How the Fruit Fights the Juicer (on monopolies, part 2)
What you can do if you’re tired of getting squeezed
In my last article, I showed how the average American is getting squeezed by companies merging and merging until both buyers and sellers have too few choices. It turns out that David Dayen perfectly summarized it in the introduction to his book Monopolized:
The structure of modern capitalism now favors monopoly, in the absence of government action to prevent it.
In other words, if we do nothing — if we don’t actively push against the profit motive that incentivizes companies to make money at the expense of all other concerns — then that’s exactly what they will do.
Why do we let them get away with it?
You might think that surely, as companies were getting larger, antitrust regulators would’ve stepped in if the mergers were causing problems. That has definitely not been the case. Mergers are in the thousands each year, while annual enforcement actions barely top one dozen. With that many mergers, it seems likely that more of them should be questioned.
There are three big reasons why we haven’t seen much pushback against mergers.
1. The “consumer harm standard”
From the New Deal in the 1930s the 1980s, regulators considered big monopolies to be inherently bad (specifically, dangerous to democracy, because of the political influence they could buy).
Then, in 1979, the Chicago School of Economics introduced the idea of using “consumer welfare” as the standard for deciding whether to approve a merger or acquisition. They reasoned that if large companies kept prices low, that would help more than hurt. It sounds reasonable, but it’s led to a vastly less equitable society.
Wages increased most for the people who already made the most money.
Which, not coincidentally, has led to greater concentration of wealth.
Furthermore, the “consumer welfare” theory (low prices good) has been stretched, “or perhaps overtaken, by support from some companies and some think tanks that want to see companies earn higher profits unconstrained by the antitrust laws.” In other words, the goal became profit above all, even consumer welfare. [1]
The authors of Chokepoint Capitalism point out, “By putting the focus so exclusively on consumer prices, it encouraged corporations to squeeze their workers and suppliers, which reduced people’s ability to pay for goods and services — exactly the same result as if consumer prices had gone up!” [2]
2. We like some of the benefits
Another reason mergers and acquisitions haven’t faced enough scrutiny is that they do lower prices for a while, and that does help people. We usually have no personal connection to the employees or companies involved (except you, Toys ’R Us!), and any brand with clout is kept, at least in name.
We also get used to the benefits. After years of Amazon Prime, I get frustrated when I order online and have to pay for shipping, even if that makes no sense. Even though I already know Amazon only achieves great prices with free shipping by undercutting its suppliers, abusing its warehouse workers, and hurting the environment, sometimes ordering from them is still both the fastest and the cheapest way to get what I need.
Another example is that anyone with a 401(k), IRA, or pension is invested in the stock market. We’ve been told to expect 8% annual returns (on average over long time periods). While not everyone can be or is saving enough to self-fund their retirement, what we do save we count on getting those returns.
I’m not saying we’re all equally complicit, of course — just that the status quo isn’t uniformly bad (i.e., some people are doing great, and some aspects would be missed by everyone). In some ways, it’s working… for now.
3. The lid is locked down
Giblin and Doctorow compare the economy since the 1980s to the apocryphal frog being boiled alive. It turns out that, given the choice, a frog will in fact jump out of a pot as soon as the water gets uncomfortably warm. But the monopolization of our economy has locked the lid on as tight as a rice cooker’s — so even though we’re hot now, we can’t get out on our own.
Motivation for Christians
To my Christian readers, did you know that the Bible has far more to say about economic justice than it does about almost any other subject? There are more than 2,000 verses throughout the Bible that talk about justice, taking care of the oppressed, and not showing favoritism. Here’s an example from the Old Testament:
There are those who hate the one who upholds justice in court
and detest the one who tells the truth.
You levy a straw tax on the poor
and impose a tax on their grain.
Therefore, though you have built stone mansions,
you will not live in them;
though you have planted lush vineyards,
you will not drink their wine.
And words of Jesus from the New Testament, describing God’s final judgment:
“Truly I tell you, just as you did it to one of the least of these who are members of my family, you did it to me.”
The verses range from laws regarding whole nations to the way individuals treat one another in church. That range tells me that God cares about fairness and justice at both personal and systemic levels. Our system that squeezes the poor for the profit of the ultra-rich does not reflect God’s values, so we as Christians are called to “seek justice.”
Change your mind to change the world
There are many possible actions we could take, and I’ll mention some briefly. But the biggest challenge is going to be altering our own expectations. Human beings are terrible at change, even when it’s for the better. Following are two mindset shifts that will help us.
Mindset shift 1: What is a “free market” free of?
I was surprised to learn that the term free market, coined by Adam Smith in 1776, didn’t refer to absence of regulation but rather meant “no monopolies or combinations in restraint of trade or limiting entry into new fields, and no government-granted privileges for a favored few.”
He proposed it in opposition to the then-prevalent system, mercantilism. Thus it wasn’t government interference per se that he opposed, but government putting its thumb on the scales in its own favor.
So call yourself a free-market capitalist all you want! That system doesn’t hate regulation in and of itself. Think about what would need to happen to promote market competition and the genuine exchange of goods and services — i.e., buyers and sellers both having sufficient choice. Since it’s clear that our market isn’t doing that, introducing regulation to move in that direction would be well within conservative dogma.
Personally, I want someone to intervene if it’s to take someone else’s thumb off the scales.
Mindset shift 2: Theory vs. Practice
You know the saying, “In theory, theory is the same as practice, but in practice it isn’t”? We need to judge our laws and practices by their results, not by how fair they sound.
It’s something progressives should take to heart, because legislation with the best intentions can absolutely backfire.
Take the EU’s 2019 Copyright Directive, which exempts platforms from liability for its users uploading copyrighted content “if they have ‘made best efforts’ to prevent the availability, and future upload, of infringing works.” It effectively meant no new entry can afford to compete.[*]
YouTube’s algorithm qualifies for exemption, and I would hope so; YouTube has already spent over $100M on it. Yet it still doesn’t find everything and needlessly flags many fair-use cases. But no startup could hope to disrupt an industry when the rules require either an insurmountable investment of time and money, or the kind of content monitoring that could easily be construed as illegal surveillance.
We have to stop listening only to the biggest companies’ concerns, because they prefer even regulation to true competition. [3] If we hope to reduce the gaping inequality of our country, we have to change how we make the laws and who’s “in the room where it happens.” [4]
Unions can help… and hurt
One option we have as a society is to counteract monopolies by empowering unions. It makes sense that only groups with equal power can negotiate fairly, and unions have given workers a juggernaut on their side as big as the companies who employ them. They fought — often literally, sometimes against their own American soldiers — for such outlandish demands as the ability to exit a burning building and compensation for on-the-job injuries.
More recently, streaming services have caused a lot of upheaval in the entertainment industry. I’d wager that if you asked any average viewer whether streaming a show is the same as watching a TV rerun, they’d say, “Obviously.” Yet it took a full union strike to get companies to agree that they needed to pay residuals for streaming shows just as they already do for TV reruns.
That said, you might have heard the same stories I have — of union bosses taking expensive vacations on the union’s dime; of unions promoting an “us against them” or “stick it to the man” mentality, which leads to strikes where the workers lose money while the bosses don’t; that unions are more interested in protecting employment than protecting work quality. One story I heard was a union hat negotiated to keep electronic lock records from being used against an employee (even if he “badges out” immediately after clocking in).
The story I can personally vouch for comes from my dad. At a conference where he was running a demo for his employer, a union electrician cut the plug off his surge protector. He’d gotten tired of waiting for the electrician to do it for him and had plugged it in himself. Maybe that union guy was overstepping his bounds, or maybe he was just a jerk, but he didn’t make a great impression.
In writing this article, however, I realized two things. First, given all the anti-union lobbying and legislation that has been opposing unions from the very beginning, it makes sense that union members can be a little protective of what they’ve won. [5] They still shouldn’t be jerks about it, but at least I can understand the sentiment.
Second, unions are subject to the same forces as any group of human beings, including companies — namely, that people given power can get used to it and start wanting to maintain their power for its own sake. That doesn’t mean unions shouldn’t be part of a strategy to fight back against monopoly power. It just means we need to be aware of their pitfalls.
Strengthen the laws for all stakeholders
As I mentioned above, lower prices are only beneficial to consumers when they don’t result in squeezing the suppliers and sellers who employ those same consumers. Thus it’s important to make sure our laws reflect that.
However, just as unions are subject to the problems of growing power, so are laws and lawmakers subject to regulatory capture. No one is going to give “the people” power — we’re always going to have to fight for it. Democracy is always on trial. That said, we should at least try to get the law-enforcing power of our government more on our side. Here are some options.
Pursue antitrust more stringently
Instead of worrying strictly about consumer prices, regulators evaluating mergers and acquisitions should be considering both consumer choice and supplier choice. Antitrust is a big hammer, so it still won’t apply in all cases, but we need to make our goal having both sides be “free as in market.” Only then can the economy run fairly.
Stronger enforcement against conflicts of interest
Should internet service providers be allowed to own internet content producers? Should talent agents be allowed to own production studios and negotiate with themselves [PDF]? Should everything-sellers be allowed to own any manufacturing?
The law already has a pretty good working definition of conflict of interest. I’m not a lawyer, but it seems like we could build on that case law to apply to businesses. More regulation and better enforcement against conflict of interest would allow companies to decide for themselves how to deal with it, rather than having the government forcibly break up larger companies.
Empower gig workers
Deputizing unions to a greater extent will require updating our laws. Though overall opinion toward unions in the US has remained generally positive, the “law has not kept pace with workers’ interests and needs.” Regulation of unions should be in favor of their members, however — not in favor of companies who dislike them.
[Almost] all of the legislative changes to the NLRA since its enactment in the mid-1930s have been changes that weakened unions.
(The exception was allowing healthcare workers to unionize in the 1970s.)
In addition to clawing back some anti-union power from corporations, the law needs to account for the expanding “gig economy.”
As you can see above, freelancers and gig workers earn far less per hour than regular employees, and even so would be willing to take lower hourly wages for a steady job. If they could unionize or otherwise demand better wages or working conditions, they might feel differently.
But US workers who are deemed freelancers or contractors (even if misclassified) are prohibited from working together. That means Uber drivers, independent truckers, and book authors — all suffering from the corporate squeeze — face huge fines and jail time if they band together, because that would be “illegal collusion.” (Meanwhile, a large company can simply buy a competitor, enabling it to “fix” prices legally. [6])
One option for independent workers would be sectoral bargaining. Since it is common in European states, such as Austria, we can learn a lot about what we’d want to copy (or not). It’s an example where neither government intervention nor a traditional union was used to effect a similar outcome.
Change is the only constant
The world will not look in 20 years as it does today, and definitely not as it did 20 years ago. We simply don’t have enough resources left on earth for our economy to continue growing indefinitely, not to mention fallout from climate change and its concomitant migration, future pandemics, automation, or the prophesied AI revolution.
Will we end up in a corporate-controlled dystopia? Will we ride the boom economy until it crashes for good? Or will we fight for reasonable prosperity that benefits everyone, even if it means adding or changing some laws?
[1] What about B-corps? I hope that having an explicit mandate to consider criteria besides profit will help them remain ethical, but it might also just prevent them from ever getting big enough to go wrong.
[2] Rebecca Giblin; Cory Doctorow. Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid (Kindle Locations 4645–4646). Beacon Press.
[3] “Big Business prefers power without responsibility but will take power with responsibility as a second choice.” (Giblin and Doctorow, 280–281)
[4] Yes, that’s a Hamilton reference.
[5] “Workers who try to unionize — like the Amazon warehouse workers in Bessemer, Alabama, in 2021 — face vicious, lawless, anti-union blitzes that trample all over the tattered remains of labor law. The goal — as Alex N. Press explained to the hosts of the techno-critical podcast This Machine Kills — is not just to defeat the union drive, but to salt the earth, traumatizing all the workers involved so that they never join another union drive, ever again.” (Giblin and Doctorow, Kindle Locations 4610–4614, their emphasis)
[6] ‘Other businesses learned from this, and prefer to engage in tacit collusion instead — what asset management firms coyly call “cooperative behavior,” which works best in industries “with few players, rational management, barriers to entry, a lack of exit barriers and noncomplex rules of engagement” — exactly the conditions that are most likely to exist in heavily concentrated markets.’ (Giblin and Doctorow, Kindle Locations 4594–4597).
