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Hullabaloo


Sunday, June 29, 2014

 
Your fascinating long read of the day: Bigger ain't better

by digby

A conversation between Tom Frank and Barry Lynn about America's history of monopoly power.  I thought this passage was especially interesting in light of our current "debate" about the president allegedly abusing the power of his office by manipulating the regulatory agencies to to thwart the intent of legislation. The historical discussion picks up in 1980 with Reagan'selection:

Barry Lynn: ... all the traditional concern with protecting our rights as producers of work and ideas and goods, and suddenly it’s all about the consumer, it’s all about, how do we promote your welfare as a consumer? And that’s actually the phrase they use, the “consumer welfare test.” So nowadays, what this means in practice is that if you are a big capitalist, if you go to the Justice Department and say, I’m gonna merge the number one beer company to the number two beer company, or the number one steel company to the number two steel company, and this deal will result in all sorts of big savings, because this deal will let me fire all these excess people and close all these excess plants, and I’m going to pass at least some of those savings on to the consumer, put a few pennies in their pocket, then you get a stamp of approval from the U.S. government. That’s the test put in place in ‘81 and ’82. And that’s the test still in place today. I mean, the Department of Justice just last year let the number one book publisher in America, Random House, merge with the No. 2 book publisher, Penguin. Which is insane.
Thomas Frank: was politically literate in the early ’80s, and was reading newspapers, and I don’t remember any debate about this at all.
There was a big debate in 1981, which I’ve gone back and studied. Much of the debate took place within the Senate. Howard Metzenbaum led the challenge to it. The Reagan people came in and said, we’re going to impose this radical change to your antitrust laws which you’ve been using since 1773 to protect yourselves against concentrated power. . .
Wait, so they worked this huge change in antitrust without actually getting a new law passed, am I right?
Yes, that was what was so brilliant about what they did. The Department of Justice establishes guidelines that detail how regulators plan to interpret certain types of laws. So the Reagan people did not aim to change the antimonopoly laws themselves, because that would have sparked a real uproar. Instead they said they planned merely to change the guidelines that determine how the regulators and judiciary are supposed to interpret the law.
But they didn’t change the laws, the laws were still on the books, is what you’re telling me.
Yes. Here we have laws that go back 200 years in America, and 400 years to Elizabethan times, and 800 goddamn years to the Magna Carta, and the Reagan people came along and said hey, ya know what, we’re so much smarter nowadays, we’re technocrats, we’re scientists, so let’s take these laws and enforce them in a slightly different way, based on this slightly different goal, this scientifically determined goal of efficiency, and you’re going to be so much happier because we’re going to help you live better as a consumer, we’re going to get you so much more stuff. When they said that, there was some real opposition from both Democrats and Republicans. Metzenbaum was against it. Arlen Specter was against it.
Not much of a Republican.
Well, back then he was a pretty mainstream Republican.
Okay.
So Metzenbaum and Specter were like, what the hell is going on here, this is a big problem, you people in the Reagan Administration can’t just gut our antimonopoly laws like this. But then another group of people came along and said, well no, these radical changes in antimonopoly law are actually a good idea. And this really confused matters, because some of the people who agreed with the Reagan Administration stood on the left wing of the Democratic Party. They were, in essence, the grandchildren of the old Teddy Roosevelt Progressives – people like John Kenneth Galbraith and Lester Thurow.
So wait, they want regulation-
What Galbraith and Thurow wanted was to get rid of competition, which they thought was inefficient and wasteful.
To say a word for my leftists: That can make sense if the giant companies they’re talking about are regulated, right?
Depends what sort of regulation you’re talking about. As Brandeis used to say, competition is often the best regulator. Top-down regulation by government “experts,” on the other hand, can tend toward sclerosis and corruption, the blending of state and private power.
What’s most important to understand about the radical reframing of antimonopoly law by the Reagan people in cahoots with the Progressives is just how  massive a political shift it set into motion in America. In 1978 Robert Bork published a book called The Antitrust Paradox, which became sort of a primer for the Reagan people. Bork argued that monopoly could be more efficient, and efficiency in the name of the welfare of the consumer should be our primary goal. Back when Bork wrote that, there were tens of thousands of families who ran grocery stores in America and hardware stores and garages and general merchandise stores, and that was because the law protected them from concentrated capital. Jump ahead 32 years and we’ve got a single company, Wal-Mart, that is the de facto governor of commerce in many small towns and even small cities all across America. Wal-mart has sucked Main Street right inside their walls. And that has huge political and economic effects. Wealth from these communities flows off to distant places, Bentonville, Wall Street. And power over these communities is exercised from distant places, like Bentonville, and Wall Street. But we see the effects also at a national level. Here you have one family with as much wealth as the bottom 41.5 percent of all Americans. One family with as much wealth as 130 million Americans.
But they do sell stuff cheaper.
Do they?
David Brooks writes about this all the time.
They don’t always sell stuff cheaper. That’s the thing about old, decrepit systems, and Wal-mart is increasingly an old, decrepit system. They have stock-outs all the time. They’ve got empty shelves sometimes. They sometimes don’t have enough people in the stores to stock the shelves. My friend Tracie McMillan went and worked in a Wal-Mart in Michigan in their produce department. She then wrote a book about her experience, and one of the things she details is the remarkable wastefulness of the Wal-Mart system.
That’s cool. Those small towns will generate competitors then and put Wal-Mart out of business, right? *laughs*
*laughs* Yeah, well. So it was a political revolution that happened.
Here we are having all of these discussions in America about inequality. Inequality in wealth. Inequality in voice. And yet no one’s looking at one of the main sources of that inequality, which was the overthrow of antitrust in 1981 by the Reagan Administration.

I know it's shocking to find that it's perfectly fine for Ronald Reagan to boldly use the power of the presidency in exactly the same way that President Obama has (tepidly) used itand is now being called a tyranical despot for having done so.  That's how it rolls.

This article is a fresh perspective on the problem of inequality by looking at how we've dealt with "bigness" in the private sector. Well worth the time.

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