of miracles,” griped John F. Kennedy before assuming the presidency. 

The sentiment made its way into his inaugural address, albeit in a more stirring manner: 

“All this will not be finished in the first 100 days. Nor will it be finished in the first 1,000 days, nor in the life of this administration.”

A recurrent trope of American politics is to scour the actions of the first 100 days of a new president’s administration and compare it, usually unfavourably, with the productivity of the first 100 days of Franklin Roosevelt’s presidency (in which he managed to pass 76 pieces of legislation, 15 of them country-changing). 

The exercise is both arbitrary and imperfect: presidents with early legislative successes tend to have more later on in their term, but it is hardly a guarantee. 

Nonetheless, it is still a test that White Houses past and present torture themselves over. 

Lyndon Johnson ordered his congressional liaison to “jerk out every damn little bill you can and get them down here by the 12th”. 

“On the 12th you’ll have the best 100 days,” Johnson boasted. 

“Better than [fdr] did!” 

Joe Biden’s administration is no different.

One year ago, when enthusiasm was difficult to detect from even his keenest supporters, the comparisons with Roosevelt would have seemed absurd. 

And yet here they are. 

“Biden is off to an excellent start—arguably, one of the best since Roosevelt,” writes David Gergen, a former adviser to four presidents of both parties.



Mr Biden assumed power at an awful time, with crises in democracy, public health and racial grievance to address. 

Yet crises can be auspicious. 

More than 230m Americans have been partially vaccinated—more than the 100m he set out at the start of his term. 

The post-covid-19 economy is forecast to grow by 6.5% in 2021. 

Both of these would probably have occurred no matter who won the election in 2020. 

But the confluence of crises at his inauguration, plus a competent cabinet cribbed from the Obama years, has carried along ambitious plans. 

Mr Biden has already signed a $1.9trn covid-19 rescue package into law, spending that dwarfs even Roosevelt’s initial outpouring of cash (see chart 1). 

Unlike past crisis presidents, Mr Biden does not start with vast majorities in Congress; a lukewarm mandate gave Democrats only the barest majorities. 

Yet he has wielded the tools at his disposal—a budget measure known as reconciliation to surmount the threat of a filibuster—to pass laws all the same.

Transformational presidents often arrive as curious avatars. 

Johnson, who ascended to the presidency by the historical accident of Kennedy’s assassination, was a creature of the Texas political machine. 

Walter Lippmann, a renowned American commentator, wrote dismissively of fdr during his first presidential campaign: “He is no tribune of the people. 

He is no enemy of entrenched privilege. 

He is a pleasant man who, without any important qualifications for the office, would very much like to be president.” 

Many Democrats would have cribbed those words a year ago to describe their party’s nominee. 

Yet apathy now seems an asset. 

Mr Biden does not stir the same ire that Mr Obama did within the conservative media, which sometimes seems to dwell more on his supposed aphasia and diminished mental faculties than his objectionable policies. 

“Boring but radical,” is how Senator Ted Cruz tried to put it. 

All the same, Mr Biden is pursuing a muscular policy of state intervention in the economy and race relations that should delight progressives. 

He is far to the left of Mr Obama on both counts.

This method comes with risks. 

In the absence of a reliable negotiating partner, with the Republican Party still unable to exorcise itself of Trumpism and its anti-democratic fantasies, Mr Biden has no responsible opposition to save his administration from bad ideas and excess. 

Securing bipartisan legislation with the filibuster in place requires ten Republican Senate votes—which look so far out of reach that the White House barely goes through the motions of trying to attract them. 

The bad Democratic habit of throwing mountains of money at malfunctioning sectors of the economy and hoping for the best—like a largely unexplained proposal for $400bn of elder-care spending, or the $225bn to be spent on subsidising child-care centres and their poorly paid workers—thus goes unchecked.

The theory of the Biden presidency thus far is that extraordinary levels of spending, only partially matched by raising taxes on corporations and the rich, can enrich America indefinitely without triggering inflation. 

And that direct government intervention, not creative destruction, is a powerful force to spur innovation. 

This is a remarkable gamble.

Try something

What spurs most of the Roosevelt comparisons is the American Rescue Plan, the $1.9trn behemoth of legislation that Democrats managed to pass in Congress without Republican votes and with few edits. 

It spends a huge amount of money rather diffusely: cheques for $1,400 distributed to most Americans (at a cost of $400bn), and $350bn in aid for states and communities whose budgets did not appear to be in dire need of it. 

Though double the size of the stimulus measure that Mr Obama was able to pass in the aftermath of the financial crisis, it does not signify a permanent transformation of the welfare state just yet. 

Even child tax allowances, the most significant measure, which are expected to halve child poverty, are only temporary.



That means that although Mr Biden has outdone his hero (fdr’s portrait now hangs over the fireplace in the Oval Office) in size, he has not yet done so in scope. 

Roosevelt managed to stabilise the careening banking sector, pass the Glass-Steagall Act, establish a federal system of deposit insurance, take the dollar off the gold standard, create the Civilian Conservation Corps and the Tennessee Valley Authority, besides passing other public-works and relief legislation. 

Mr Biden would clearly like to effect a transformation on the Rooseveltian or Johnsonian scale. 

But that cannot simply be bought.

Instead, the great transformation, should it ever arrive, will come in the next 100 days. 

Throughout his presidential campaign, Mr Biden promised that after immediate relief, which he has provided perhaps over-generously, he would “build back better”. 

That promise will arrive only with Democratic unanimity in Congress—which will be even harder to achieve than for the American Rescue Plan. 

The next plan aims to spend more than $4trn on mobilising all of government to fund infrastructure of various kinds and arrest the progress of climate change.

Presidents, at least Democratic ones, measure their success by the number of landmark acts and enduring governmental programmes left behind. 

Social Security, food stamps and modern unemployment insurance are among Roosevelt’s innumerable contributions. 

Beyond sweeping health-care and poverty-reduction programmes, Johnson’s include major civil-rights legislation on anti-discrimination, voting rights and fair housing. 

Mr Obama left his health-care plan. 

Mr Biden’s best chance of entering this pantheon would be to start the decarbonisation of America.

Before he assumed office, Mr Biden pledged that America would decarbonise its economy (meaning no net carbon emissions) by 2050. 

To get there, he aims to make power generation entirely carbon-free by 2035. 

He aims too to reclaim the mantle of global climate leadership tossed away by Mr Trump and his administration’s know-nothingism. 

At a summit of world leaders held (virtually) in late April, Mr Biden announced that America would aim to reduce its emissions by about 50% from 2005 levels by 2030. 

If the country realises these ambitious targets sometime after Mr Biden has left office, he could lay claim to the title of most consequential president of the century—remarkable given his slim margin of victory, lacklustre oratory, and the tepid enthusiasm he inspires even in his own party.

Were he to get his way, hundreds of billions of dollars would be spent putting Americans to work (preferably within unions): not just in green jobs, but in building roads and bridges, repairing sewers and power lines, and laying down broadband fibre cables. 

There is even a Civilian Climate Corps—deliberately recalling Roosevelt’s Civilian Conservation Corps, which employed 3m men who, among other things, planted 3bn trees. 

Other expansions to the welfare state, like permanent child allowances, paid family leave, extra subsidies for child-care centres and expanded health-insurance programmes, were revealed on April 28th at an estimated cost of $1.8trn. 

Mr Biden aims to raise these immense sums from much higher taxes on corporations and the wealthy, who did well under Mr Trump’s tax reform.

These plans have been sketched by the White House. 

Making them happen would require all Mr Biden’s skill at arm-twisting and back-slapping in the Senate, given that Democrats hold the chamber by the thinnest margin possible. 

So far, he has proposed starting a clean-energy revolution by spending close to $1trn over the next decade on basic research, subsidies for renewable energy and a jobs programme for “millions” put to work building new infrastructure, such as 500,000 electric-vehicle charging stations (there are only 115,000 petrol stations in the whole country) and retrofitting and weatherising existing infrastructure.

But enacting change so quickly cannot be accomplished through subsidies and direct employment. 

Mr Biden would need to rapidly shake up a cocktail of regulations that would force such a transition. 

More executive orders are among the ingredients, but legislation would be required, too. 

The trade-off between good policy and winning elections is clear here. 

A clean-electricity standard is politically palatable, but limited compared with the scale of the problem. 

The bolder, more effective option of a carbon tax is going nowhere.

Senate rules mean that the budgetary portions of the Biden agenda—like expanded social safety-net spending—stand a good chance of passage because they can avoid the risk of a filibuster, a minoritarian stalling tactic that holds up legislation unless 60 senators agree to move forward. 

Many of Mr Biden’s plans, like green spending, the trillions in safety-net expansion and the raising of taxes on businesses and rich Americans, are engineered to get around this threat through reconciliation, which only requires a simple majority.



Other sweeping reforms contemplated by the administration, which principally change regulation rather than government spending, will be casualties of the filibuster for as long as Democrats keep it. 

This applies to immigration reform, a boosted federal minimum wage, or greater voting-rights and civil-rights protections. 

Even if the filibuster were to be ditched, which seems unlikely now, the time limit on such reforms is also shorter than a four-year term would suggest. 

Even small losses during the mid-term elections in 2022, which first-term presidents often suffer, would flip Democratic control of one chamber of Congress and therefore probably doom future legislation (as Mr Biden will remember from his vice-presidential days). 

Perhaps that is why the focus has been squarely on economic policy.

Politics is not the only constraint on Mr Biden. 

The White House seems to relish eye-popping spending proposals. 

That is a departure from the Clinton-era Democrats, who cared about fiscal rectitude. 

Even Roosevelt began his presidency with the intention of balancing the budget, and only later turned Keynesian. 

The Congressional Budget Office estimates that the budget deficit of 2021 will be 10.3%, after a covid-induced shortfall of 14.9% in the previous year. 

The national debt is on track to be 102% of gdp by 2021 and 202% of it in 30 years’ time. 

Yet Mr Biden is blasé about the problem and keen to spend trillions more, which may only partly be covered by rising taxes. 

While interest rates are low, the spending may be sustained. But they will not stay low indefinitely. 

Already, inflation expectations have risen; if they do so quickly and unexpectedly, and Mr Biden’s economic experiment comes undone, it would badly damage the Democratic Party at a time when the other lot are unfit to govern.

If dealing with Congress and the bond market may be a headache, Mr Biden can at least issue directives. 

He has already taken some 60 important executive actions—more than any president since Roosevelt. 

Many of these revoke the actions of Mr Trump on immigration, like building a wall on the Mexican border, or climate change, by re-entering the Paris accord to reduce emissions. Because Mr Trump was singularly unsuccessful at passing major legislation (his only one, a tax cut in 2017, also stands a good chance of rollback), these revocations signal the end of a permanent Trump policy agenda in Washington. 

Others sketch the beginnings of causes Mr Biden aims to pursue through legislation: defining racial equity, relaxing immigration enforcement, mandating “buy American” rules, even forming a commission to study possible expansion of the Supreme Court. 

This all implies a muscular executive branch that will unilaterally seek to rewrite environmental, immigration and civil-rights rules to the maximum permitted by the courts.



Mr Biden may have plainly modelled himself on Roosevelt at the start of his presidency, but on race he aims to differ from the New Deal. 

Local administrators of Roosevelt’s innovations explicitly excluded African-Americans. Mr Biden’s plans, by contrast, are avowedly anti-racist. 

So far the racial-equity agenda of the first “woke” administration has been pursued in ways that look a bit like reparations. 

The covid-19 relief bill included a $5bn relief fund for minority farmers alone. 

The infrastructure package maintains that, somehow, 40% of the benefits of clean-energy investments will go to previously disadvantaged communities.

This too may perhaps be a quirk of the reconciliation procedure used to circumvent the filibuster. 

Spending targeted towards minorities alone can pass through the Senate more easily than consequential legislation that would reform policing, prisons, immigration and voting rights.

Formal reparations (an issue which Mr Biden supports the study of by another commission) are deeply unpopular; policymaking that resembles reparations may not be much more warmly received. 

The politics of this racial-equity agenda is worse for the White House than the politics of big spending, which is broadly popular. 

Should progressives grow discontented with the signalling on racial equity, and instead demand that Mr Biden pushes harder, his party’s showing in the 2022 elections could suffer.

Government is ourselves

The Trump administration suffered from a severe form of attention-deficit disorder. Under Mr Biden, Washington has mercifully receded from global headlines. 

“Boring but radical” gets fewer clicks than “fascinating but incompetent”. 

This has led many to underestimate the scale of change currently under way in the relationship between the people and their government.

Mr Biden is a Rooseveltian revanchist, who seeks to reclaim the trust Americans once placed in government. 

His proposals for muscular industrial policy, autarkic supply chains and massive publicly-funded employment will be inefficient. 

But economic rationality is not their point. 

They are the results of a complicated balancing act between idealist left-liberal policy, centrist caution and what Congress can pass through reconciliation. 

The first 100 days of the Biden presidency have shown that he will pursue that philosophy in surprisingly maximalist fashion for a supposed moderate, even with such slim margins of Democratic control in Congress. 

The daunting tasks he has laid out for himself—averting climate change and rectifying racial injustice—will, in Kennedy’s words, not be finished in the first 1,000 days or even in Mr Biden’s lifetime. 

But he has already done more than seemed possible when he was sworn in.

Larry Summers accuses Federal Reserve of ‘dangerous complacency’ over inflation

Ex-Treasury secretary warns of risk US central bank will be forced into knee-jerk rate rise

James Politi in Washington

The comments from Larry Summers at a conference on Tuesday marked a significant escalation of his attacks on the Federal Reserve © Bloomberg

Lawrence Summers, the former US Treasury secretary, has sharply rebuked the Federal Reserve for its loose monetary policies, accusing the central bank of creating a “dangerous complacency” in financial markets and misreading the economy.

The comments from Summers at a conference hosted by the Federal Reserve Bank of Atlanta marked a significant escalation of his attacks on the US central bank. 

The Harvard University economist and former top Democratic presidential adviser had already criticised Joe Biden’s fiscal stimulus as overly excessive earlier this year.

Summers said monetary and fiscal policymakers had “underestimated the risks, very substantially, both to financial stability as well as to conventional inflation of protracted extremely low interest rates”.

The Fed has vowed to keep US interest rates on hold close to zero until the recovery hits certain milestones, including full employment, while predicting that spikes in inflation will be transitory. 

The latest median forecast from the central bank’s officials shows rock-bottom rates remaining in place until at least 2024.

“Policy projections suggesting that rates may not be raised for . . . close to three years are creating a dangerous complacency,” Summers said, adding that the Fed could be forced into a knee-jerk tightening of monetary policy that would spook markets and even hurt the real economy.

“When, as I think is quite likely, there is a strong need to adjust policy, those adjustments will come as a surprise.” 

That “jolt” would do “real damage to financial stability, and may do real damage to the economy”, Summers warned.

The Fed has argued that strong monetary support for the economy is still needed because of the risk of a slowdown in the recovery and the shortfall in employment compared to pre-pandemic levels. 

Nor does it expect the current spike in consumer prices to last, arguing that it is being fuelled by supply chain bottlenecks and the economic reopening.

Summers warned that the notion of an equal balance between inflationary and deflationary risks, and between financial bubbles and credit problems was “very far off of an accurate reading of the economy right now”.

“The primary risks today involve overheating, asset price inflation and subsequent financial excessive leverage and subsequent financial instability. 

Not a downturn in the economy, excessive unemployment and excessive sluggishness,” Summers said.

“It is not tenable to assert today in the contemporary American economy that labour market slack is a dominant problem,” he added. 

“Walk outside: labour shortage is the pervasive phenomenon.”

Summers’ attacks on US economic policymakers this year have been particularly stinging because he is a Democrat, and have resulted in his being sharply criticised within the party. 

Liberal activists in particular say he is out of touch with the struggles of middle and low income households.

They say Summers — who served as Treasury secretary from 1999 to 2001 — represents the market-friendly, deficit-fighting wing of the Democratic economic establishment that backed excessively tight fiscal policies during the administrations of Bill Clinton and Barack Obama, leading to middle-class stagnation and a revolt against globalisation.

None of that has deterred Summers from taking a very public stance. 

On Tuesday he said that the Fed’s new policy framework, approved in August last year to be more tolerant of inflation after the lessons of the financial crisis, was not fit for the current environment.

“It is not a reasonable place for policy to be in a world where the budget deficit has been expanded by 15 per cent by stimulative policy,” Summers said. 

“I would rather see us go back to go back to a Fed that is concerned about pre-empting inflation, rather than a Fed [that] is concerned about pre-empting fears that it will be concerned about inflation.”

High Growth Sectors in the Post-Recovery Decade

The post-pandemic economy could well be defined by the return of robust aggregate productivity growth after 15 years of relative sclerosis. Between the increased availability of powerful new technologies and aggressive fiscal policies, the stars are aligned for a cascading sequence of rapid recovery around the world.

Michael Spence



FORT LAUDERDALE – A multispeed economic recovery is underway, reflecting the significant cross-country variations in containing the coronavirus and acquiring and administering vaccines. 

But notwithstanding these differences in timing, there will soon be a cascading sequence of rapid recoveries around the world.

Sectors that had to shut down because they could not function without unsafe human-to-human proximity will now (or soon) reopen. 

Businesses that survived the pandemic closures (many with support from fiscal programs) will experience rapid expansion, powered by pent-up demand. 

Growth rates will surge for a limited period of time before subsiding toward normal levels. 

We will enter the post-recovery world sometime in 2022 (though it will come sooner for some than others).

For investors, policymakers, businesses, and households alike, a major question is whether and to what extent we will return to pre-pandemic growth patterns. 

Will we witness a shift to some markedly different set of dynamics?

While there are many areas of uncertainty in the post-recovery economy, some industries seem poised for a period of extraordinarily rapid growth. 

Specifically, in sectors with a combination of technological possibilities, available capital, and high demand for creative new solutions, conditions will be highly favorable for investment and new company formation.

Among the broad sectors with the greatest growth potential, my three leading candidates are the application of digital technologies across the entire economy, biomedical science (and its applications in health care and beyond), and technologies that address the various challenges to sustainability, especially those associated with climate change. 

Elevated growth in this context means not just sector growth, but high levels of entrepreneurial activity and innovation, a plethora of new fast-growing companies, and large inflows of capital carrying higher expected rates of return.

These areas are distinct but overlapping, because they are defined more by science and technologies than by outputs. 

All three are viewed as key sources of resilience – for businesses and for society as a whole – and that perception has been reinforced by the pandemic and growing awareness of the effects of climate change. 

Between this changing outlook and the forced adoption of digital technologies during the pandemic, there is now a heightened awareness of both the opportunity and the necessity of digitalization, which is reflected in high and rising demand for technological solutions.

In all three areas, many years of research and innovation have yielded powerful scientific tools and technologies that are becoming broadly available for entrepreneurs and investors who aim to tackle specific problems. 

At the same time, the techno-entrepreneurial ecosystems that were once concentrated in just a few places have expanded globally, resulting in an interconnected web of investors and entrepreneurs sharing insights, transferring technology, and adapting to local conditions.

The start-up “unicorns” once associated with Silicon Valley and a few other high-tech hubs can now be found in growing numbers across a wide range of developed and middle-income countries – and in surprising sectors like education. 

In short, the systems that unleash entrepreneurial talent are increasingly taking root around the world.

This is partly because governments have recognized the opportunities in these sectors and duly stepped up their game. 

The fiscal programs coming out of the pandemic have been far more aggressive than in the past. 

Commitments to invest in infrastructure (including digital), science, and technology are expanding, not just in the United States and China, but also in Europe, across the digital, biomedical, and greentech sectors.

Moreover, policymakers seem to understand that deficient demand has negative effects not only on employment but also on the incentives for adopting new technologies. 

Most governments thus are eager to ensure that the economy is running at high intensity without demand-side headwinds holding back growth and employment.

Given these factors, there is a reasonable chance that the 15-year negative trend in aggregate productivity growth – and hence overall real growth – will be reversed. 

Powerful new general-purpose technologies are coming online, and the pandemic has increased adoption and learning in previously lagging sectors. 

This is crucial, because productivity growth at the aggregate level requires not just widespread availability of the necessary technologies, but also their broad diffusion.

Particularly important is digital adoption by small and medium-size businesses and lagging sectors. 

In India, part of the digital transformation involves equipping millions of small retail businesses and the related supply chains with technological solutions, as opposed to having large entities sweep them away, causing potentially massive job disruption.

The distribution of income is another key factor in productivity growth. 

If incremental income continues to flow mainly to high-income individuals and the owners of capital, that may be good for asset prices, but it will be bad for demand, and hence business investment and productivity.

At least in the US, President Joe Biden’s fiscal plans – which include infrastructure investment, changes in taxation, and a higher minimum wage – are designed to restore middle-income jobs and boost incomes for low- and middle-income households.

As a recent study by the McKinsey Global Institute sets forth, the digital transformation may be broad enough that it will help to raise overall productivity growth substantially. 

For example, innovation in delivery of primary health care (previously a lagging sector) will likely show up not just in the productivity data for that sector, but also in other important measures of performance, including overall health outcomes and quality and timeliness of care.

As for the decarbonization agenda, some might argue that this will have a small or even slightly negative immediate impact on growth and productivity. 

But on this issue, especially, one should be mindful of the relevant time horizons. 

Whatever the short-term effects of an expanded green investment agenda, the goal is not to elevate short- or even medium-term productivity. 

The point, rather, is to avoid or reduce the risk of a massive negative shock to productivity (among other things) in the long run. 

The present value of green investments thus can be very high even if the impact on short-run flow measures of productivity is small.


Michael Spence, a Nobel laureate in economics, is Professor of Economics Emeritus and a former dean of the Graduate School of Business at Stanford University. He is Senior Fellow at the Hoover Institution, serves on the Academic Committee at Luohan Academy, and co-chairs the Advisory Board of the Asia Global Institute. He was chairman of the independent Commission on Growth and Development, an international body that from 2006-10 analyzed opportunities for global economic growth, and is the author of The Next Convergence: The Future of Economic Growth in a Multispeed World. 

AT&T Is Cutting Its Dividend and Spinning Off WarnerMedia. Here’s How Much Its Stock Might Be Worth.

By Nicholas Jasinski



AT&T said it would “reset” its dividend as part of the transaction, to a payout ratio of about 40% of free cash flow. Gabby Jones/Bloomberg


AT&T stock was the biggest loser in the S&P 500 on Tuesday, a day after announcing a megadeal to shed its media assets and focus on its 5G and fiber-internet telecom core. 

That strategic refocus was seen as a positive by investors and analysts, but it comes at the cost of a dividend cut after the proposed spinoff closes. 

Worse still, it doesn’t solve all of the company’s problems.

AT&T stock (ticker: T) lost 5.8% on Tuesday, to close at $29.55, after losing 2.7% on Monday. 

Shares of Discovery (DISCA), which will combine with WarnerMedia, fell 1.6%, to $33.31, extending Monday’s 5.1% decline. 

The deal will provide AT&T with $43 billion in cash and other assets to pay down debt. AT&T shareholders will own 71% of the combined WarnerMedia/Discovery, with Discovery shareholders owning the rest. Discovery CEO David Zaslav will lead the company, and the merger is expected to close in the middle of 2022.


AT&T said it would “reset” its dividend as part of the transaction, to a payout ratio of about 40% of free cash flow, which management estimates at least $20 billion in 2023. 

That means roughly $8 billion in annual payout, or some $1.11 per share (AT&T has about 7.19 billion shares outstanding, per its latest filing). 

Should the post-spinoff equity trade for the same annual dividend yield as Verizon Communications ’ (VZ) current 4.3%—given a similar leverage and business profile—it would be worth $186 billion, or about $25.88 per share.

Several Wall Street analysts did a version of that math this week, and came up with similar values for AT&T’s telecom businesses after spinning off WarnerMedia. 

Valuing the newly created media company is a tougher task, and depends on investors’ views of its future streaming prowess.

Management said Monday that they expect WarnerMedia/Discovery to generate about $13 billion in adjusted Ebitda—short for earnings before interest, taxes, depreciation, and amortization—in 2023, and to be levered at 5 times net debt to adjusted Ebitda at closing. That implies about $65 billion of net debt on the new entity.

The market ascribes vastly different multiples to streaming winners and legacy media players. Walt Disney (DIS), which has a runaway streaming success in Disney+, trades for 17.3 times its enterprise value to 2023 Ebitda estimate, while streaming pure-play Netflix (NFLX) goes for 22.3 times. 

Relatively subscale media companies ViacomCBS (VIAC) and premerger Discovery each trade for about 8.5 times their 2023 EV/Ebitda ratio.

WarnerMedia/Discovery will bring HBO Max and Discovery+ under one roof, plus a deep library of content from their multiple brands and a combined annual production budget of about $20 billion, per management. 

But the business today is more of a collection of cable networks and a Hollywood movie studio, with the streaming services not expected to turn a profit for several years.

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At a Disney-like multiple of 17 times 2023 Ebitda, WarnerMedia/Discovery would have an enterprise value of $221 billion and its equity would be worth $156 billion after subtracting net debt. 

AT&T shareholders’ 71% stake would be worth $110.8 billion, or about $15.40 per current AT&T share, if the stock gets the same credit from the market as Disney’s. 

At an 8.5 times EV/2023 Ebitda ratio in line with ViacomCBS’ and Discovery’s today, the same math yields a value of about $4.49 per share.

Add the $25.88 value of AT&T’s telecom businesses, and AT&T stock today could be worth between $30.37 and $41.28—depending on whether investors believe WarnerMedia/Discovery will look more like ViacomCBS or Disney in the future. 

The reality is likely to be somewhere in between. But after a nearly 10% selloff in the past two days, AT&T stock is trading below both of those values.

Another way to play the transaction is via Discovery stock, which will morph into a 29% stake in the combined media company. 

With a fully diluted market value of $22.5 billion at Tuesday’s close and net debt of about $13 billion, Discovery’s $35.5 billion enterprise value implies a $122.4 billion enterprise value for WarnerMedia/Discovery. 

AT&T shareholders’ stake in the media company would be worth $40.8 billion after debt, or $5.67 per share.

For now, the market seems to be valuing WarnerMedia/Discovery much more like ViacomCBS than Walt Disney.

Apple and the Past

Thoughts in and around geopolitics.

By: George Friedman


A few days ago, my phone – a 10-year-old iPhone 6 – died. 

Or, more precisely, it continued to work as a phone but ceased to do many of the other things I expected it to do. 

It could no longer access my banking app, for example. 

It seems that the bank had issued a new version of the app, one that I could not use on my antique 6, and disabled the old one. 

The app was no longer supported by my venerable operating system, and with haughty disdain, the bank no longer wanted to do business with a phone that had been present at many meetings and family holidays. 

I asked our IT head how to solve this, and he said with barely hidden glee that there was no hope, a new phone must be purchased. 

Chortling, he sent along the link to the Apple store.

Now, to be allowed to make a purchase at the Apple store you must make a reservation. 

The rationale is to prevent the spread of COVID-19, but I suspect that the real purpose is to test the extent to which you really are worthy of owning an Apple product. 

My wife made an appointment, and we showed up on time. 

There was a line governed by the laws of nature and social distancing. 

Our temperature was taken, and we inched forward, converging into a complex of lines that I could not understand. 

Finally, someone staring at his computer said, "Friedman," and ushered us to almost being in the store, but not quite until another man met us. 

My wife was with me because she believes that a female salesperson can sell me anything at any price. 

Untrue but irrelevant. 

The salesperson was a man.

To me, it appeared that the question was, “Are you good enough to own an Apple product? 

Do you have what it takes?” 

There was no browsing thoughtfully, there was no poking at boxes and lifting things that were not to be lifted. 

The customer is under surveillance at all times. 

I can assure you that the Pentagon is much more casual than this. 

I wondered how Apple could stay in business treating customers like supplicants.

Of course, I know why Apple is so successful. 

I loved my iPhone 6 because it did what I needed. 

It didn’t break even when dropped it, and it could be called and located by the ring (yes I used a ring on the phone) when I lost it, which was several times a day. 

It had a telephone, email, texting (which I loathe) and an unnecessary but unobtrusive camera, and it allowed the national weather service to display itself. 

It did what a phone should do and a few other things. 

But best of all, it fit in my pants pocket – that is, when I didn’t lose it.

I dreaded the videogame-capable, Netflix-linked, echocardiogram-compatible, speaker-for-the-dead megalith I was about to buy. 

And herein lies the true genius of Apple. 

I handed our salesperson my old phone and said, sobbingly, “It’s broken.” 

He said he was sorry, sounding less honorific than funereal, and asked what I wanted. 

I said I wanted to buy the same phone. 

Exactly the same phone. 

He asked what color I wanted. 

Baffled, I said black. 

(What other color should phones be?) 

He handed me my phone, an iPhone 8, all shiny and new, and looking the same even when turned on. 

Inside it was different, and he reeled off the advantages. 

The only advantage for me was that I would not have to learn anything new.

It reminds me of Ford. 

Among his many geniuses was that he invented the auto dealership, which was owned by others who spread around the country, selling and repairing their wares. 

The genius of Apple is that it is not enamored with progress, defined here as tools to do new things in new ways. 

It is less creative destruction than managing the evolution of things in thoughtful ways. 

Put differently, progress finds new ways to do things but won’t throw the baby out with the bathwater. 

Apple marketers clearly understood that a large segment of the market is not excited by cellphones. 

People want them to do the things they are meant to do and limit the number of other things they can do to minimize the level of effort it takes to use the damned thing. 

For a while, it seemed that Apple was doomed to go the way of Blackberry, seemingly foundering between a music vendor, credit card hustler and the purveyor of overperforming and overpriced progress. 

But it knew exactly what it was doing, and I know that because Apple updated my 10-year-old cellphone and knew that my apps would ultimately force me to go to the store and joyously buy the same thing I owned and loved.

Progress is the Enlightenment’s gift to us, allowing reason to determine human needs and science to provide them. 

It is always easier to invent needs and fulfill them than it is to look deeply and find those things that humans must have at a point in history. 

It also makes more money. 

Edison, Ford, Rockefeller – they knew what electricity, cars and oil would do. 

Ford knew it so well that he famously said customers could buy a car in any color so long as it was black. 

Edison stuck with one thing, electricity, and made a new world possible. 

Rockefeller knew that coal wasn’t enough. 

Blackberry failed to understand that email wasn’t enough. 

Steve Jobs understood what was possible. 

The company he founded recognized what the later auto industry could not, which is that things that are old and familiar can be far more useful and efficient, and even comforting.

This is a lot to draw from a visit to the Apple store, and there is much I’ve overlooked about Apple’s success. 

But I once owned a Plymouth Valiant that did the same thing my Lexus can do now for a lot less money. 

It was a great car, and I would trade for it (and the illusion of my youth) in a minute. 

But Chrysler stopped producing it, replacing it with nothing much. 

Attempting the future while preserving the past is a skill most new entrepreneurs lack. 

They seek to overcome the past without recognizing the virtues of selling the old alongside the new.

There are many things wrong with Apple, and many things right. 

I don’t know enough about Apple to have an opinion on the whole. 

But this part impressed me. 

And I saw a shrewdness embedded there.

I own no stock in Apple. 

I once did but sold it figuring that it had run its course. 

I also thought that the camera in the cellphone was a desperate attempt to revive a declining industry. 

So on such matters, I should be mostly ignored. 

But where most companies want to overcome the past, Apple sees its virtue and merely reengineers it. 

And as the United States goes forward, this should be borne in mind.