A golden oldie from Matt Stoller:
These systems interrelate, and inefficiency in one impacts the other. This became very obvious to me when I went to Kenya last summer, and saw how a semi-competent telecom and banking system could work. Kenya has the worldís most innovative mobile payments system, called M-Pesa. M-Pesa is a cell phone based cash remittance system based on text messages. Unlike Chaseís Quickpay system, M-Pesa just works, and works well.
You load your SIM card with money at any number of street stalls, telecom stores, beauty shops, or anywhere else someone has decided to set up a Safaricom outlet. Transfers happen via text message, and they cost 0.5 Ė 4% of the cost of the transaction, which is cost effective for a country where so few people have access to banks. Withdrawals can happen at any Safaricom outlet. If your phone is stolen, thatís ok, the cash is loaded onto your SIM card and you have a unique password. And everyone uses it. Itís like Paypal, only itís not terrible.
This isnít just a problem of monopolistic behavior or excessive market power. Safaricom is a very powerful company in Kenya, and there is basically no competition to what they do. Yet they have produced a terrific system that companies all over the world are trying to replicate. Cell service on volcanos where no one lives except zebras and lions is more reliable than cell service on Fifth Avenue in New York.
What seems to have happened is that American corporate executives are now more focused on financial engineering, which is essentially the extraction of capital from their enterprises and from the public, than they are at selling improved goods and services. For example, GE just got a tax break extended which added $3 billion a year in annual profit in the latest fiscal cliff deal. Thatís a lot of money, and not one good or service was improved to drop that cash to the bottom line.
As another example, the cable industry is projecting an average monthly bill of $200 by 2020, versus $86 today. At 73 million subscribers, thatís an additional $100 billion a year of revenue. Comcast alone has 22 million customers Ė thatís $30 billion a year for this one company alone. And letís be clear, this is not going to better products, Americans tend to get worse internet and cable service than counterparts around the world. Investing in manipulative pricing schemes, lobbying for tax breaks and not investing in good infrastructure is a rational choice for American corporate executives, since their ethic is to extract as much capital as possible from the American economy. And yet, this is why America canít have nice things.