Goliath: The 100-Year War Between Monopoly Power and Democracy (Stoller) 2019
The History of Populism vs. Corporatism
Outlines the history of the United States as a country that limited monopoly power in the interest of preserving democracy. Says concentrated economic power leads to a decline of democratic institutions. In the 1920s, Andrew Mellon was Treasury Secretary and owner of many businesses, and used the government and regulation to ensure that his monopoly power in various industries thrived. The 20s saw a wave of bubble speculation, where people could borrow money (“broker’s loans”) to speculate further in stocks, driving the market way, way up. It all came crashing down (though the depression did not begin immediately) with the stock collapse in 1929, the decline leading to non-repayment of broker’s loans, and banks started to fail, which froze up depositors bank accounts, leading to runs on more banks, etc, creating the liquidity crisis -- money was taken out of circulation and people couldn’t spend money, buy less, hire fewer people, etc. Populists like Wright Patman saw the rise of monopoly power as enabling despots like Mussolini and Hitler, the former of whom was extremely admired by Andrew Mellon, and FDR said there was no hope for liberty in democracy if private power grew stronger than the democratic state. The early 30s saw one of the predecessors to current culture wars, prohibition, as something monopolists tried to distract voters from economic issues; this did not stop populists, however. Men like JP Morgan yielded enormous power with the predecessor of Citibank, controlling large swaths of the economy, having a “preferred list” of people to deal with. Assails the Milton Friedman/Robert Bork/Chicago School of economics, which penetrated both the left and right (I.e. Galbraith on the left), and that markets are “science” and should not be interfered with. Galbraith and Nader see people as consumers, and big companies and chains as helping get the best deal for the consumer; thus was the emergence of the know-it-all, eggheady, central-planner liberal, that did not trust small-town citizenry, and thought big was good, and government could cooperate with big business and big labor. A&P pioneered the low-price, low-service, chain store format, through both efficiency but also strong-arming suppliers. The book thus begs the question, what is the role of business, I.e. trucking industry – is it to ensure the maximization of shipping at the lowest cost, or is it to provide good middle class jobs. The tug of war between monopoly and democracy has waged since the Revolution, from Alexander Hamilton and the financing of the revolution, to the Industrial age and then FDR, to the essential end of this tug of war from Reagan to now. The Homestead Act of 1862 and 1866 handed out plots of land, one of the most radical redistributions in U.S. History – a democratic ideal about land ownership persisted with Brandeis in the early 1900s; even Republican Eisenhower praised social security and unemployment insurance as president in the 50s, and still saw the importance of preventing economic concentration of power to preserve “the little fellow.” In the 50s, 73% of Americans trusted the federal government, and thought it was benefit for the benefit of most; 68% thought they had a say in it; a culture of antitrust persisted through the 50s and 60s (in government). The post-war years were years of prosperity, with all boats lifting up until 1970. Banking and finance had begun to move towards profit-maximization, however, with people like Wriston from Citi (tax avoidance, lending against potential earnings vs. Replacement costs, etc), and the certificate of deposit dawned to move around New Deal banking regulations and free banks to buy deposits and take on risk. The late 60s also saw the dawn of mega-conglomerates as companies expanded by buying unrelated businesslines (I.e. PennCentral where they would use creative accounting to make the company look not insolvent, until it all failed). Thus, the dawn of making money via financialization, rather than actually “doing stuff,” I.e. through conglomerates and mergers; the 80s saw the relaxation of merger laws, so companies could swallow competitors. Democrats in the 70s sold out, embracing corporatism, instead of embracing populism, small business, and unions – in exchange for embracing other liberal social values. Explains the importance of Wright Patman in Congress, who fought for fair trade and against big banks. The concentration of power has lead to feelings that the system isn’t working for average people, leading to populism Worldwide. Elites have been allowed to participate in pillaging (Savings & Loan, 2008 Housing crisis) through lax regulatory environments, but then expecting to be saved by The Fed and the Federal Government. Savings and Loan enabled people to spin up a bunch of bad junk-bond debt, then buy a company with it, pillage its assets and cash, and then let the whole thing take a dump, which were S&L’s backed by the FDIC, and liability was limited by LLCs. Emergence of people like Jack Welch (being #1 or 2 in an industry, or getting out, firing lots of people, etc) and management consultants. Corporate raiders actually worked against what was in the best interests of businesses (I.e. Goodyear would keep cash and invest in research and their future, but they were susceptible to raiders); golden parachutes would mean ending executive employment would have a huge severance. Mortgage crisis similarly meant that the high risk credit default swaps got unleashed on markets with lax regulation, confounding Alan Greenspan, who cannot believe the market did not regulate itself to the end of self-preservation. Today, we see concentration of media power with FANGs, and free press dies