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.”
Originally published on the Dollars&Sense Blog, October 2020
