After President Joe Biden’s sweeping executive order intended to curb monopolistic practices and enhance competition, it’s tempting to proclaim, as University of California, Santa Barbara history professor Nelson Lichtenstein did in a New York Times op-ed, that “America’s 40-year experiment with big business is over.”
Biden himself declared, broadly, that “Capitalism without competition isn’t capitalism; it’s exploitation. … Without healthy competition, big players can change and charge whatever they want and treat you however they want.”
But a closer examination shows that many of the 72 items in Biden’s order are modest. For example, creating rules requiring airlines to refund fees when baggage is lost or delayed. Or ordering the Federal Communications Commission to ban internet companies from charging consumers termination fees if they switch providers. And ensuring that meatpackers don’t underpay chicken farmers.
More punch comes from a push to restrict the growing use of non-compete clauses, which the White House rightly argues “makes it harder for (workers) to switch to better-paying options.”
Likewise, Biden has appointed antitrust advocate Lina Khan to lead the Federal Trade Commission and Tim Wu to his National Economic Council. Wu, a Columbia University law professor, coined the term “net neutrality” and advocated an antitrust suit to break up Facebook.
Still, Theodore Roosevelt trustbusting this is not. TR, for example, ordered his Justice Department to file suits that dismantled the Northern Securities railroad monopoly and attacked John D. Rockefeller’s Standard Oil. The result of the latter was that Rockefeller’s monopoly was broken into 34 smaller companies.
The most Biden ventures is to order his agencies to enforce antitrust laws “vigorously” and to “challenge prior bad mergers that past Administrations did not previously challenge.”
This 40-year experiment with bigness isn’t over because Democrats could lose control of one or both houses of Congress next year — and lose the White House in 2024. The country is closely divided, and meanwhile Republican-controlled legislatures are writing voter suppression laws.
In this event, the pendulum would swing even more to laissez-faire policies — to an extent, that is. Donald Trump’s administration opened investigations into Big Tech, resulting in lawsuits against Google and Facebook.
Congress needs to spend more on antitrust — as of 2020 it spent 18% less than in 2000, even though the economy has become more concentrated (Sen. Amy Klobuchar of Minnesota has introduced a bill to remedy that).
Also, every one of Biden’s aspirations might face lawsuits that could eventually be decided by the most rightward, pro-big business Supreme Court in nearly a century.
Remember, the antitrust suit against Microsoft lasted a decade. And although the judge ordered the company to be broken up, it never happened. Between an appeal and then a settlement decried by critics as a slap on the wrist, the Beast of Redmond still stood, albeit weakened by its “lost decade.” Under CEO Satya Nadella, Microsoft is now stronger than ever, and generally admired.
Don’t expect that breaking up Amazon would be any easier.
Our problem today is that mammoths walk the land in nearly every industry.
Mammoth JPMorgan Chase is made up of dozens of locally based banks, including Seattle’s Washington Mutual. The same is true of Bank of America and others.
Mammoth Walmart ravaged the main streets of America.
Six Class One railroads monopolize the nation’s railways. In 1960, the number was 102. For example, today’s BNSF is made up of the Great Northern, Northern Pacific, Spokane, Portland & Seattle, Burlington, Frisco, and Santa Fe railroads.
Five major airlines control most of the air traffic in the United States. Gone are such famous carriers as Continental, TWA, Northwest, Pam Am, Pacific Southwest, Piedmont, Republic, US Airways and Western.
This unprecedented consolidation happened because of a change in the interpretation of antitrust, powered by the arguments of Robert Bork (more famous for his failed Supreme Court nomination; the 1987 hearings were chaired by Sen. Joe Biden). To simplify: “Consumer welfare” in low prices outweighed the old arguments against monopolies and cartels.
The results pleased shareholders thanks to the elimination of “costly” competition and the ability to eliminate redundancies. Consumers were slow to notice, unless they were among the workers who lost their jobs as redundant or saw their pay stagnate.
Most communities were among the losers, too. The hometown headquarters disappeared and with them good jobs, philanthropy, civic engagement from executives, and talent that could leave to start new local businesses.
The giants, facing less competition, were less likely to invest in research and development. They were more likely to spend on tax avoidance and politics to maintain their power.
This contributed to the emergence of lapdog regulators, from the Securities and Exchange Commission that looked the other way with Enron and other scandals of the turn of the century, to the Federal Aviation Administration’s mishandling of the 737 MAX troubles. The lapdogs were heavily to blame for the housing bubble and financial panic of 2008.
Another problem emerged under laissez-faire: the monopsony. Companies such as Amazon and Walmart aren’t classic monopolies such as Standard Oil. But their size allows them to control markets as the dominant buyer and seller of goods and services.
As a result, Biden would need years of successful antitrust suits to begin undoing the damage of the past 40 years. And that means years of Democrats winning elections.
Winning public opinion is another challenge, as University of Chicago law professor Eric Posner has pointed out.
In the Gilded Age of the late 19th century, monopolists such as Rockefeller were widely despised. Theodore Roosevelt had the wind of popular support at his back.
Today, Big Tech and Walmart are among the most admired companies. Apple, Amazon and Microsoft are at the top on Fortune’s latest ranking. Google parent Alphabet ranks No. 7, followed by JPMorgan Chase and Walmart No. 11 (right behind Costco).
Changing minds may be the toughest battle of all.