robertreich:

THE MONOPOLIZATION OF AMERICA: The Biggest Economic Problem You’re Hearing Almost Nothing About

Not long ago I visited some farmers in Missouri whose profits
are disappearing. Why? Monsanto alone owns the key genetic traits to more than
90 percent of the soybeans planted by farmers in the United States, and 80
percent of the corn. Which means Monsanto can charge farmers much higher
prices. 

Farmers are getting squeezed from the other side, too,
because the food processors they sell their produce to are also consolidating
into mega companies that have so much market power they can cut the prices they
pay to farmers. 

This doesn’t mean lower food prices to you. It means more
profits to the monopolists.

Monopolies All Around 

America used to have antitrust laws that stopped corporations
from monopolizing markets, and often broke up the biggest culprits. No longer.
It’s a hidden upward redistribution of money and power from the majority of
Americans to corporate executives and wealthy shareholders.

You may think you have lots of choices, but take a closer look:

1. The four largest food companies control 82
percent of beef packing, 85 percent of soybean processing, 63 percent of pork
packing, and 53 percent of chicken processing. 

2. There are many brands of toothpaste, but 70 percent of all of it comes from just two companies.

3. You may think you have your choice of sunglasses, but they’re almost all from one company: Luxottica – which also
owns nearly all the eyeglass retail outlets.

4. Practically every plastic hanger in America is now made by one
company, Mainetti.

5. What brand of cat food should you buy? Looks like lots of brands but behind them are basically just two companies. 

6. What about your pharmaceuticals? Yes, you can get low-cost generic versions. But drug companies are in effect paying the makers of generic drugs to
delay cheaper versions. Such “pay for delay” agreements are illegal in other
advanced economies, but antitrust enforcement hasn’t laid a finger on them in
America. They cost you and me an estimated $3.5 billion a year.

7. You think your health insurance will cover the costs? Health
insurers are consolidating, too. Which is one reason your health insurance
premiums, copayments, and deductibles are soaring. 

8. You think you have a lot of options for booking discount airline
tickets and hotels online? Think again. You have only two. Expedia merged with
Orbitz, so that’s one company. And then there’s Priceline.

9. How about your cable and Internet service? Basically just four
companies (and two of them just announced they’re going to merge). 

Why the Monopolization of America is a Huge Problem

The problem with all this consolidation into a handful of giant firms is they don’t have to compete. Which means they can – and do – jack up your prices.

Such consolidation keeps down wages. Workers with less choice
of whom to work for have a harder time getting a raise. When local labor markets
are dominated by one major big box retailer, or one grocery chain, for example,
those firms essentially set wage rates for the area. 

These massive corporations also have a lot of political clout.
That’s one reason they’re consolidating: Power. 

Antitrust laws were supposed to
stop what’s been going on. But today, they’re almost a dead letter. This hurts
you.

We’ve Forgotten History

The first antitrust law came in 1890 when Senator John Sherman
responded to public anger about the economic and political power of the huge
railroad, steel, telegraph, and oil cartels – then called “trusts” – that were
essentially running America. 

A handful of corporate chieftains known as “robber barons” presided
over all this – collecting great riches at the expense of workers who toiled
long hours often in dangerous conditions for little pay. Corporations gouged
consumers and corrupted politics. 

Then in 1901, progressive reformer Teddy Roosevelt became
president. By this time, the American public was demanding action. 

In his first
message to Congress in December 1901, only two months after assuming the
presidency, Roosevelt warned, “There is a widespread conviction in the minds of
the American people that the great corporations known as the trusts are in
certain of their features and tendencies hurtful to the general welfare.”

Roosevelt used the Sherman Antitrust Act to go after the
Northern Securities Company, a giant railroad trust run by J. P. Morgan, the
nation’s most powerful businessman. The U.S. Supreme Court backed Roosevelt and
ordered the company dismantled.

In 1911, John D. Rockefeller’s Standard Oil Trust was broken up,
too. But in its decision, the Supreme Court effectively altered the Sherman
Act, saying that monopolistic restraints of trade were objectionable if they were “unreasonable” – and that determination was to be made by the courts. What
was an unreasonable restraint of trade?

In the presidential election of 1912, Roosevelt, running again
for president but this time as a third party candidate, said he would allow
some concentration of industries where there were economic efficiencies due to large
scale. He’d then he’d have experts regulate these large corporations for the
public benefit. 

Woodrow Wilson, who ended up winning the election, and his
adviser Louis Brandeis, took a different view. They didn’t think regulation
would work, and thought all monopolies should be broken up.

For the next 65 years, both views dominated. We had strong
antitrust enforcement along with regulations that held big corporations in
check. 

Most big mergers were prohibited. Even large size was thought to be a
problem. In 1945, in the case of United States v. Alcoa (1945), the Supreme
Court ruled that even though Alcoa hadn’t pursued a monopoly, it had become one
by becoming so large that it was guilty of violating the Sherman Act.

What Happened to Antitrust?

All this changed in the 1980s, after Robert Bork – who,
incidentally, I studied antitrust law with at Yale Law School, and then worked
for when he became Solicitor General under President Ford – wrote an
influential book called The Antitrust Paradox, which argued that the sole
purpose of the Sherman Act is consumer welfare. 

Bork argued that mergers and large size almost always create
efficiencies that bring down prices, and therefore should be legal. Bork’s
ideas were consistent with the conservative Chicago School of Economics, and
found a ready audience in the Reagan White House. 

Bork was wrong. But since then, even under Democratic administrations, antitrust has
all but disappeared. 

The Monopolization of High Tech

We’re seeing declining competition even in cutting-edge,
high-tech industries. 

In the new economy, information and ideas are the most
valuable forms of property. This is where the money is. 

We haven’t seen
concentration on this scale ever before.

Google and Facebook are now the first stops for many Americans
seeking news. Meanwhile, Amazon is now the first stop for more than a half of
American consumers seeking to buy anything. Talk about power.

Contrary to the conventional view of an American economy bubbling
with innovative small companies, the reality is quite different. The rate at
which new businesses have formed in the United States has slowed markedly since
the late 1970s. 

Big Tech’s sweeping patents, standard platforms, fleets of
lawyers to litigate against potential rivals, and armies of lobbyists have
created formidable barriers to new entrants. Google’s search engine is so
dominant, “Google” has become a verb. 

The European Union filed formal antitrust charges against
Google, accusing it of forcing search engine users into its own shopping
platforms. And last June, it fined Google a record $2.7 billion. 

But not in
America. 

It’s Time to Revive Antitrust

Economic and political power cannot be separated
because dominant corporations gain political influence over how markets are
organized, maintained, and enforced – which enlarges their economic power
further. 

One of the original goals of the antitrust laws was to prevent this.

Big Tech — along with the drug, insurance, agriculture, and
financial giants — is coming to dominate both our economy and our politics.

There’s only one answer: It
is time to revive antitrust.