The Democrats Confront Monopoly

By Polly Cleveland

In the 1970’s when I studied microeconomics in grad school, we got to monopoly briefly in one of the last chapters of the text. We learned that monopoly really wasn’t a such a problem. If a big corporation tried to raise prices to take advantage of a monopoly position, why, competitors would immediately rush in. So not to worry, it was in the interest of monopolists to behave. Moreover, monopolists enjoyed economies of scale, allowing the likes of Walmart to deliver lower prices to consumers than the mom and pop stores they put out of business. By that measure, laws like the Clayton Antitrust Act of 1914, designed to protect small businesses from anticompetitive practices…were actually anti-social as they kept consumer prices high. There was no hint of trustbusters’ original concern for concentrated political power, or exploitation of workers. This was the Chicago School theory of benign monopoly.

Since I knew the brutal history of some of the great monopolists like Standard Oil, American Tobacco, or AT&T, I took this lesson with a grain of salt. But I didn’t worry too much. Why? Because for the post World War II period, corporate concentration hadn’t notably increased. Yes, some big firms had merged, but others had broken up. Antitrust seemed to be doing its job. Little did I know how the Chicago theory of monopoly was even then taking the legal world by storm. That was the work of Yale Law School professor Robert Bork, who published The Antitrust Paradox in 1978. (In 1987, the Senate would deem Bork too conservative for the Supreme Court.)

The Democrats Confront Monopoly”, by Gilad Edelman in the November/December Washington Monthly, tells the story. Starting slowly in the Reagan Administration, then with gathering momentum, through both Republican and Democratic administrations, larger and larger mergers got the green light from the Justice Department and the courts. It was Bill Clinton after all, who took the Glass-Steagall shackles off the banks, allowing the disastrous merger of commercial and investment banking.

Meanwhile, economists began to notice growing inequality and wage stagnation. They came up with a variety of explanations: Maybe workers lacked skills to work with modern technology. Maybe it was competition with low wage workers overseas. Maybe it was just inevitable as machines took over jobs. I focused on a different explanation: Starting in the Reagan Administration, the tax system—federal, state, and local—increasingly favored what was not yet called The One Percent.

But in 2009, a book knocked me over: Barry Lynn’s Cornered: The New Monopoly Capitalism. Lynn, a business journalist, had seen a what we economists had missed: growing monopolization was making the American economy more unequal, less innovative and more unstable. In fact, the same was happening internationally, as multinational corporations took over more and more of the world economy. But Lynn didn’t stop with an exposé. Instead, he created a team of researchers at the New America Foundation, where he was a fellow. His team produced a whole series of eye-opening reports, published mostly in the Washington Monthly. Gradually the message got out, and was picked up by leaders on the left end of the Democratic Party, including Senators Bernie Sanders, Elizabeth Warren and Al Franken, and economists like Joseph Stiglitz and Paul Krugman.

Then, disaster, and a lesson. On June 27 this year, Lynn’s team released a statement welcoming a European antitrust action against Google. Google, a major funder of New America, apparently complained. Two days later, Lynn’s team were told to be out by the end of August. As observed in hundreds of outraged editorials and articles, there could hardly have been a better textbook example of the dangers of monopoly.  Lynn and his team have now set themselves up as the Open Markets Institute, but funding remains precarious.

Meanwhile, the team continues research and publication. In the same issue of the Washington Monthly, Phillip Longman explains How Big Medicine Can Ruin Medicare for All. Unless we address the growing monopolization of hospitals and their suppliers, Medicare-for-all or single-payer will resemble the Pentagon facing the defense contractors. (I can relate to the medical monopoly issue: In New York City, Mount Sinai Hospital has just taken over a number of other hospitals and medical buildings. Doctors practicing in these places were given a choice: sell their practices to Mount Sinai or get out. My gynecologist sold Sinai her practice; my shoulder surgeon angrily moved to an inconvenient midtown location.)

In June 2016, at an event organized by Lynn, Elizabeth Warren delivered a stunning speech on the damage of monopoly and the importance of reviving antitrust. Shortly afterwards, I attended a New York presentation by Alan Blinder, Hillary Clinton’s economic policy advisor. He focused on Hillary’s positions on issues vis-à-vis Trump’s and those of the median voter, complete with graphs. He suggested that Bernie had pulled her away from that median voter—a bad idea. Absolutely not a hint that Hillary should lead, rather than try to sniff out the densest patch of voters. One issue Blinder didn’t have on the list was antitrust, so I raised my hand and asked. “Oh,” he said, “that’s not a priority at present, but maybe after her first two years…”

New Issue!

1117cover--for-blog--504x648

Our November/December 2017 issue is out!  You can find the table of contents of the issue here, and I just posted John Miller’s “Up Against the Wall Street Journal” column here.  And here is the p. 2 editorial note, including news that signals the end of an era: our long-time co-editor, Alejandro Reuss, is leaving D&S. He will be greatly missed!

Contradictions of Capitalist Development

In their renowned book, The Deindstrialization of America (1984), Barry Bluestone and Bennet Harrison describe what deindustrialization has wrought for workers in the manufacturing “core” of the Northeast United States: “Their very jobs are being pulled out from under them. And instead of providing new employment opportunities, a higher standard of living, and enhanced security, the decisions of corporate managers are doing just the opposite.”
In her cover story for this issue, Marie Duggan gives us a fine-grained and deeply human story of the decline and fall of the machine-tool industry in Keene, N.H. Above all, Duggan’s message is that deindustrialization is not something that “just happened,” but the result of human decisions—from the level of firm managers and owners to the heights of national economic policymaking and back. Likewise for the consequences, which ruptured what can only be described an intimate relationship between the owners, managers, and workers in the industry. A traditional “welfare capitalism,” where owners and managers cared for “their men,” with a mixture of real feeling, paternalism, and hostility to labor organization, gave way to a form where the workers got the shite end of the stick, the relationship exploded into open conflict, and the industry was ultimately left as a looted shell.
Patricia Rodriguez takes us to a different part of the world, to the port city of Buenaventura, Colombia, and a different—equally searing—account of capitalist development. Here, the rise of the modern port industry is bringing “environmental destruction and the forced, violent displacement of Afro-descendant and indigenous communities in the area.” Rodriguez, too, gives us a human story of the dispossessions and violence suffered by the poor and marginalized, but also the inspiring story of their resistance to these assaults and their determination is devising and fighting for alternatives.
Finally, among our features, an interview with economist William Tabb takes us around the globe—from the high-income countries that were the epicenter of the global crisis to developing countries that face the harrowing prospect of dealing with globally mobile capital. In the former, workers face a power structure committed to wage repression and financialization; in the latter, they face elites that have abandoned national autonomous development in favor of neoliberalism and integration with global capital. Yet, Tabb, too, gives reason for hope rather than despair—that, in response to a system that is neither socially nor ecologically sustainable, we will see the growth of anti-capitalist resistance.
Also in this issue: Gerald Friedman on Medicare for All, John Miller on the Trump tax giveaway to (you guessed it!) corporations and the very rich, Arthur MacEwan on the labor share of total income in the USA and other high-income countries.

“To New Battlefields …”

This is the final issue for Alejandro Reuss as co-editor of Dollars & Sense. He first became involved with D&S, as an intern, in 1996. Since then, he has been a collective member, an Associate (when he was at UMass-Amherst for graduate school), and co-editor (in two separate stints, 2000–2002 and 2013–2017). All told, he has been on the D&S staff for seven years and on the collective for sixteen, and has had an immeasurable impact on the organization and its publications. He will no longer be on the D&S staff, board, or collective, or in any other formal leadership position in the organization. “The only ties will be of another nature—the kind that cannot be broken.”