Thursday, January 25, 2007

The State of the Union The annual state of the union speech by the US president is generally reported as an inventory of policies and ideologies concocted for maximum political effect. And the reporting and commentary follows suit, dissecting what voter group is pleased or antagonized by what policy. But another take involves the consideration of the effect of each policy proposal on those powerful business interests who stand to lose or gain on each move. It may seem that, as Bush did, discussing such issues as education, health, and energy independence, that high ideals are being pursued, and to some extent they are. But whatever the ideals, there are repercussions for business, potential winners and losers, and the lobbyists and their CEOs were listening far more closely to the president’s words than all but the most die-hard partisans. Take education. Bush’s reaffirmation for "No Child Left Behind" may bring up images of earnest teachers and deprived urban children, but it also the foundations for the increased profitability in such companies as Thomson and Pearson that make up the testing oligopoly. Bush’s health plan seems dead in the water, but the howls form hospitals (many of them consolidated and privately owned) were almost as loud as the sighs of relief from big health insurers like WellPoint and Aetna, who might get a windfall from the planned policy. Furthermore, big companies, especially the Big There auto companies, are excited at a chance to shake off their current health insurance borders and shift "ownership" on to their workers. In energy alternatives, the proposal to support alternative fuels already has companies scrambling t be included. Major corporations like General Electric (wind power) and ADM (gasohol) are jockeying for position, even nuclear power companies (Enteregy) are get ready. And of course, there’s Iraq. Whatever else the "surge" means, it means a big plus in revenue for the companies like Raytheon and Halliburton that supply the war effort. They may not be determining the policy, but clearly their stockholders won’t mind a few more orders. But it’s not just the Republican’s actions, now blunted, that have lobbyists working hard. In a Wall Street Journal story  ("Capitol Hill Power Shift Could Aid Philip Morris", 1/23/07), its shown how the best intentions get monetized. The article states that even though Democrats will get tough on tobacco, it may turn out to be "A blessing in disguise," at elast for Philip Morris, A law giving the FDA more power to regulate the way cigarettes are advertised and sold may play into Philip Morris’s hands by making it even harder for upstart rivals to encroach on its market share. It's an ill-wind indeed that doesn't blow some big corporation some cash.  As the article analyzes the situation cogently: The company's rivals contend that new restrictions would hurt them more because their brands are much less known than the famous Philip Morris Marlboro brand. With marketing potentially dramatically curtailed by FDA regulation, they would have fewer ways to promote themselves. The result, they say, would be that Marlboro would keep its market share. Philip Morris USA's share of the retail cigarette market was 50.4% as of the third quarter of 2006. Competitors such as Reynolds American Inc.'s R.J. Reynolds Tobacco Co., which markets Camel and Kool cigarettes, gripe that FDA regulation is the "Marlboro Monopoly Act." Thus, in a curious twist, Philip Morris will not testify against the FDA regulation at Congressional hearings. Once again, the benefit of having the #1 position in the market is your ability to weather changes better. If the status quo is essentially frozen, Marlboro and Philip Morris win out, as do the biggets incumbents in other areas. So, paradoxically, even outwardly hostile legislation can end up as a benefit for the biggest. . 9:44:37 PM

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