In the spring of 1950 Sam Walton and his father-in-law drove across the greening hills of northwest Arkansas into the little town of Bentonville. Sam later wrote that Bentonville appealed to him because it was close to his wife Helen’s hometown in Oklahoma, and it was a good place to hunt birds. At the time the area was home to many apple orchards and chicken farms, and bobwhite quail thrived in the brush that grew between the farm fields and woods.1
Walton had recently sold his first store, a Ben Franklin franchise in Newport, Arkansas, and he now used the $50,000 he had cleared to buy Luther Harrison’s variety store on Bentonville’s town square. Walton’s father-in-law, Leland Stanford Robson, loaned him another $20,000 to buy the barbershop next door. After knocking down that wall, Walton opened a 4,000-square-foot “five-and-dime” variety store.
“At the age of thirty-two, I was a full-fledged merchant,” Walton wrote in his autobiography. “I love competition, and [Bentonville] just struck me as the right place to prove I could do it all over again.”2 And Walton would indeed have to compete. Although Bentonville’s population was only 2,900, the town already had three other variety stores.
America in 1950 was a land of independent farms, independent stores, independent businesses, and independent communities ruled to a very large degree by the people who lived in them. It was a world in which almost any citizen who wanted to get ahead had real opportunity to do so (or, at least, any white male citizen with access to the generous government programs and bank credit of the time). One way Sam Walton got ahead was through simple hard work. This included extensive travel to the small clothing factories of western Tennessee and the Garment District of Manhattan, to save a few pennies by buying straight from the manufacturer.3 He also closely studied how powerful suppliers of branded goods, like Procter & Gamble, manipulated the little guy, in order to figure out ways to escape from their sway.4
The Walmart museum in Bentonville today describes Walton’s five-and-dime as a “huge success.”5 Yet at 80 feet by 50 feet, Walton’s original store was anything but huge. Nor was the chain of 24 stores Walton built over the coming two decades in any way huge. By 1967 yearly sales per store still barely topped $500,000.6
Most people reading these words were probably taught that the independent stores and independent farms of midcentury America were nothing more than artifacts of an earlier time, inefficient businesses in an inefficient backwater of the world waiting to be modernized and rationalized. Yet such a story could not be more wrong. As we will see over the course of this book, the political economy of Bentonville in 1950 was very much by design. Not only the outlines of the fields and the size of the stores, but even how its citizens thought and acted were to some degree the result of two centuries of hard political struggle by the American people, expressed in thousands of laws and policies designed to protect the liberty of the citizen and democratic institutions.
The America of the 1950s was very much also a land of the “organization man” in the “gray flannel suit,” and of giant unions at corporations like General Motors and U.S. Steel.7 And it was very much a land of intricate, nation-spanning networks—of communications and transportation, of finance and industry—networks more advanced than anywhere else in the world. These systems, taken as a whole, had helped to empower Americans to fight and win a two-front war against Germany and Japan. But the fact that, five years after the end of the war, America was still home to millions of prosperous, family-owned farms and stores—and family-owned trucking companies, and family-owned insurance agencies, and family-owned bakeries, and family-owned icehouses and slaughterhouses—was the result of millions of American families rising up, time and again, to keep the financier and corporate lord out of their business. So, too, was the fact that millions of American working people could count on strong unions to protect them in their work.8
As we will see, it was a design that consciously elevated the protection of individual liberty and democracy above certain forms of efficiency. As we will also see, it was a design that in many respects proved to be far more efficient than many of the systems imposed by the monopolists.
In the case of small general merchandise stores like Sam Walton’s, men wielding concentrated capital had tried many times to roll up control. By 1912, for instance, F. W. Woolworth had assembled nearly 600 stores into a single chain, gone public, and put his name on the tallest skyscraper in the world just a few blocks north of the Wall Street bankers who gave him the money. In the case of farming, powerful men—land barons in the North, plantation owners in the South—had been attempting to roll up control over America’s farmlands since the beginning of the nation. But the American people had repeatedly fought back with various forms of antimonopoly law, consciously tracing their actions back to what they understood to be the true promise of the American Revolution.9
Today the Walmart corporation runs nearly 5,000 stores across America. Together these hold as much merchandise as at least 150,000 stores the size of Sam Walton’s first.10 To serve these stores, Walmart runs 42 distribution centers and employs 1.5 million people. The corporation completely dominates retail in America, often capturing more than 30 percent of sales for particular items, and increasingly controlling markets across entire regions. For instance, in 43 metropolitan areas in the United States, Walmart has captured more than half of all grocery sales.11
To put this into political terms, the Walmart corporation today is the still-largely-undisputed commercial master of thousands of towns and suburbs, and it sets the standard for wages and working conditions in many parts of the country. The corporation’s control of the gate to the market also enables it to essentially dictate terms to thousands of companies, including some of the biggest manufacturers in America. Walmart can make or break communities, corporations, careers, and candidates.
But it is not merely the corporation that has amassed power. So too has the Walton family. The six sons and daughters of Sam Walton together hold as much wealth as nearly 150 million Americans, making them the richest family in the history of the world.
These children of Sam Walton do many good things with their wealth. They build museums and schools and protect rivers and wetlands. But here at the start of our book, let’s make sure we understand the full implications of this concentration of wealth and power in the hands of one family. What we see reflected in their rise is a whole array of political and social revolutions that have remade just about every aspect of American life. The stripping out of our towns? The collapse of American entrepreneurship? The collapse of American manufacturing? The shift from competition in markets to corporate systems of command and control? The rise of China as a world power? The dysfunction in American politics? Every one of these radical changes is largely a function of the same changes that cleared the way for the rise of Walmart, and the Waltons, and a few other superpowerful families and individuals like them.
Sam Walton and his family bulldozed much of the America that gave him his start. But Sam Walton didn’t build that bulldozer. Someone else did, and it’s important to understand who that was, how they did it, and who else helped to drive it. That’s why my aim in this first chapter is simply to provide a brief history of what we can call “Stage One” in the monopolization in America, from the election of Ronald Reagan in 1981 up through the Wall Street crash of 2008.
It’s also important to understand who’s driving that bulldozer now. Because as awesomely powerful as Walmart and the Waltons remain, in today’s world they look more and more like bit players. That’s why in the next chapter I will describe “Stage Two” in the monopolization of America: I will detail how powers like Amazon and Google have taken advantage of new technologies and online platforms to seize the initiative from the giants that so dominated the U.S. political economy only a few years ago. And why I will provide some description of exactly how Google and Amazon are supercharging the bulldozer in ways that are vastly accelerating the smashing of social and political balances exemplified by Walmart and its power.
Taking the time to understand the similarities and differences between these two stages of monopolization is a vital first step to understanding our discussion—at the center of Liberty from All Masters—of how citizens made, protected, and expanded the American System of Liberty over our nation’s first two centuries. And to understanding why it’s so important to relearn these ideas and this language as we seek to master Google, Amazon, Walmart, and the other powers that so threaten our democracy and our most basic liberties today.
In August 1981, President Ronald Reagan fired 11,345 air traffic controllers for failing to heed his order to abandon a strike and return to work. To make sure such a strike never happened again, Reagan decertified the controllers union and banned every striker from working again for the government, for life.
For British prime minister Margaret Thatcher the opportunity to break the power of unionized working people came in 1984, when coal miners struck to protest the closing of smaller pits. Thatcher also aimed to ensure no such strike ever happened again. She directed police to arrest strikers, and ordered soldiers to deliver the coal. She also directed her government to block welfare payments to miners’ families.
At the time, the actions by Reagan and Thatcher were widely depicted as the first shots in a coordinated transatlantic “libertarian” or “neoliberal” reaction against “government control” over the economy. In addition to their assault on unions, Reagan and Thatcher also sharply cut taxes on the wealthy, slashed regulation of corporations in order to provide greater liberty for business executives and financiers, and promoted the privatization of many activities that had been run by the public for the public.
The political and social effects of breaking the unions were far-reaching and profound. Working people in the United States first began to form modern unions early in the nineteenth century, and their victories had long inspired workers around the world. For most of the twentieth century the unions of working people had played a powerful and sometimes determinative role in American politics, with both parties vying for their support. But after Reagan’s stroke against the controllers, it became much harder for working people to organize unions, not only in government service but in manufacturing, construction, transportation, and services.
For millions of workers both in the United States and Britain, the effect was traumatic. As one reporter put it later, “the unions … lost their power, influence, millions of members and a large swathe of their rights.”12
Yet what almost every labor leader—as well as almost every policymaker and historian in the years since—missed or chose to ignore was that Ronald Reagan and Margaret Thatcher did not aim just to make it harder for working people to organize and cheaper for the rich to pay their taxes.
Antimonopoly law can be understood as a tool that citizens use to prevent the capitalist and corporate masters from organizing their own unions and consolidating their own overarching systems of power and control. And over the course of America’s first 200 years, citizens had devised hundreds of different laws and policies to break any such concentration of power that threatened individual liberty and democracy. This was—as we saw in the introduction—the American System of Liberty.
Yet in the early 1980s, both Reagan and Thatcher aimed precisely to lift almost all such restrictions and limits on consolidation and coordination, thereby—in essence—liberating the capitalist and corporate masters to organize their own unions. In Reagan’s case, his team came to power with a well-honed plan to overthrow America’s entire antimonopoly system. Indeed, even before Reagan took office, the man he had chosen to run the Antitrust Division of the Justice Department, William Baxter, had already detailed the administration’s thinking to the Senate. Baxter had said that from Reagan’s inauguration on, the government planned to use the law to promote “efficiency” rather than liberty and democracy.
Then and over the course of the next year, a small group of senators, Republican and Democrat, assailed the changes. Ohio Democrat Howard Metzenbaum wrote that the Reagan administration “has a penchant for entrusting administration of our most important laws to those who believe they should not be enforced. Nowhere is this better illustrated than in the case of William F. Baxter, chief of the Justice Department’s antitrust division.” The Reagan White House, he said, shows “disdain [for] the entire political and social dimension of our antitrust laws.”13
But few heeded the warnings. It was not only labor leaders who missed or misunderstood the radical nature of what the Reagan administration was doing. It was also most of the organizations that represented the interests of family businesses and family farms and of America’s families and communities generally. To be sure, there were many crises in the early 1980s that helped distract Americans from this putsch, including a harsh recession and sharp tensions with the Soviet Union. But the key factor of its success was a lack of organized opposition in either party.
In chapters seven and eight, I will detail how Reagan administration officials, along with allies in the Democratic Party, planned and sold this revolutionary change in policy—after replacing the word “efficiency” with a yet more benign-sounding euphemism, “consumer welfare.” In the rest of this chapter, and the next, my aim is simply to detail what happened after the traditional restraints on monopoly were eliminated.
The U.S. Justice Department did not publish the new pro-monopoly rules until June 1982. But the impact of the change began to be felt much earlier, almost as soon as it became clear that the grumbling senators lacked the ability to stop Baxter. By August 1981 financiers and CEOs had launched a frenzied remaking of the American economy, with deals among airlines and banks and oil companies on a pace nearly double that of 1980.14 By December 1981, Jack Welch, the CEO of the industrial conglomerate General Electric, had clarified the thinking that would shape corporate America for the next generation. General Electric, he announced, planned to abandon all markets where the corporation was “not already number one or two.”15
Of all the effects of this consolidation, the restructuring of retail—the world of Sam Walton—would prove to have some of the most extensive and radical effects. Through most of the twentieth century, Americans had staunchly opposed the concentration of power within giant middleman corporations. Their reasoning was simple: they did not want anyone to capture control over the marketplace and then use that control to dictate terms to sellers and buyers. It was this basic thinking that helped to inspire the Tea Party in Boston in 1773. Early in the twentieth century this way of thinking had inspired the American people’s reaction against Woolworths, A&P, and the other new chain retailers.
Now, with the stroke of William Baxter’s pen, all limits were off.
In the case of Walmart, the transformation could not have been more extreme. Although the corporation had gone public in 1970 and had purchased at least two small chains, by the late 1970s its operations were still limited to 125 midsize stores in five states.
As we have seen, the massive consolidation of power that resulted came at the expense of independent store owners. As we will discuss shortly, it also came at the expense of independent farmers. But before moving on, it’s important to understand that this consolidation also affected workers in ways that had little to do with the Reagan administration’s breaking of unions. Fewer new businesses also means fewer new jobs. It also means less competition for workers, which means lower wages and worse benefits. And indeed, as economists have finally begun to prove in recent years, the age of Walmart has witnessed sharp declines in real wages in America, with monopolists today wielding their new buyer power to drive down the average worker’s pay by 20 percent or more, or one dollar out of every five, compared to a generation ago.16
Less competition for the labor of working people also plays out in more political ways. It also means, for instance, that the average employee is more stuck in their job, and more subject to the whims of their boss, whether they like the boss or not. And indeed, over the last generation we have seen a sharp decline in the ability of the average working person to move from one job to the next.
The political economic structure of Bentonville in 1950 was, as we will see in more detail in the coming chapters, very much by design. So too the concentration of wealth and power we see today in corporations like Walmart and in the hands of families like the Waltons. This unraveling of prosperity and of liberty was something that was done to you, your family, and your community intentionally. And it was done not only in the business of retail but in every other corner of the American economy as well.
In January 1961, in his last days as president, Dwight Eisenhower delivered one of the most important speeches in the history of the United States. Here was a man who during the Second World War had been the supreme allied commander in Europe. Eisenhower then served as president during the early years of the atomic era, one of most dangerous periods in human history. Yet Eisenhower during this time managed to engineer a new system of governance in post-war Europe, a system that would prove to be one of the true foundations of democracy in the modern world. And in his parting words to the American people, Eisenhower chose to emphasize one thing especially: concentration of industrial and political power right at home posed as grave a threat to democracy and peace as the power of the Soviet Union.
“We must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military–industrial complex,” Eisenhower said. “The potential for the disastrous rise of misplaced power exists, and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted.”17
It was a fear that had long shaped Eisenhower’s policies. At home, his administration enforced antimonopoly law as aggressively as had New Dealers Franklin Roosevelt and Harry Truman.18 Overseas, his administration followed Truman’s lead in imposing antimonopoly on both occupied Germany and occupied Japan, believing that the concentration of private power in these nations in the 1930s had helped to destroy civilian government and to unleash the horror of industrialized war.
In 1993, 32 years after Eisenhower’s speech, President Clinton’s deputy secretary of defense William Perry held a dinner for 15 defense industry chiefs at the Pentagon.19 Perry said the Clinton administration wanted the number of big defense contractors in the United States cut by at least half within five years. To help, the government offered huge subsidies, theoretically to pay for the “cost” of the mergers. The dinner became known as the “last supper” and unleashed a massive consolidation among America’s defense contractors. And it worked even better than hoped. By 1997, the number of top-tier contractors was down to four.
In retrospect, it’s clear that this rationalization of the defense industry was a very bad idea. It resulted in skyrocketing costs, slower innovation, and a less secure America. It also means that today many civilian industries are less innovative and less safe; Boeing’s purchase of McDonnell Douglas in 1997, for instance, eliminated not only a weapons maker but an independent rival in the manufacture of airliners, an absence acutely felt today in the aftermath of Boeing’s grotesque failure to ensure the safety of the 737 MAX.
But in the mid 1990s, Perry’s experiment was simply one in a long series of efforts by the Clinton administration to carry the Reagan administration’s overthrow of antimonopoly law beyond the reach of the Justice Department and the Federal Trade Commission—whose enforcement of antitrust law affects only a portion of the overall economy—into innumerable business sectors regulated by other government departments and agencies.
At the time, most Democrats viewed Clinton as a savior. After years of union busting and tax cutting by Ronald Reagan and George H. W. Bush, Clinton promised to reverse course. Yet when it came to the most vital issue in a democracy—the engineering of corporate and market structures to guard liberty and democracy against politically dangerous concentrations of power—Clinton proved to be more radical than Reagan. Not only did Clinton’s antitrust team do little to challenge the philosophy of efficiency introduced by the Reagan administration into the enforcement of antitrust law by the Justice Department and the Federal Trade Commission,20 they also unleashed extreme consolidation across the political economy, including in:
The News Media. The Telecommunications Act of 1996 lifted key restrictions on corporate ownership of media, paving the way for giants like News Corp and Fox, which now have the power to control entire political parties and even nations.
Banking. The Interstate Banking and Branching Efficiency Act of 1994 removed limits on the horizontal size of banks. Approval of Citicorp’s merger with Travelers in 1998 removed limits on the vertical structure of banks.
Finance. The Financial Services Modernization Act of 1999 repealed many of the barriers that had separated different forms of financial activity since the Glass-Steagall Act of 1933. Retroactively, it made the Citicorp-Travelers deal legal.21
Energy. The Clinton administration green-lighted Exxon’s takeover of Mobil, Chevron’s takeover of Texaco, and British Petroleum’s takeover of Amoco and ARCO.
Farming. Not only did the administration approve megamergers in the railroad, grain handling, seed, and chemical industries, but it also merged the Packers and Stockyards Administration with the Federal Grain Inspection Service and changed their mission from protecting the markets that protect farmers to selling commodities.22
Commodities Markets. The Commodities Futures Modernization Act of 2000 sharply limited public regulation of financial instruments, including futures, options, and swaps, creating the foundation for both the Enron scandal of 2001 and the soaring prices for oil, grains, and metals that helped precipitate the crash of 2008 and the Great Recession.23
As president, Bill Clinton even took actions to concentrate power within the corporation, such as promoting changes in tax policy that led corporations to shift executive compensation from salary to stock, thereby aligning the interests of executives with the investor rather than the customer, employee, and community.24
To be clear, many other leading progressives had for years promoted various policies that aimed to undermine antimonopoly law and make it easier to consolidate power. Jimmy Carter, the Democrat who served one term as president just before Reagan, was the first to use the term “deregulation.” Stephen Breyer, whom Clinton appointed to the Supreme Court in 1994, and Robert Reich, who served as Clinton’s first secretary of labor, had both promoted similar changes since the mid-1970s, as we will discuss in more detail later.
But it’s important to understand that once in power, Clinton and his main economic team—led by Robert Rubin and Larry Summers—embraced monopolism more firmly and gleefully than any previous Democratic president in history, going back to Thomas Jefferson in 1801. Indeed, they embraced monopolism more firmly and gleefully even than the Reagan administration, as their actions in the defense industry illustrate. If anything, when it came to the disassembly of New Deal–era thinking and institutional structures, Clinton and his team acted in ways far more feckless and reckless than the Reaganites dared imagine.
Through the full length of the twentieth century, the Democratic Party had been the party of the people. As we will see in chapter five, one of its great achievements—80 years before Bill Clinton’s election—was precisely the overthrow of plutocracy and the restoration of America’s antimonopoly regime. In the 1990s, however, Bill Clinton and his cronies sold the Democratic Party back to the plutocrats. Rather than serve as president of the American people and reverse the dangerous actions taken by Reagan, Clinton seemed instead to prefer the title of first butler to big business. Or perhaps more accurately, panderer in chief.
Of all Bill Clinton’s efforts to serve the monopolist, the most far-reaching in its effects was his administration’s remaking of trade policy. Since the founding of the nation, Americans have used trade to promote many goals—including prosperity, innovation, and national security. Most importantly, at least until President Clinton, Americans always used trade policy foremost as a form of antimonopoly policy. And Americans understood that the way to achieve these other ends was through the intelligent regulation of international competition.
To understand this essential purpose of trade, we need merely consider the goals of America’s two wars with Britain, in 1776 and 1812. In both the aim was to ensure the United States was not subject to Britain’s trade monopoly and was free to diversify its imports and exports among many nations. A second aim was to ensure that the American people had the ability to arm themselves, in case of war. These twin goals of independence and industrial self-sufficiency shaped American thinking and policy right through the Second World War.25
In the years after the Second World War, the U.S. government adopted a very different approach to trade. Faced with a growing threat from the Soviet Union and the need to rebuild the devastated economies of Europe, America used the Marshall Plan and other policies to engineer a new industrial system in Europe and across the Atlantic that was much more highly integrated across borders. One goal was to bind all these nations to one another industrially, in ways that made it hard for one nation ever again to go to war against another. A second goal was to allow for greater specialization of labor among these nations, and thereby enable all the peoples within these nations to grow and prosper together in ways that supported democracy against the Soviet threat. The United States soon extended this system to Japan, Korea, Taiwan, and Southeast Asia.
Although these moves were sometimes viewed as an imperial project, the U.S. government time and again during this period refused to protect the interests of U.S. corporations and often traded away those interests in the name of promoting industrial integration among nations. American leaders applied abroad the same basic antimonopoly policies that Americans had adopted at home—and used their power to ensure that there would always be many corporations competing in any particular market, and that no corporation or group of corporations would ever have sufficient power to threaten public control over the state.
From the creation of the Bretton Woods system in 1944 until 1994, under every president from Franklin Roosevelt through George H. W. Bush, the U.S. government remained in firm control of this system, using various forms of antimonopoly and other policies to limit the power and direct the actions of private corporations, in America and around the world, toward the public good.26 The United States worked out these relationships in direct public negotiations with other nations, through groups such as the Organisation for Economic Co-operation and Development. One result was that, at least within the democratic nations, the various compromises and trade-offs necessary to make the system work always had to accord ultimately with the will of the people.
By any fair measure this system worked phenomenally well, delivering a period of unprecedented prosperity and peace among the industrial nations of the world. Yes, the system served American interests. But what we see in this system is not a Trumpian “America First” interpretation of the national interest. Rather we see a far more sophisticated selfishness, in which the United States chose often to forgo immediate material benefits today for much greater benefits—both material and political—in years to come.
Even the Reagan administration, when it came to thinking about the international system, set aside its radical neoliberal philosophy and continued to use trade power to promote constructive competition. In the mid-1980s, for instance, when the Japanese government and Japanese manufacturers attempted to exploit liberal U.S. trade policy to concentrate control over computer components and car parts, the administration responded neither by ceding the U.S. market to Japan nor by implementing blunt protectionism designed to block Japan entirely from the U.S. market. Rather, it used sophisticated antimonopoly policies to promote the distribution of capacity from Japan to third-party nations, including South Korea, Taiwan, and Malaysia, in ways that increased competition and limited U.S. dependence on any one nation.
If a single year proved the wisdom of America’s post-war system for governing international trade, it was 1989, the year of the Tiananmen democracy uprising in China and the collapse of communism in most of Eastern Europe. The world was treated to a perfect demonstration of the difference between the communist and American systems of economic governance. One, top down in nature, after long years of dysfunction, broke down suddenly and hard. The other, built from the bottom up—and in 1989, the re-monopolization of the United States was still in a relatively early stage—provided wealth, opportunity, and resiliency.
The Cold War had ended without hot war. The West’s ability to build sophisticated weapons played a major role. Far more important had been the American people’s ability to build a democratic economy not only at home but internationally.
Bill Clinton’s defeat of George H. W. Bush in the 1992 election meant it was up to Clinton to determine how the United States would adjust the international trading system to account for the collapse of the Soviets. On taking office, Clinton faced two fundamental decisions.
First was whether he should tilt U.S. policy toward post-Soviet Russia, which was then struggling toward democracy. This would have been a direct continuation of the U.S. policy that had stabilized democracy in Western Europe and around the world. Or he could tilt policy to favor China, where recalcitrant Maoists had just ordered tanks to drive over protesting working people and college students.
Clinton’s second decision was whether to continue to use trade policy to fight monopoly, in keeping with the fundamental traditions of the United States. Or he could carry the new neoliberal principles into trade policy as well, and here also clear the way for private monopolies to control and govern.
By mid-1993 Clinton had made up his mind. It was for China and its autocrats. And it was for private monopoly at home, which was achieved by structuring the North American Free Trade Agreement, the World Trade Organization, and America’s bilateral trade agreements to make it vastly easier for foreign states and private corporations to concentrate power. In other words, at one and the same time, Bill Clinton’s trade policy threw the door wide open to the exploitation of both the American people and the other peoples of the world by the exact same globe-spanning corporations.
For a few years at the end of the 1990s, and then again around 2005, America’s economy looked fabulous. Unemployment was at a low, the stock market boomed, and wages ticked up a bit. But the structure of the economy was radically different than before the overthrow of antimonopoly law. Instead of the wide distribution of property and power, which had long held in America, economic activity was now largely fenced into a few hundred or so domains, each ruled over by one or two corporate lords, their rights descending from some grant of privilege by Ronald Reagan or Bill Clinton.
It was a world that would have looked familiar to John D. Rockefeller or J. P. Morgan. Sure, the bowlers, canes, and ascots of those times were absent. But the egos, hierarchies, courtiers, and private estates made the new plutocratic era seem almost English in its splendor and Elizabethan in its power relationships.
In addition to the Walton clan from Longshelfington, there was Lord Gates of Dosminster and Viscount Koch of Carbonbourne. And Earl Ellison of Erpcester and Baron Dell of Wintelford. And Duke Buffett of Conglomerary and Lord Welch of Turbine Old Hall. And Earl Stonecipher of Airehaven and Baron Tyson of Nuggetshire. And Lord Malone of Settopboxsett and Viscount Dimon of Vaultingham.
There were lords of candy (the Mars family), sneakers (Phil Knight), casinos (Sheldon Adelson), pop music (David Geffen), brokerage services (Charles Schwab), glossy magazines (Si Newhouse), cruise ships (Micky Arison), real estate (Sam Zell), heavy construction (the Bechtel family), pipelines (Richard Kinder), bathrooms (the Kohler family), cosmetics (the Lauder family), hotels (the Hilton family), and financial data (Mike Bloomberg). Some domains, like Wrigley’s gum, dated to the nineteenth century. Others, like the opium of the Sackler family, hearkened to the days of the old China trade, only now opium was a product pushed right here at home in America.
Some lords were more powerful than others; Rupert Murdoch, for a while, owned his own political party.27 And the masters of funds like Blackstone and Renaissance—the Paulsons and Simonses and Dalios and Schwarzmans—often controlled many domains all at once.
A few pirates—like Carl Icahn and T. Boone Pickens—strode the halls. But the competitions—for precedence and power—had an almost chummy character. And indeed, the lords carefully reinforced their rule through ownership, governance, industrial, and financial structures that tied them to one another in a single community of property and power.
These lords formed, very much, a society, with the ability to identify and exclude the outlier. Some—think Dennis Kozlowski, a conglomerate maker who was convicted for buttressing his holdings through crude fraud—had been thrown in the tower. A few—think Dan DiMicco, the steel manufacturer, sworn enemy of Chinese imports, and ultimately one of the masterminds of the Trump campaign of 2016—had been locked outside the walls, to plot, angrily.
It was a world that was, in fact, almost fully internationalized or, to use Bill Clinton’s favorite term, “globalized.” In the mountain aerie of Davos, the American peers mingled with the grandees of Carrefour, ArcelorMittal, Gazprom, Samsung, Tata, SoftBank, and LVMH.
In 1998, the historian and business consultant Daniel Yergin wrote that “the decamping of the state from the commanding heights marks a great divide between the twentieth and twenty-first centuries.” And indeed, these new lords, as they looked down from the peaks of the Alps, could rightly fancy themselves the rulers of all they surveyed.28
And yet, even so, those few years of fin de siècle plutopian triumphalism look now like an almost innocent time. There was still some coherence to the political and economic structures, still some ability to raise a sigh about the immorality of poverty. The news media was still largely intact. Congress was still largely intact. The power of the lords was truly awesome, yet it was still highly delimited in its nature.
Timing is important in books. In 2009 David Rothkopf published a work titled Superclass: The Global Power Elite and the World They Are Making. Discussing history and sociology, Rothkopf got a lot right. But he got one key word wrong. By the time his tome hit bookstores in March 2009, the world had fallen into the deepest financial crisis since the Great Depression. It was now very clear that Rothkopf’s “power elite” had not been making the world but rather breaking it.
Underneath the glitz and tinsel, the industrial and financial systems over which these great men had captured control had become fantastically unstable. And after the collapse of Lehman Brothers in September 2008, it all came cascading down.
A more clear-sighted vision of the new power structure appeared almost simultaneous with that of Rothkopf. This was an article by Simon Johnson, who had served as the chief economist of the International Monetary Fund, titled “The Quiet Coup.” In the piece, Johnson wrote not of a “power elite” but of “an American financial oligarchy.”29 And he made clear that he did not regard this gang as particularly deserving of their positions and responsibilities.
“Regulators, legislators, and academics almost all assumed that” these oligarchs “knew what they were doing,” Johnson wrote. “In retrospect, they didn’t.”
Writing in the immediate aftermath of the crack-up, Johnson did not speculate in great detail as to why these experts had missed the warning signs. But he did offer one key piece of analysis that tied the crisis directly to the radical change in antimonopoly thinking a generation earlier. The largest U.S. banks, he wrote, had become “too big to fail.” This in turn gave them “disproportionate influence” over public policy.
That, if anything, was Johnson’s one major understatement in the article. Although the government did arrange for the shuttering of a few failed institutions, such as Lehman Brothers, in most other cases it simply used public funds to bail out these private actors. In some cases, the regulators all but demanded that the big get even bigger, and when institutions like JP Morgan Chase demurred, the officials tossed in yet more taxpayer monies to tempt the already glutted to eat more.
The Obama administration, newly in power, had in short chosen to socialize the risk that had been voluntarily assumed by these private corporations. It did so at a time when the recession was in the process of destroying nearly 10 million jobs and driving more than 9 million families from their homes.30 Perhaps not surprisingly, regulators spent a lot of time thinking up ways to hide what they were doing. “As the crisis has deepened and financial institutions have needed more help,” Johnson wrote, “the government has gotten more and more creative in figuring out ways to provide banks with subsidies that are too complex for the general public to understand.”
In the end, the monopolists did something far worse than break the economy. They also broke American politics. Millions of Americans came to understand that the new lords had captured control over the state and were now able to use the state to serve their own private purposes, by shifting tax monies from working people to themselves, or by buttressing their own power over some particular industrial activity or other. Even when they broke the financial system, the new lords kept their control. Perhaps nowhere was this more clear than when the Obama administration responded to a crisis triggered by bigness by making banks and other corporations even bigger. Which is one of the main reasons why millions of Americans began to look for alternative ways to get justice, be it through the Tea Party, Occupy Wall Street, Bernie Sanders, or Donald Trump.
Perhaps most dangerous of all, the monopolists of this first generation—once they had profited so enormously from the overthrow of antimonopoly law—failed to close the door against a far more powerful set of actors who, as we will see in the next chapter, posed an even greater threat to American democracy and American liberty.
In 2006, the business journalist Charles Fishman published The Wal-Mart Effect. In that book, he described Walmart’s unprecedented power over America’s markets—where it accounted for upward of 30 percent of total sales of many common goods. Given that very few companies can stand to suddenly lose 30 percent of their business without going bankrupt, this gave Walmart the ability, Fishman wrote, to use its “muscle” to “squeeze” suppliers, and often to “dictate” to them not only the price they could charge, but where and how to manufacture their own products. Walmart, Fishman wrote, had become a “quiet but irresistible force.”31
We are accustomed to thinking about the ways that monopolists harm us as buyers by charging higher prices and by cutting quality and supply. But the ways that monopolists harm us as makers and sellers of things can be far more dangerous to us as individuals and as a society. As monopolists exploit their power to extract various forms of wealth from the businesses and people under their sway, one result can be a destruction of the technologies, machines, and skills on which our prosperity and security depend (such as the capacity to produce N95 facemasks).32 There is also, as we will see, the bankrupting of family businesses and the destruction of entire communities. There is also the blunt political effect of being able to make even powerful people, and companies, afraid.
In the case of Walmart, the immediate effects of the corporation’s relatively sudden concentration of power fell hardest on the makers of jeans, pickles, bicycles, pet food, coolers, and other consumer goods. But Walmart was merely one of many such consolidation plays by retailers and other middlemen, and the capitalists who backed them. Between the early 1980s and the early 2000s, America’s economy was rebuilt on an entirely new plan. In place of open markets, with many buyers and sellers and many middlemen, including many retailers, one or a few supergiant retailers or trading companies now enjoyed the power to essentially govern the production and distribution of everything from medical devices to office supplies to fire safety equipment to car parts to industrial gauges.
This concentration of power harmed not only the businesses that made things but the people who worked for those businesses: in other words the actual scientists, engineers, and assembly-line workers who designed and built the products that kept us happy and alive, as well as the janitors who cleaned up afterward. As we’ve seen, recent studies have detailed how wages across America today are 20 percent or more lower, relative to the economy as a whole, than a generation ago. And further, that the main reason for this decline is that the monopolists who captured control over our markets have exploited their power to drive these wages down.
We will discuss the effects of monopsony—which is when a single corporation dominates buying of a particular good or service—in greater detail in chapter seven. What I want to focus on here are the effects on America’s farmers of having only one buyer for their crops and livestock. During Stage One of monopolization in America, from the beginning of the Reagan administration to the crash of 2008, no group of people was more harmed by the closing of markets than America’s farmers. As badly as working Americans were shafted, the average farming family was treated, relatively, far worse.
Farmers and ranchers, we all know, are not like other workers. They are independent businesspeople—family businesspeople, typically—and their interests are supposed to be protected by a right to sell into open and competitive markets and to earn fair market prices for what they sell. That’s why, in the 1920s and 1930s, when citizens were drawing up America’s modern labor law regime, which placed a number of important limits on how employers can treat workers, both Republican and Democratic administrations did not extend these laws and regulations to farmers. Instead, as we will see in more detail in later chapters, they invested heavily in building up laws, agencies, and regulatory practices designed to ensure that the price of grains, livestock, milk, and produce would be governed not by any corporate boss but by supply and demand within carefully constructed marketplaces.
In such market systems, the most fundamental goal of political economic law is “non-discrimination.” The aim of such law is simple—that everyone be given the same opportunity to succeed or fail. As we will see in more detail later, non-discrimination is key to equality of opportunity, hence to democracy and to the full liberty of the individual.
In farming, the traditional way to achieve non-discrimination is to ensure fair prices in an open market and to give farmers all the information they need to adjust their production to the realities of the moment. This is not always possible, however, when a corporation captures control over some key market gateway, such as a local slaughterhouse or grain silo. In such a case, to ensure equal opportunity requires forcing the gatekeeper corporation to treat everyone who sells into that market the same and never unfairly favor or disfavor any seller. Over the years Americans have developed many forms of common carrier law and practice to ensure equal access to all markets.
In the case of chickens, under the traditional system, farmers raised and fed their own birds, then carried them to markets where they sold them. For every pound of chicken, the farmer was paid a price that had been determined within a public market, based on supply and demand, perhaps adjusted slightly up or down based on the quality of their particular birds. Punishment was simple. A lesser or lazier farmer who brought a smaller flock to market had less to sell, hence walked off with less money. Even when the market price was low, such an open market system allowed smart farmers to adjust: they could, for instance, raise fewer chickens and devote their land and labor to other crops and animals.
Over the last generation, however, the rise of the Walmart model of control over America’s retail markets has resulted in a top-down reorganization of every level of American agriculture. As the power of monopoly retailers has increased, many corporations under the sway of these retailers have also consolidated power. This is true, for instance, of slaughterhouse corporations like Tyson and grain handlers like Archer Daniels Midland. In many parts of the country, farmers now find only one potential buyer for their products. And, not surprisingly, these monopolists use their power to dictate prices for the animals and crops the farmers grow.
The result, since the Reagan administration, has been that the farmer has gone home from market with an ever-smaller share of what America’s families spend each year on food. Earnings have been so bad, in fact, that over the last three decades millions of farm families have simply chosen to leave the land.
But Americans still need to eat, so corporations have come up with ways to keep some farmers working. In the case of chickens, Tyson and Pilgrim’s Pride provided farmers with big loans—often guaranteed by the government—to build new and bigger sheds in which to house their chickens. They also introduced systems in which they provide the farmers with the chicks they are to grow and the feed and drugs they are to use in raising them. Under these systems, the corporations then pay the farmers for how efficiently they transform chicken feed into chicken flesh.33
As should be obvious, under this new system, the farmer has for all intents been transformed into a worker. The corporation makes all the decisions about what is to be raised and how, then provides all the inputs and tools, including capital. Then the corporation measures output. About the only thing the farmer actually owns is the debt and the waste. About the only thing the farmer actually controls is when exactly to declare bankruptcy.
This new system does not retain any of the traditional protections for the American farmer. These are not markets, by any definition of the word, and farmers are not paid market prices for their crops and livestock. Nor, thanks to the nature of the debt that they took on, can they easily shift to other products. Yet the growers are still not in any way covered by labor law, which places some basic limitations on the ability of corporations to discriminate in how they treat two people engaged in the same line of work.
As a result, corporations like Tyson and Pilgrim’s Pride have been free to develop payment systems designed precisely to treat one farmer differently from the next, and to pay one farmer more or less than the next for the exact same amount of work. The corporations even have a name for this system of personalized and routinized discrimination. They call it the Tournament System.
According to the corporations, this Tournament System simply promotes efficiency and hard work. Farmers who do a better job, they say, will get paid more per pound. Those who do a lesser job get paid less. What is in fact taking place here, however, is that the corporations are taking advantage of the fact that there is no longer an open market where sellers and buyers discover the price through supply and demand. This means that every farmer must accept the price the corporation is willing to pay, and naturally the corporation chooses to pay every farmer less. But the corporations are now doing so in a way that makes it hard for all the farmers to join together and complain about the price, because when every farmer is paid a different price, no farmer has any idea what the fair market price should be.
And that’s not all. Indeed, as any chicken farmer will eagerly explain to anyone who happens by, the system is worse even than that. At no point is there any auditing of the quality of the birds or the feed the corporation provides them. At no point is there any control on the weighing of the flock when the farmer delivers it to slaughter. The entire system, in short, gives to the corporation a power that is entirely arbitrary in nature. In place of rule of law, the farmer faces rule by whim of the master, the boss, the foreman.
As one farmer once told me, the result is “a kiss ass economy.”34 In the days of the open market, the farmers were a single community, all affected in the same way by the market price. Today, in place of community, farmers fearfully bicker with one another as they compete for the favor of the foreman.
This new system of serfdom was well developed long before the stock market crash of September 2008. Indeed, one of the few bright spots of the early years of the Obama administration was the new president’s promise to do something to help America’s farmers get something like a fair shake. It was a promise that the administration’s agriculture secretary, Tom Vilsack, could have made good on simply by using the rule-making authority of his office to outlaw this corporate-controlled Tournament System.
Yet by 2010, under pressure from Republican defenders of the livestock corporations, the Obama administration suddenly quit the field, leaving America’s chicken farmers—and indeed all of America’s farmers and ranchers—to the mercies of JBS, Smithfield, Monsanto, Tyson, and a few other multinational corporations, most of which are now foreign owned.
The main message for the corporate lords of America and the world? You are at liberty to rule over your domains, and over your people. Both belong entirely to you. And every day, you can make your people dance to whatever tune you play, in whatever way you wish.