Hi,
Welcome to BIG, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here. Or just read on…
For those of you near D.C., I will be at Politics and Prose today at 7pm to do a book talk on Goliath: The Hundred Year War Between Monopoly Power and Democracy. More information is here.
Today’s
issue will be about the Democratic debate, in which antitrust played a
prominent role. Part of the story is that the Democrats are
strengthening their own views on monopoly, and I trace the parallel to
how Democrats operated in the late 19th and early 20th century, when
they effectively demanded that the DOJ send John D. Rockefeller to jail,
and did actually indict his brother William.
In
the meantime, I had my own debate over monopoly versus automation on
MSNBC yesterday with MSNBC anchor Stephanie Ruhle and political pundit
Jason Johnson. Sparks fly!
The Crisis of Capitalism
It’s
fairly obvious something is deeply wrong with our economy, a crisis of
capitalism. There are many theories, but my basic view is that the
problem is that monopolists have taken over everywhere. There’s
concentration in big markets, everything from search and social
networking to airlines and cable. There’s concentration in smaller
markets, like peanut butter, syringes, bank software, and comic book distribution.
Monopolization increases inequality and wage stagnation, reduces
entrepreneurship, causes regional inequality, and corrupts our politics
and corporations.
The
Democratic Party is responding by getting more aggressive against
monopoly power. In the Democratic debate in June, Democrats spent a few minutes
on big tech and monopoly. This time, they did it again, with a twist.
The moderators started by asking about Andrew Yang’s argument that automation,
not monopoly power, is what matters. Pete Buttigieg has made this case
as well, saying that automation, not offshoring via trading structures,
led to job losses in the 2000s.
The
counter-narrative is that problems in our economy are due not to trends
that have existed since the 1700s, but to the central question of
power. Elizabeth Warren, Amy Klobuchar, Bernie Sanders, and Cory Booker
all took this side, arguing that monopolization in the business world is
the key issue at hand. All of the major figures in the party, with the
exception of Joe Biden, increasingly see our central economic challenge
this way. Robert Bork came up twice in the debate, and Bork, while featuring prominently as a Supreme Court nominee, was an antitrust lawyer first and foremost.
Even
Biden is sympathetic to antitrust. Biden himself is more driven by the
environment around him, not any hard and fast principles, and he would
like to rhetorically go after big tech and concentrations of corporate
power if only because it sounds good. It doesn’t hurt that some of his
main backers are from Comcast, and they hate Google. He’s reluctant,
though, because one of his main advisors on antitrust, Terrell
McSweeney, was on the Obama Federal Trade Commission, and she bears some
responsibility for the lax antitrust record of the Democrats in that
era. For example, while at the FTC, she supported a regulatory attack on the city of Seattle for trying to increase wages for Uber drivers. As it turns out, McSweeney’s view is causing tension
on the Biden team. Nancy Scola of Politico writes as much, in a coded
way, saying the topic is a “live issue” inside the campaign. But it’s
what I’ve heard as well from multiple people close to Biden.
If
you look at how Uber responded to California’s law probably mandating
that it treat its drivers as employees, you’ll see why anti-monopolists
are gaining strength. Uber general counsel Tony West basically responded
to the California government with, ‘nahh, we’re not going to comply.’
And then threatened to spend $60 million on a popular referendum to
overturn the law if California tries to enforce it. I wrote about this
dynamic for Wired yesterday in a piece called Corporate America's Second War With the Rule of Law. As usual, we’ve been here before, this was the situation in the roaring 1920s.
There
were bitter battles in the 1930s, because the rule of law is a
political value that must be won. And in fact, going back through
history, I found that the Democratic Party, for a hundred years until
the Clinton administration, tried to do just that, particularly focused
on the problem of monopolies. The party consistently got stronger on the
problem of monopoly over time. From 1880-1988, there was something on
antitrust or monopolies in the Democratic Platform. Here’s the
Democratic platform in 1880.
“Free ships and a living chance for American commerce on the seas, and on the land no discrimination in favor of transportation lines, corporations, or monopolies.”
The
language got more aggressive as farmers, merchants, and workers
organized against railroads on the one hand, and as corporations became
more powerful on the other. In 1900, in the midst of the first great
merger wave that created modern corporate America, the platform said
“private monopolies are indefensible and intolerable” and were “robbing”
the people and small businessmen. As problems in the corporate world
got worse, Democrats became even more assertive. Think Democratic
attacks on the FTC for its weak $5 billion settlement for Facebook was
aggressive? When the antitrust division under Taft broke up Standard Oil
and American Tobacco, Democrats in 1912 said this was a pittance,
demanding that enforcers effectively send John D. Rockefeller to jail.
We condemn the action of the Republican administration in compromising with the Standard Oil Company and the tobacco trust and its failure to invoke the criminal provisions of the anti-trust law against the officers of those corporations after the court had declared that from the undisputed facts in the record they had violated the criminal provisions of the law.
When
Democrats took power later that year, they acted. In 1912-1913,
Congressman Arsène Pujo led the first great Congressional investigation
into corporate power, the ‘money trust’ hearings. When Woodrow Wilson
became President, the DOJ started indictments. In the case of the J.P.
Morgan dominated transportation conglomerate The New Haven Railroad,
which was sort of the Uber of its day, the antitrust division indicted the *entire board of directors,* which included such luminaries as William Rockefeller and Theodore Vail, the President of AT&T.
Wilson
also broke up AT&T for the first time, established the Federal
Trade Commission to stop anti-competitive practices, and appointed Louis
Brandeis to the Supreme Court in 1916. Democrats were on the cusp of a
New Deal, a genuine attack on monopolists. Unfortunately, World War One
interrupted, delaying the restructuring of the American political order
for another twenty years.
Today
we’re in a similar situation as we were in the early 1900s, on the cusp
of a major policy revolution. The wind is blowing strongly. From
1992-2012, antitrust didn’t warrant a mention in the Democratic platform
(thank you Bill Clinton!) And then, in 2016, because of the new
anti-monopoly movement, Democrats finally put something into their
platform again. I was actually part of the group who worked to insert a
provision; we tried to get something about big tech and data in there,
but the Clinton campaign, which did inch
towards antitrust, wouldn’t go that far. They wanted to focus on
airlines and cable, the rumor was Sheryl Sandberg would be in Clinton’s
cabinet.
By
the 2020 debates, it is now axiomatic that we have to address the
crisis of big tech. And the leading Democrat, Elizabeth Warren, wants to
do that with a series of break-ups. In fact, she put that idea out
there in March, and it has since become a normalized idea across the
enforcement community. The right question isn’t whether what Warren
suggested is too aggressive. The right question is when break-ups will
become the moderate option. In fact, I wouldn’t be surprised to hear
calls for jail time for some of the richest men in the country. The
Sherman Act, after all, is a criminal statute.
Thanks for reading. And if you liked this essay, you can sign up here for
more issues of BIG, a newsletter on how to restore fair commerce,
innovation and democracy. If you want to really understand the secret
history of monopoly power, buy my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.
cheers,
Matt Stoller
P.S. Here's a snippet about sloth and waste from one corner of the world, the electric utility industry.
As
tech companies march towards monopoly, one could think of utilities as
"postcards from the future." One of the common threads between utilities
and large corporations in "competitive" markets is that management
becomes more concerned with the avoidance of bad press than with
delivering high-quality products. This principle is showcased perfectly
in information technology (IT) contracting. Some major utilities (whose
names I will withhold to avoid retaliation) spent north of $100M on a
shitty database and web portal for one state's electric market. Utility
managers hired IBM for this piece of work -- not because IBM's IT
consulting is worth a damn, but because "no one ever got fired for
hiring IBM." Later, to my horror, I got this utility to admit in sworn
testimony that they hired IBM without a defined scope of
work....Naturally, costs skyrocketed -- but who cares? The utility's
laziness led to windfalls for IBM and some random management consultant.
The project was a disaster, but a few years later, IBM's contract was
renewed without any competitive bidding. This taught me that monopolies
trade price and quality for decreased liability.https://mattstoller.substack.com/p/when-democrats-used-to-indict-plutocrats?token=eyJ1c2VyX2lkIjozMjc2MzIwLCJwb3N0X2lkIjoxNDc3OTksIl8iOiJ3U2tVciIsImlhdCI6MTU3MTMzOTE1MywiZXhwIjoxNTcxMzQyNzUzLCJpc3MiOiJwdWItMTE1MjQiLCJzdWIiOiJwb3N0LXJlYWN0aW9uIn0.ECxCEjfuGvFWLRqyjG6Y2U0CJkdUOZV5Mmwt6nFTOVM
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