A fine mess

The large fine levied on Intel by the EU for supposedly antitrust actions, coupled with the announcement that Obama administration foolishly intends to dust off the United State’s antitrust guns, begs a number of questions. For the moment, though, I’m only interested in two: where is this fine money supposed to be going? how much of it actually ends up there?

Naturally, like all fines from regulators or courts, actual payment will be mired by years of legislative wrangling and will probably end up being settled for some smaller number. But, according to Silicon Valley Mercury News, the EUR 1.06 billion fine “will have to be put into a bank account by Intel within the next three months and left there pending the outcome of its appeals.” A legal news site indicates, however, that “it was not reported who would control the bank account—Intel, or the European Commission. Nor was there any word as to who would own the interest earned from such a large sum of money sitting in an interest-bearing account.” It also doesn’t seem to be specified if there are any limits on which banks can be used. Can this be a US bank, for example, or does it need to be in the EU? Europe being Europe, I’m assuming that they will demand that the money be kept in a European bank.

In what looks like a FAQ on the decision, a site claiming to be “Europe’s leading independent online business information service about the European Union” says the following:

Does Intel have to pay the fine immediately?

The fine must be paid within three months of the date of notification of the Decision.

Where does the money go?

Once final judgment has been delivered in any appeals before the Court of First Instance (CFI) and the Court of Justice, the money goes into the EU’s central budget, thus reducing the contributions that Member States pay to the EU.

Does Intel have to pay the fine if it appeals to the European Court of First Instance (CFI)?

Yes. In case of appeals to the CFI, it is normal practice that the fine is paid into a blocked bank account pending the final outcome of the appeals process. Any fine that is provisionally paid will produce interest based on the interest rate applied by the European Central Bank to its main refinancing operations. In exceptional circumstances, companies may be allowed to cover the amount of the fine by a bank guarantee at a higher interest rate.

What percentage of Intel’s turnover does the fine represent?

The fine represents 4.15 % of Intel’s turnover in 2008. This is less than half the allowable maximum, which is 10% of a company’s annual turnover.

This last bit means that the European Commission could have made this fine as high as EUR 2.55 billion, but somehow concluded that 1.06 billion was the proper amount for this offense.

So, what you have in this case is over a billion euro from an American company deposited into (probably) a European bank, but locked there until the appeals process is over. (Hey, what a coincidence! Just when European banks badly need large deposits that are unlikely to be withdrawn.) The interest seems to just accumulate there for the interim. Once the appeal is sorted out, it’s likely that at least some of the money in this account will be inserted into the European Union’s central budget, possibly with interest. Since this is a central fund, and not earmarked for anything specific, the EU can then use this money pretty much any way it likes. Here’s how they spent it last year:

EU central budget 2008

I can’t find a good source of information about what percentage of fines like these eventually get paid in reality, or how much grift there might be in the system. I’d love to hear about both.

The black horse

Now that idiot thugs are refusing disaster relief and rice shortage prophesies are being self-fulfilled, it won’t be long until famine starts to rear its head. While many people are busy dying, those that aren’t will be spreading blame around. Blame will fall on bad weather, bad crops, bad luck, even on Al Gore. But the truth will be none of these. While starvation is (obviously) caused by a lack of food, famine—that is, widespread starvation over a large area—is the result of bad government.

As far as food goes, governments fail their people in two ways: by failing to plan for bad times and by bungling (or, all to often, profiting from) crises when some external event triggers a food problem. Usually, famine involves both. In its 2002 coverage of Ethiopia entitled “Bad weather, and bad government”, the Economist said:

Bad weather is rarely enough, on its own, to kill large numbers of people. Famine usually requires bad government, too…. In Ethiopia, the food crisis has been aggravated by the legacy of a senseless border war with neighboring Eritrea between 1998 and 2000. It killed tens of thousands, forced 350,000 to flee their homes, blasted both countries’ infrastructure and prompted foreign donors to freeze a lot of aid. In all, it cost Ethiopia an estimated $2.9 billion—almost a whole year’s output for every farmer in a country where 80 per cent of the population lives on farms. Such a monumental man-made disaster has made it harder for the country to cope with a natural one.

The millions of Chinese that starved from 1958 to 1961 also owe their deaths more to their government’s response to natural disaster than to the disasters themselves, even by that governments own admission. Research into other famines by Amartya Sen reached similar conclusions. Even black swan events, such as fungus unexpectedly killing potatoes needs bad government to become the Irish Potato Famine.

Our modern reaction to famine in other countries is to send relief aid and “keep them in our prayers”. This probably saves a few lives (at least in countries where the government isn’t stealing the aid), but treats the symptom, not the disease. You will continue to see famine in country after country until we change this “we sympathize” tune we sing into an accusation of incompetence against the government causing the problem, even our own (especially our own). Some, for example, are taking the World Bank to task, claiming it created policies that encourage governments to create famine. This is a step in the right direction, but a better step would be to also blame the governments themselves.

Art “Four Horsemen: Famine” by Greyskin666.

Another Empire

America’s detractors have called it “imperialist” for some time. Recently, the American government has embraced this label, invading several countries. While it is doubtful America is really trying to build a classical empire, I think it could actually do so in a way that would avoid some of the problems usually experienced in empire building and actually help the people of the world a little in the process.

Imperial US

America should announce that any government that actively pursues or obviously condones genocide has forfeit its right to rule and will be eliminated, with the nation it presently governs invaded and made part of the American Empire.

Since it appears that defeating foreign armies (particularly from the types of countries likely to practice genocide) is significantly less of a challenge for America compared to “winning the peace”, this strategy should provide a fairly large group of natives (though certainly a minority) who would back their new American overlords, namely the people previously being slaughtered by their own government.

After taking over a few of these countries, the likely furor of neighboring countries make it almost certain that Imperial America would be faced with the necessity of (or at least the pretext for) conquering Lybia. I figure that about half of Africa would be part of the Empire by the end of the decade. And not just the crummy bits either, but some serious mineral wealth. You might think ruling such a place would be a disaster waiting to happen. Of course it would be, but America couldn’t do much worse ruling this part of the world than its done for itself. At the very least, a lot fewer women would be raped and people getting their hands cut off would be the occasional accident instead of an hourly event.

It would also supply America with what it appears to need most: a labor pool that doesn’t mind being paid very little to make Nikes. For many in Africa, making pennies a day beats lining up to get your limbs severed, hands down (as it were).

Another thing going for this policy is that it embodies America’s second founding principle: hypocrisy (freedom being the first founding principle), given that the “let’s get our citizens to destroy their food supply” strategy employed against Native Americans would fit the “obviously condones genocide” requirement.