Watch

Search form

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

THE MONOPOLIZATION OF AMERICA: The Biggest Economic Problem You’re Hearing Almost Nothing About
Mon, 5/14/2018 - by Robert Reich
This article originally appeared on robertreich.org

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.

Originally published by RobertReich.org

Sign Up

Article Tabs

Warsaw, City is Ours, municipalist movements, Right to the City, Fearless cities, Warsaw smog, Warsaw housing crisis, Warsaw housing rights movement

The Right to the City is a core ingredient in the radical municipalist movement now spreading across cities worldwide, driven in Warsaw by local issues like air pollution and unaffordable rents.

occupy, creative activism, activism, act out, puerto rico, colonialism, imperialism, capitalism, hurricane season, aid work, earth defense coalition, strikes, UC system, worker strikes, union leadership, unemployment rates, employment statistics, economic

This week on Act Out! UC workers strike but find a foe where the friendlies should be – an unfortunately familiar story.

With March on Harrisburg, the "Blue Wave" Gathers Force in Pennsylvania

We aren’t meant to believe that what we do, or what we march for, or who we elect, on the local level, has any real larger-scale consequences. March on Harrisburg is attempting to change that.

public banks, public banking movement, Bank of North Dakota, Santa Fe public bank, Los Angeles public bank, divestment movement

After Santa Fe ceded ground as the first metropolis ready to lead us into an era of public banking, the City of Los Angeles has jumped to the forefront of the banking revolution.

struggling single mothers, working mothers, childcare costs, universal childcare, women in poverty

More than a quarter of single mothers living without partners or parents are now in poverty, and almost twice as many women as men are likely to live in poverty at some point.

Stacey Abrams holds a news conference in Atlanta to announce she has qualified to run for governor. (Bob Andres / Atlanta Journal-Constitution via AP)

A brighter political future depends upon turning out large numbers of voters of color.

Wall Street hedge funds, corporate bankruptcies, Toys 'R' Us bankruptcy, retailers

When the last Toys ‘R’ Us store closes its doors once and for all, the company's top executives will have pocketed $8.2 million in retention bonuses while liquidating the company and laying off tens of thousands.

Warsaw, City is Ours, municipalist movements, Right to the City, Fearless cities, Warsaw smog, Warsaw housing crisis, Warsaw housing rights movement

The Right to the City is a core ingredient in the radical municipalist movement now spreading across cities worldwide, driven in Warsaw by local issues like air pollution and unaffordable rents.

North Carolina teacher strikes, national teacher strikes, teacher pay, teacher walkouts, right to work laws, union busting, teachers union

Teachers from 20 school districts across the state held a strike that affected around 700,000 students, as teachers demanded an increase in per-pupil funding to the national average and raises in teacher pay.

The fast food industry has one of the widest pay disparities between CEO and worker. Photograph: Lucy Nicholson/Reuters

The first comprehensive study of CEO-to-worker pay reveals an extraordinary disparity – with the highest gap approaching 5,000 to 1.

Warsaw, City is Ours, municipalist movements, Right to the City, Fearless cities, Warsaw smog, Warsaw housing crisis, Warsaw housing rights movement

The Right to the City is a core ingredient in the radical municipalist movement now spreading across cities worldwide, driven in Warsaw by local issues like air pollution and unaffordable rents.

Posted 3 days 14 hours ago
public banks, public banking movement, Bank of North Dakota, Santa Fe public bank, Los Angeles public bank, divestment movement

After Santa Fe ceded ground as the first metropolis ready to lead us into an era of public banking, the City of Los Angeles has jumped to the forefront of the banking revolution.

Posted 6 days 15 hours ago
occupy, creative activism, activism, act out, puerto rico, colonialism, imperialism, capitalism, hurricane season, aid work, earth defense coalition, strikes, UC system, worker strikes, union leadership, unemployment rates, employment statistics, economic

This week on Act Out! UC workers strike but find a foe where the friendlies should be – an unfortunately familiar story.

Posted 4 days 16 hours ago
Robert Reich, antitrust laws, monopolies, preventing monopolization, corporate mergers, wealth redistribution, consumer choice

America used to have antitrust laws that stopped corporations from monopolizing markets, and often broke up the biggest culprits. No longer. Now money and power is being entirely redistributed to the top.

Posted 6 days 17 hours ago
black identity extremists, FBI monitoring, FBI surveillance, surveillance programs, racial profiling, police brutality, Black Lives Matter, Brennan Center for Justice

Rakem Balogun spoke out against police brutality. Now he is believed to be the first person prosecuted under a secretive U.S. effort to track so-called ‘black identity extremists’.

Posted 6 days 17 hours ago
Warsaw, City is Ours, municipalist movements, Right to the City, Fearless cities, Warsaw smog, Warsaw housing crisis, Warsaw housing rights movement

The Right to the City is a core ingredient in the radical municipalist movement now spreading across cities worldwide, driven in Warsaw by local issues like air pollution and unaffordable rents.

Members of the American Federation of Teachers hold up signs depicting Education Secretary Betsy DeVos and David Koch, while protesting in support of unions outside of the supreme court on 26 February. Photograph: Jacquelyn Martin/AP

Rightwing activists are launching a nationwide drive to persuade public-sector trade union members to tear up their membership cards and stop paying dues, posing a direct threat to the progressive movement in America.

North Carolina teacher strikes, national teacher strikes, teacher pay, teacher walkouts, right to work laws, union busting, teachers union

Teachers from 20 school districts across the state held a strike that affected around 700,000 students, as teachers demanded an increase in per-pupil funding to the national average and raises in teacher pay.

Robert Reich, antitrust laws, monopolies, preventing monopolization, corporate mergers, wealth redistribution, consumer choice

America used to have antitrust laws that stopped corporations from monopolizing markets, and often broke up the biggest culprits. No longer. Now money and power is being entirely redistributed to the top.

Federal Communications Commission, net neutrality, net neutrality repeal, free internet, two-tiered internet, Ajit Pai, CRA resolution

Democrats are forcing the Senate to vote on Wednesday, nearly 1 month before the FCC repeal of net neutrality would take effect.