Review of “Liberty from All Masters,” by Barry C. Lynn

Book Review: Liberty from All Masters by Barry C. Lynn

By Polly Cleveland

Fifty years ago, my husband and I volunteered to work for Ralph Nader. Unwittingly we helped enable the monopolists who rule America today.

In 1965, Nader had published Unsafe at Any Speed: The Designed-In Dangers of the American Automobile. After General Motors harassed him in response, he won a large judgment which he used to set up The Center for Responsive Law in Washington D.C., headquarters for a series of investigations. Nader’s first report, on lapses at the Federal Trade Commission, kicked off the new era of consumer protection. In 1969, I worked on an investigation of the U.S. Department of Agriculture, showing how it favored both agribusiness and chemical companies over the interests of small farmers and consumers. In 1970, my husband and I moved to California to work on Nader’s Power and Land in California Project, showing how the state’s giant landowners extracted subsidies from federal and state agencies.

This was important work, leading to major improvements in regulations for consumer health and safety. However, as Barry Lynn shows in Liberty from All Masters, the consumer protection movement unintentionally bolstered longtime opponents of antitrust and other restrictions on big business and big banks. First, it made Americans’ interests as consumers paramount over their interests as citizens. Second, it undermined confidence in government agencies, who often became viewed as necessarily corrupt and incompetent. Only a few years later, President Ronald Reagan could proclaim that, “The most terrifying words in the English language are: I’m from the government and I’m here to help.”

The 19th– and early 20th-century Populist and Progressive movements crystallized what Lynn calls the American System of Liberty. This is the idea that under law, all citizens have equal rights, including the right to be treated the same under the same circumstances—a powerful response to slavery before the Civil War and to many forms of oppression since then. Among the largely agrarian Populists, it provoked a demand that the giant railroads be treated as “common carriers,” forced to charge all their customers the same rates. Protests against robber barons like U.S. Steel and Standard Oil led Congress to pass the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914. The Glass-Steagall Act of 1932 separated banks that took the public’s deposits from the predatory investment banks behind the 1929 meltdown. In 1936, protests that chain stores like A&P were wiping out small businesses led Congress to pass the Robinson-Patman Act as part of FDR’s New Deal package.

Robinson-Patman generated a proliferation of so-called “fair trade” laws. These prohibited distributors from paying different rates to suppliers of the same goods—precisely the way Big Ag today treats chicken farmers. They also prohibited stores from offering discounts below producer’s list prices. What’s wrong with discounts? First, deep-pocket chain stores used massive discounting to wipe out local competitors one at a time, before moving on to the next town. Second, contrary to the assumption in economics textbooks, there’s more to a product than just its price. By setting higher than rock-bottom list prices, producers may wish to signal superior quality. They may also wish to gain broader distribution by making sure that there’s enough profit built in for small stores to carry their product. Consumers in turn may gain from greater availability of the product and from the better service provided by small stores. Under the influence of Robinson-Patman, the chain stores faded to irrelevance.

Come the 1970s, though, the consumer protection movement played into the invisible hands of the old monopolists. By 1975, most “fair trade” laws had been repealed with little opposition. In 1978, then Yale law professor Robert Bork published The Antitrust Paradox, claiming that antitrust laws were unfair to consumers, depriving them of the low prices that big efficient corporations allegedly could deliver. (Yes, that Robert Bork, of Nixon’s 1973 “Saturday night massacre” and Reagan’s failed 1986 nomination to the Supreme Court.) As Lynn points out, Bork effectively replaced citizens’ right to equitable treatment under law with consumers’ desire for cheaper stuff.

Meanwhile back at the University of Chicago, law professor Richard Posner published The Economic Analysis of Law (1973) and Antitrust Law: An Economic Perspective (1978). With these publications, he brought cost-benefit analysis into interpretation of the law. Soon, right wing foundations were training judges all over the country in how to apply cost-benefit to their decisions. Up to a limited point, cost-benefit makes sense. Ill-designed laws, such as bans on marijuana possession, may do more harm than good. But Posner’s ideas effectively buttressed those of Bork, in green-lighting monopolies as long as, supposedly, they brought lower prices to consumers.

Bork and Poser’s message, amplified by right wing think tanks like Cato and the Heritage Foundation, played well in Reagan and Bush Senior’s Department of Justice. Antitrust cases were dropped or settled for token fines. Not a peep from the liberal establishment. Same or worse under Clinton, who enthusiastically supported the repeal of Glass-Steagall to retroactively legalize Citibank’s merger with Travelers Insurance. And so on through Bush Junior and Obama.

During this period from 1980 on, I myself focused on the increasing regressivity of the tax system, the growing inequality of wealth and income, and the looming real estate bubble. What a shock, when in 2010 I opened Barry Lynn’s Cornered: The New Monopoly Capitalism and the Economics of Destruction. Somehow I had missed the creeping monopolization of the economy, a major contributor to inequality. And it was getting worse, as the tech giants Google, Amazon, Apple, and Facebook took control not only of the goods we buy, but the news we receive, in fact, of our ability to make informed decisions, as individuals and as citizens.

Public awareness came slowly; even in fall 2016, Hillary Clinton’s economic advisor Alan Blinder could dismiss monopoly as a concern. But Cornered inspired a whole new generation of journalists and researchers, publishing in magazines like The Washington Monthly, Harper’s, The American Prospect and others. This year, some of these sons and daughters of Barry have published new books on monopoly, including Matt Stoller (Goliath), David Dayen (Monopolized), and Zephyr Teachout, whose Break ‘Em Up I reviewed in September.

Lynn and these authors propose the obvious reforms: enforce existing anti-trust laws, with updates for the digital age. Unfortunately, they say little about the root of Big Tech’s monopoly power, so-called “intellectual property rights.” These are the government-created and protected exclusive rights to pieces of the public domain: patents, trademarks, copyrights, trade secrets and other licenses. Many of these “rights” should never have been granted; all of them should be subject to taxes, fees and strict regulation.

Reform is in the air. October 6, in the newly-revitalized House of Representatives, the Judiciary’s Subcommittee on Antitrust published a no-holds-barred report on Big Tech, the result of sixteen months of investigation. October 20, the US Department of Justice Antitrust Division together with eleven states filed a major suit against Google. As Matt Stoller puts it, “We’re all anti-monopolists now.”

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…”