Our system is squeezing you. Will you push back?

The same motive that drives innovation drives monopolization, with negative consequences for most Americans.

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Bleeding Heart Liberal

7 min readJun 30, 2023

It is a truth universally acknowledged that the profit motive is a powerful incentive for people to create, invent, and innovate.

a white woman’s hand squeezing an orange slice, with juice running out between her fingers

Unfortunately, it’s also a huge driver of unfair, unethical, and illegal behavior. Right now, we live in a world where record labels can make millions of dollars off an album and tour, while giving the artists nothing. Where an enormous media company can purchase a large media company and try to stop paying royalties for the tie-in novels. Where a truly gargantuan company can try to double-charge authors for returns on books they know readers have finished.

In my opinion, capitalism — defined as “an economic and political system in which a country’s trade and industry are controlled by private owners for profit” — paired with representative government is so far the most effective system humanity has tried for running a large society.

But I don’t believe that capitalism was ever meant to run unchecked. After all, either money is motivating or it isn’t; and if it is, it won’t stop motivating people no matter how much they already have.

That doesn’t mean we have to accept the abuse and unethical behavior — but improving the system will require doing something different from what we’re doing now. We’ll have to acknowledge that:

Our current regulation is creating an unfair society; and
Having less regulation will, based on historical data, likely make things worse. (More on this below.)

To my progressive readers: as you think about current regulations, consider their actual outcomes and whether you’re willing to judge them by that measure.

To my conservative Christian readers: as you think about the current system, consider how many commands in the Bible demand fair treatment for all, especially the least powerful.

How’s it working for you?

Before I move on, I want to show statistics, not just anecdotes, about our current situation. Nearly 47% of US wage-earners make less than $30,000 a year (not adjusted for household size). Wage growth has not consistently kept up with inflation…

A graph comparing seasonally adjusted hourly wages in both then-current dollars and converted to 2018 dollars, which shows that the buying power of averages wages has hovered around $20/hour in 2018 dollars since 1964, with a peak in the 1970s approaching $25/hour (in 2018 dollars).

…for most income groups. You’ll notice a glaring outlier when the top 1% is broken out.

A graph of cumulative income growth, after transfers and taxes, since 1979. The lines representing the lowest income quintile, the middle three quintiles, and the 81st to 99th percentiles all grow gradually, while the line for the top 1% of incomes rises much faster (with rocky declines as well, but always consistently higher than the others).

But don’t hate on the 1% too much. Many of them are still earning wages (i.e., working for a living); the real winners have been the top 0.1% and even the 0.01% — who gain most of their income from non-wage sources, such as business profits and dividends.

Total income (incl. capital gains) of the top 1% of US households

A graph that breaks the income for the top 1% of Americans into the top 0.5-1%, 0.1-0.5%, 0.01–0.1%, and the top 0.01%. The topmost line (representing the 0.01%) shows most of gains (as well as the dramatic falls, but always trending upward and higher than the others), rising up to $40M/year, while the top 0.1% shows some modest gains, and the bottom half of the 1% are nearly flat, their gains invisible on the scale of 10s of millions. — Note that the gains of the top 0.1% and tippy-top 0.01% make the rest of the graph look similar to the above.

The ultra-rich then parlay their fortunes into outsize political influence: A Cambridge study found that “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.”

The problem IS the bigness

Apparently some pro-business folks rebel against the idea that being big is itself a problem if there are no other symptoms. Fine — the problem isn’t technically the size of the companies; it’s that not one company has ever gotten big and remained ethical. Remember how Google’s motto used to be “Don’t be evil”? Even companies who start out trying to be moral cannot overcome the imperative we give them to grow.[1]

The Monopoly Playbook

In a free market (more on that later), a profitable industry should invite new entrants, who attempt to provide better or cheaper products or services so as to capture some of those profits.

The richer a corporation gets, however, the easier it becomes for them to simply buy their competition, as Mark Zuckerberg (in)famously wrote, rather than having to compete. Amazon once took a $200M loss in one month to run competitor diapers.com into the ground, whereafter Amazon bought it on the cheap and shut it down (although I did read at least one contention that diapers are always a loss leader, even for diapers.com).

Companies want us to think that they got rich because they were better. But compare how Amazon describes its self-proclaimed “virtuous cycle” with how it looks to its suppliers.

On the left, Amazon’s self-proclaimed “Virtuous Cycle,” which are interlocking cycles: Lower cost structure > lower prices > customer experience > traffic > sellers > selection > customer experience. On the right is a diagram titled “What’s really going on: the anti-competitive flywheel” and a cycle labeled “Creating chokepoints” with Lock in users > lock in suppliers > eliminate competition > forcer workers & suppliers to accept unfairly low prices. — Amazon sees a benefit, where suppliers feel a squeeze. Diagram on right from Chokepoint Capitalism.

Sure, you can get a “lower cost structure” through greater efficiency, but when a company buys or eliminates enough competition, it can also simply force sellers to accept bad terms because they have no other choices (known as monopsony).

Getting huge also enables corporations to engage in regulatory capture (even easier now that companies have effectively no limit to their political donations), “converting their temporary market advantages into enduring law-backed defenses.”[2] One of the most egregious examples is US radio. Did you know that terrestrial radio doesn’t pay royalties to artists for the songs it plays? I was shocked. Now dominated by iHeartMedia (formerly known as Clear Channel), radio station owners have been able to defeat literally dozens of bills that would require stations to actually pay royalties, as streaming and satellite radio must.

The results of monopoly

The bigger companies get, the more harm they cause. Once an industry becomes consolidated, the dominant company or companies can “depress wages and salaries, raise consumer costs, block entrepreneurship, stunt investment, retard innovation, and render supply chains and complex systems highly fragile.”[3] We saw some of that fragility exposed during the Covid-19 pandemic, and we’re still trying to catch up.

Notably, they haven’t shared much of their excessive wealth in a while:

A line graph titled, “The gap between productivity and a typical worker’s compensation has increased dramatically since 1979.” The line of cumulative growth in “productivity” (measured by overall GDP) rising steadily since 1948 to 252.9% in 2018, while the line depicting cumulative growth in “hourly compensation” flattens around the mid 1970s and rises very slowly, topping out at 115.6% in 2018.

As a friend of mine pointed out, there are multiple reasons why productivity might outpace wages, such as investment in automation. But that productivity did correlate with striking income gains for the 1% — which are, again, mostly direct business profits and capital gains. That suggests to me that companies still had plenty of profit.

The solid pink lines show a smoothed curve of income growth; the dashed lines are raw data. (Data from previous charts.)

Our current system makes monopolies inevitable

But remember, corporations are getting big because that’s what the system asks them to do. Industry after industry has consolidated power into a very small number of players.[4] Our current implementation of capitalism leads inexorably to monopolies.[5]

Even worse, these are markets where the market is captured by only five firms in the whole WORLD.

It’s not totally hopeless

While this picture of our economy looks quite bleak, we do still have a democracy. If, as I’ve proposed, these trends toward monopolization and wage inequality are due to policy,[6] then they can also be rectified (eventually) by policy changes. Please come read the next post for more about what we can do!

[1] What about B-corps? I hope that companies with an explicit mandate to consider criteria besides profit will 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 761–762). Beacon Press.

[3] Khan, Lina, The Ideological Roots of America’s Market Power Problem (June 1, 2018). 127 Yale L.J.F. 960 (2018), Available at SSRN: https://ssrn.com/abstract=3367602

[4] “…competition in the US was virtually eliminated in an astonishing variety of industries. Just a handful of firms — or sometimes only one — now control everything from the arts (publishing, movies, music, streaming, comics, bookselling, movie theaters, talent agencies, games, wrestling, radio stations) to finance (banks, investment funds, auditors, bondrating agencies) to agribusiness (seeds, livestock, tractors, fertilizer, pesticides, precision agriculture, and the production of meat, eggs, grain, and produce) and everything in between (cruise lines, cheerleader uniforms, groceries, pharmaceuticals, glass bottles, medical devices, airlines, eyeglasses, athletic shoes, fast food, food delivery, and pet food).” (Giblin & Doctorow, Kindle Locations 136–141)

[5] “The decline in competition is so consistent across markets that excessive concentration and undue market power now look to be not an isolated issue but rather a systemic feature of America’s political economy.” (Khan)

“The structure of modern capitalism now favors monopoly, in the absence of government action to prevent it.” (Dayen, David. Monopolized (p. 5). The New Press. Kindle Edition.)

[6] See “The policy determinants of wage growth for the vast majority” at EPI, “Raising America’s Pay.”

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