In the 1970’s when I studied microeconomics in grad school, we got to monopoly briefly in one of the last chapters of the text. We learned that monopoly really wasn’t a such a problem. If a big corporation tried to raise prices to take advantage of a monopoly position, why, competitors would immediately rush in. So not to worry, it was in the interest of monopolists to behave. Moreover, monopolists enjoyed economies of scale, allowing the likes of Walmart to deliver lower prices to consumers than the mom and pop stores they put out of business. By that measure, laws like the Clayton Antitrust Act of 1914, designed to protect small businesses from anticompetitive practices…were actually anti-social as they kept consumer prices high. There was no hint of trustbusters’ original concern for concentrated political power, or exploitation of workers. This was the Chicago School theory of benign monopoly.
Since I knew the brutal history of some of the great monopolists like Standard Oil, American Tobacco, or AT&T, I took this lesson with a grain of salt. But I didn’t worry too much. Why? Because for the post World War II period, corporate concentration hadn’t notably increased. Yes, some big firms had merged, but others had broken up. Antitrust seemed to be doing its job. Little did I know how the Chicago theory of monopoly was even then taking the legal world by storm. That was the work of Yale Law School professor Robert Bork, who published The Antitrust Paradox in 1978. (In 1987, the Senate would deem Bork too conservative for the Supreme Court.)
“The Democrats Confront Monopoly”, by Gilad Edelman in the November/December Washington Monthly, tells the story. Starting slowly in the Reagan Administration, then with gathering momentum, through both Republican and Democratic administrations, larger and larger mergers got the green light from the Justice Department and the courts. It was Bill Clinton after all, who took the Glass-Steagall shackles off the banks, allowing the disastrous merger of commercial and investment banking.
Meanwhile, economists began to notice growing inequality and wage stagnation. They came up with a variety of explanations: Maybe workers lacked skills to work with modern technology. Maybe it was competition with low wage workers overseas. Maybe it was just inevitable as machines took over jobs. I focused on a different explanation: Starting in the Reagan Administration, the tax system—federal, state, and local—increasingly favored what was not yet called The One Percent.
But in 2009, a book knocked me over: Barry Lynn’s Cornered: The New Monopoly Capitalism. Lynn, a business journalist, had seen a what we economists had missed: growing monopolization was making the American economy more unequal, less innovative and more unstable. In fact, the same was happening internationally, as multinational corporations took over more and more of the world economy. But Lynn didn’t stop with an exposé. Instead, he created a team of researchers at the New America Foundation, where he was a fellow. His team produced a whole series of eye-opening reports, published mostly in the Washington Monthly. Gradually the message got out, and was picked up by leaders on the left end of the Democratic Party, including Senators Bernie Sanders, Elizabeth Warren and Al Franken, and economists like Joseph Stiglitz and Paul Krugman.
Then, disaster, and a lesson. On June 27 this year, Lynn’s team released a statement welcoming a European antitrust action against Google. Google, a major funder of New America, apparently complained. Two days later, Lynn’s team were told to be out by the end of August. As observed in hundreds of outraged editorials and articles, there could hardly have been a better textbook example of the dangers of monopoly. Lynn and his team have now set themselves up as the Open Markets Institute, but funding remains precarious.
Meanwhile, the team continues research and publication. In the same issue of the Washington Monthly, Phillip Longman explains How Big Medicine Can Ruin Medicare for All. Unless we address the growing monopolization of hospitals and their suppliers, Medicare-for-all or single-payer will resemble the Pentagon facing the defense contractors. (I can relate to the medical monopoly issue: In New York City, Mount Sinai Hospital has just taken over a number of other hospitals and medical buildings. Doctors practicing in these places were given a choice: sell their practices to Mount Sinai or get out. My gynecologist sold Sinai her practice; my shoulder surgeon angrily moved to an inconvenient midtown location.)
In June 2016, at an event organized by Lynn, Elizabeth Warren delivered a stunning speech on the damage of monopoly and the importance of reviving antitrust. Shortly afterwards, I attended a New York presentation by Alan Blinder, Hillary Clinton’s economic policy adviser. He focused on Hillary’s positions on issues vis-à-vis Trump’s and those of the median voter, complete with graphs. He suggested that Bernie had pulled her away from that median voter—a bad idea. Absolutely not a hint that Hillary should lead, rather than try to sniff out the densest patch of voters. One issue Blinder didn’t have on the list was antitrust, so I raised my hand and asked. “Oh,” he said, “that’s not a priority at present, but maybe after her first two years…”