The Core Solution: Competition

Your weekly excerpt from one of my books. This week: "The Hidden History of Monopolies: How Big Business Destroyed the American Dream"

How Big Business conquered America. Over the next few months the entire book will be here, new chapters posted every Sunday, for subscribers to read at no cost. If you want to get a physical book to mark up or share with others, just click on the picture above, visit your local bookstore, or check your favorite online seller.

The Core Solution: Competition

The key to a functioning regulated-capitalist economy is competition; as competition declines, so do innovation, investment, employment, and the wealth of working people. Lacking competition, those people and corporations in the economic top .01% will explode their wealth while everything and everybody else suffers.

Since the 1980s, when Reagan began aggressively applying Chicago School neoliberal policies and Robert Bork’s perspective on antitrust, industry after industry, sector after sector, has been interpenetrated and then consumed almost entirely by cancer-like monopolies and oligopolies. Not only have wages and innovation suffered, but the overall economy itself has largely stagnated, relative to the preceding four decades.

As the Federal Reserve reports, the decade of the 1950s saw real GDP growth of 3.8%. Massive government infrastructure investment by Presidents Dwight D. Eisenhower, John F. Kennedy, and Lyndon B. Johnson, along with strict antitrust enforcement, saw GDP in the decade of the 1960s jump to 4.5%. The 1970s were hit by the shock of two Arab oil embargoes producing a huge recession and double-digit inflation, but nonetheless they came in at 3.2%.79

Starting with Reagan’s economic ideas, though, the next four decades went from 3.1% in the ’80s to 3.0% in the ’90s to 1.7% in the ’00s to 2.1% in the 2010s.80 And that’s with several rounds of massive stimuli, a dropping of the top tax rate from 74% to around 28%, and the Fed lowering interest rates to ranges never seen before (creating a huge debt bubble that threatens, 1929 style, to wipe us out when it bursts).

Because these new monopolies and oligopolies that Reagan and his successors allowed to metastasize care more about protecting their markets than creating new products, America, once the world’s leader in innovation and new patents, has now fallen behind China, which is growing its patent applications at a rate of over 14% annually while we’ve slipped to 0.2% growth.81

The grand neoliberal experiment of the Reagan Revolution, continued through the administrations of Bush, Clinton, Bush, Obama, and Trump, has failed. American consumers—who were supposed to be protected by Bork’s insistence that low consumer prices were the only thing to consider with regard to antitrust laws—are paying more for cable TV, internet service, pharmaceuticals, air fares, health insurance, college, and imprisonment (among other things) than the residents of any other developed country in the world.

The cure for all this isn’t some sort of big-government micromanagement of the economy; nor is it less antitrust regulation and thus even more consolidation to produce pure monopolies that are then regulated like utilities. Neither of these “solutions” will work over the long haul, although both have been tried at various times in various industries.

The cure for our cancer-ridden economy is to activate our economy’s primary immune system: competition.

Competition, of course, is the result of specific rules being enforced, just like in sports. Twist the rules to benefit one side, and the game’s no longer worth playing or watching.

When we deregulated much of our economy in the 1980s, knocking out the rules that allowed for a sportsperson-like competition among relative equals and killing off the spaces in which new companies could start and grow without being absorbed, the cancer of monopoly and oligopoly began to grow with a vengeance, as documented previously.

To bring back economic vitality, we must reject the now-discredited Bork doctrine and Reagan’s neoliberalism and put back into place reasonable rules that support competition in the game of business.

That starts with Congress essentially reaffirming (and updating for the digital age) the 1890 Sherman Antitrust Act, the 1914 Clayton Antitrust Act, and the Celler-Kefauver Act of 1950 so that the Supreme Court will have to reverse its GTE Sylvania and subsequent rulings.

Nowhere in any of those laws do we find the phrase “consumer welfare”; instead, they all address the multiple harms caused across business, politics, and society itself by monopoly and its cousins. Bork’s ideas must be revealed as utter failures, and we must return to sane antitrust policies.

We’ve been here before.

In the late 19th century, John D. Rockefeller grew a business cancer within the oil industry, Andrew Carnegie unleashed his business cancer in the steel industry, and J. P. Morgan metastasized his business throughout banking.

Others arose, each exploiting the cancerous tools of monopoly to freeze out competition and destroy competition: Cornelius Vanderbilt with railroads and steamboats (he died the richest man in the world); Éleuthère Irénée du Pont with gunpowder and chemicals; and a whole host of other monopolies within niche markets like manufacturing matches or train cars.

Some used vertical integration, like Carnegie and, in the early 20th century, Henry Ford, who owned everything necessary to make a car, from the iron mines to the ships and rail- roads to the plants that made steel and precision parts. Others monopolized horizontally, as Rockefeller did when he bought out or forced out of business virtually every oil company of consequence in several states where he operated.

Regardless of how the cancers of monopoly spread, Congress recognized this threat against our economic and political systems and passed the Sherman Antitrust Act to cure it. Progressive Republican Presidents Theodore Roosevelt and William Howard Taft used the law with enthusiasm, and Congress fine-tuned it with the Clayton Act and the Anti-Merger act, bringing us a half-century of prosperity.

Similarly, today’s labor markets, lacking the immune system of unions, need to be cured by overturning the Taft-Hartley Act, which created the infamous “right to work for less” laws.

And we must address the shortsighted exploitation of the Earth’s natural resources; the biosphere is the ultimate natural commons.

The economic disaster wrought on our nation by Donald Trump’s feckless and incompetent handling of the corona-virus crisis presents us with new challenges as well as new opportunities.

All of these issues have been significantly exacerbated by the political power that corporations achieved through their monopoly and oligopoly status, and none will have a successful resolution without first breaking up these huge and concentrated sources of wealth and its attendant political power. As with Bork’s transformation of America’s business landscape, this healing process begins by understanding and publicizing the solution. Bork was an absolute evangelist for what he thought would positively change America’s business landscape; now that we know he was wrong, we must become evangelists for a return to sanity.

A return to sanity means remembering that humans create the economy, and we should not be servants to our own creation.

A return to sanity means rejecting Bork’s arguments that our governments, communities, and environment should be subordinate to low prices and high profits for investors.

It means forging a new framework for the game of business, where companies invest in our communities, respect and reinvest in their workers, and improve and protect our environment.

If we want our grandchildren and their grandchildren to have a chance at a vibrant democracy and a livable planet, we must bring back the corporate death penalty and break up the monopolistic corporate giants that are draining communities of their resources, impoverishing working people, and, in many cases, helping destroy the planet.