Review of Break ‘Em Up, by Zephyr Teachout

Review of Break ‘Em Up by Zephyr Teachout

By Polly Cleveland

For over twelve years I backed up our three family computers to a cloud service called Mozy.com. Friendly interface, about $60 a year per computer. Then in February last year, Mozy vanished, replaced by something called Carbonite, at over double the price. Too busy to deal with it, I let it pass. But this May, Carbonite began sending urgent messages, “80% of capacity used. Add storage to avoid interruption.” What? That would have cost a few hundred more dollars. On checking, I found I had been moved into their “Safe Pro” service for small business up to 20 computers, instead of their “Safe Home” at half the price with unlimited storage. After a month of tough emails and phone calls, Carbonite relented and downgraded me to “Safe Home.”

Two takeaways: First, I realized that Carbonite probably switched me to “Pro” because they knew I could easily afford it. How? Because e-commerce knows everything about me. Well-heeled professionals live in fear of such sneaky rip-offs. Is Amazon showing me higher prices than it would to a shopper in Allentown? Is Uber adding a markup to my fare? How could I know? Second, I found that Carbonite is engaged in a “roll-up”, in which a private-equity financed niche company seeks to buy up or force out all the competition in order to create a monopoly. Roll-ups in the pharmaceutical business have sent prices of vital generic drugs so high that diabetics are dying for lack of insulin.

My little dustup with Carbonite hardly compares to the way powerful US monopolies and oligopolies screw less fortunate people. That’s the theme of Zephyr Teachout’s chilling and infuriating new book, Break ‘Em Up: Recovering Our Freedom from Big Ag, Big Tech, and Big Money.

She begins with “chickenization.” Three processors, Tyson, Pilgrim’s Pride, and Perdue, have divvied up the American chicken market between them. Chicken farmers have no choice but to sell to the one who “owns” their geographical area. That processor dictates where they get their chicks, how they build their chicken houses, what feed and medications they give, and when they deliver their fattened birds. Farmers must blindly accept whatever prices the processors give them on delivery. They are banned, on pain of being cut off, from comparing prices and conditions with other chicken farmers. In short, chicken farmers lead the lives of medieval serfs, or worse, because at least the serfs could complain to each other about the lord!

Chickenization isn’t just for chicken farmers. Grain farmers are serfs to Archer Daniels Midland (the buyers), Monsanto (supplier of seeds and fertilizer), and John Deere and Caterpillar (equipment). Chickenization isn’t just for agriculture. It’s long been the business model of Walmart, and more recently of Amazon. These behemoths constrain their suppliers, specifying details of products, limiting their distribution, changing prices at will, and punishing those who resist or complain by cutting them off. Uber chickenizes its drivers and deliverymen. McDonalds chickenizes its franchisees, even requiring them to make their employees sign “non-compete” agreements, so they can’t switch to working for Burger King.

Monopoly damage extends beyond chickenization: it has destroyed journalism, especially local journalism. Twenty years ago, there were lots of local newspapers. Many operated on a shoe string, funded by local business ads, reporting police blotter of course, but also misdeeds by local officials and bigwigs. The local businesses are now mostly gone, rolled up by chains. Remaining advertising dollars now go to precision-targeted ads on Amazon or Google or Facebook. (When I looked up cotton T-shirts on llbean.com on my desktop, and then picked up my cell, up popped H&M T-shirts.)

Big corporate monopolists’ roll-up of small businesses has also weakened a major source of support for Black activism: Black-owned businesses and Black business associations. It was indeed Black business persons who led and helped fund the desegregation efforts of the 1960s. Growing monopolization also explains the wage mystery that so long baffled most economists: Until forty years ago, wages and productivity rose together. Then, as productivity continued to rise, wages stagnated.

Worst of all, flush with monopoly profits, large corporate PACs increasingly control politics. Teachout reports that when she ran for Congress in New York’s 16th district in 2016, her real opponent wasn’t Republican John Faso, who won. Rather, she was massively outspent by mystery PACs who even used a body double—a woman who looked and dressed like her—to misrepresent her agenda.

To defeat monopoly, we must BREAK ‘EM UP, conceptually simple, but politically unattainable without a mass movement. During the New Deal, FDR successfully used old anti-trust laws like the 1890 Sherman Antitrust Act and the 1914 Clayton Antitrust Act and new laws like the 1932 Glass-Steagall Banking Act to break up monopolies and shrink the power of finance. But starting with the Reagan Administration in the 1980s, and continuing under Democratic administrations, enforcement slowly ground to a halt. Bill Clinton eagerly presided over the repeal of Glass-Steagall. We need new laws too, reforming campaign finance, raising taxes on the wealthy, and banning the secret information-gathering that sent me a plague of T-shirts.

In 2009, journalist Barry Lynn sounded a lonely alarm with Cornered: The New Monopoly Capital. Ten years later, Barry and the daughters and sons of Barry—Zephyr Teachout, Lina Khan, Matt Stoller, David Dayen, Gilad Edelman, Franklin Foer, Phillip Longman, Tim Wu and so many others—have captured the progressive wing of the Democratic Party, including Senators Elizabeth Warren and Bernie Sanders and the redoubtable Congresswoman Alexandria Ocasio-Cortez. If the senator from the Corporate State of Delaware triumphs in November, progressives will drag him to an aggressive new New Deal.

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…”