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.”

More Links on Kerfuffle about Friedman’s Sanders Analysis

Here are more links related to the kerfuffle surrounding our columnist Gerald Friedman’s research paper on the likely macroeconomic effects if Bernie Sanders economic policies were implemented. (Find the full 53-page paper here.)

David Dayen, The New Republic,  The Pious Attacks on Bernie Sanders’s “Fuzzy” Economics.  “I don’t feel it necessary to defend Friedman, though it’s worth pointing out that his economic growth numbers would simply eliminate the GDP gap [links to the FT Alphaville piece we linked to the other day] that was created by the Great Recession and was never filled in the subsequent years of slow growth—which should be the goal of public policy, however “extreme” it sounds. What I do want to challenge is the idea that there’s one serious, evidence-based way to perform economic forecasting. The truth is that most economic forecasts that look several years into the future are flawed, almost by definition.”

Dean Baker, HuffPo, The Four Economists’ Big Letter. Dean says he agrees with the substance of the CEA ex-chair’s critique (he’s skeptical of Friedman’s growth projections), but not their “tone” of authority. “I respect all four of these people as economists, but I want to hear their argument, not their credentials. How about just giving the evidence? It might not be as dramatic, but it could have considerably more impact.” More recently at his CEPR blog Beat the Press, there’s this from Dean: President Obama’s Council of Economic Advisers Confirms Sanders’ Growth Projections, in which he discusses a section of the 2016 Economic Report of the President and a section “an that provides insight into the question of how fast the economy can grow, and more importantly how low the unemployment rate can go” and the non-accelerating inflation rate of unemployment (NAIRU). Obama’s CEA report “is hardly an endorsement of the specifics or the even the size of the Sanders agenda (and certainly not the now famous growth projections from Gerald Friedman), but it does argue for pushing the envelope in terms of bringing down the unemployment rate.” (Why Dean is engaged in line-drawing here, subtly suggesting that Jerry’s not credible, is beyond me.)

Gerald Friedman, Response to Krugman.  A response to a really condescending blog post by Krugman, Lack of Power Corrupts.  Krugman really smears Friedman.

Bill Black, New Economic Perspectives blog, Krugman and the Gang of 4 Need to Apologize for Smearing Gerald Friedman.  Excellent skewering of the “Gang of 4” CEA ex-chairs. See also Yves Smith’s introduction to her reposting of Bill’s post at Naked Capitalism, Krugman and His Gang’s Libeling of Economist Gerald Friedman for Finding That Conventional Models Show That Sanders Plan Could Work.

Richard Wolff, via email: “As a colleague of Jerry Friedman for decades, I know directly of his consistently careful work in economic history and applied economics, his exceptional commitment to teaching, and the immense time and effort he has committed to doing detailed explorations of the economics of health insurance–explorations his detractors might have learned from had their commitments not been otherwise. Shame on them.”

J.W. Mason, at his blog (The Slack Wire), Plausibility.  A follow up to the earlier post of his we linked to, Can Sanders Do It?. He gives two scatter-plot graphs, one showing “the initial deviation of real per-capita GDP from its long run trend, and the average growth rate over the following ten years, for 1925 through 2005,” the other showing the same thing for just 1947-2005 (so it eliminates the Depression and WWII years). He argues that for either, Friedman’s GDP growth projections don’t look so implausible; even less so if you take out “the seven points well below the line in the middle are 1999-2005, whose 10-year growth windows include the Great Recession.” His upshot: “Should the exceptionally poor performance of this period make us more pessimistic about medium-term growth prospects (it’s sign of supply-side exhaustion) or more optimistic (it’s a sign of a demand gap that can be filled)? This is not an easy question to answer. But just counting up previous growth rates won’t help answer it.” His earlier blog post has been republished under a new title at the Jacobin website: When Wonks Attack.  Subtitle/teaser: “Beltway wonks are dismissing Bernie Sanders’s economic plan as unserious and unrealistic. Here’s why they’re wrong.”

Brad DeLong, at his blog (Grasping Reality…) No: We Can’t Wave a Magic Demand Wand Now and Get the Recovery We Threw Away in 2009.  Responding to the Mike Konczal post we linked to. I wish people would stop the talk of magic wands and unicorns and fantasy and voodoo and puppies and unicorns. It’s just uncharitable and undignified. It reminds me of the infantilizing language Republicans and Clintonites use about Sanders’ proposals (e.g., saying that he’s promising people “free stuff” including “free ponies”). It’s that grown-up stance, talking down to the rest of us.

Kevin Drum, Mother Jones blog, On Second Thought, Maybe Bernie Sanders’ Growth Claims Aren’t As Crazy As I Thought.  Back-pedaling, in light (it seems) of Jamie Galbraith’s full-throated defense of the plausibility of Friedman’s analysis.   No apology for calling his GDP growth projections “insane” without having examined the analysis. (I asked for an apology on Twitter. But that never works.)

Jasper Craven,, Economist, Others, Defend Sanders ‘Stimulus’ Plans as Realistic. A local Vermont summary of the kerfuffle. Hat-tip Nancy B. A nice piece (though he identifies the D&S Economy in Numbers columns as Jerry’s reports, but again, Jerry’s main Sanders report is “yuge”–some 53 pages long, including appendices and sources).

Andrew Perez and David Sirota, International Business Times‘ Political Capital blog, Bernie Sanders Economic Plans Questioned By Critics With Ties To Wall Street, Hillary Clinton.

Ron Baiman, Postscript (Feb 21) to his earlier D&S blog post (Feb 19), The Poverty of Neoclassical Analysis: “Unfortunately, even, politically liberal, mainstream or ‘Neoclassical’, economists do not believe that massive increases in effective demand, or other large scale public spending and policy measures, can produce lasting major and fundamental structural changes in the economy (in spite of the examples of the New Deal, WWII, etc. ). They also don’t accept Verdoorn’s law (which Friedman employs) in spite of numerous empirical studies and common sense validation: long-term growth in demand leads to increased investment and thus increases in productivity and by implication structural changes in the economy. NC ‘Keynesians’ believe only in short-term Keynesianism — not in a long term principle of effective demand. To the extent that Friedman (rightly) employs a long-term ‘Post Keynesian’ principle like Verdoorn’s law (in addition to all of the other standard techniques that he uses) he crosses a line that NC economists will not cross. I belatedly remembered after writing and posting this piece, that Friedman had employed Verdoorn’s Law in his study of the long-term economic impact of Bernienomics.”

And in case you missed it two weeks ago:

Tami Luhby, CNN Money (Feb. 8), Under Sanders, income and jobs would soar, economist says. The article that likely ignited the kerfuffle (rather than our two columns by Friedman based on his research); this is where a large audience saw Friedman’s big GDP growth estimates. And this is where the Sanders campaign appeared to endorse Friedman’s findings. “Sanders’ policy director, Warren Gunnels, also defended the estimates, noting the candidate is thinking big.”

That’s it for now. I’m sure there will be another follow-up to this post.