In 1987, President Ronald Reagan nominated Robert Bork to serve on the Supreme Court. Bork, who had served as solicitor general in the Nixon and Ford administrations, had been the target of public ire once before, for his role in firing Archibald Cox, the special prosecutor charged with investigating Richard Nixon’s involvement in the Watergate break-in. But nothing prepared him for what now awaited in the Senate.
Senator Ted Kennedy led the attack, in what would become the most contentious nomination fight up to that time. “Robert Bork’s America,” Kennedy charged in a speech, “is a land in which women would be forced into back-alley abortions, blacks would sit at segregated lunch counters, rogue police could break down citizens’ doors in midnight raids, schoolchildren could not be taught about evolution, [and] writers and artists could be censored at the whim of the Government.”1
Bork later ruefully claimed that not a single line in Kennedy’s speech was true. But it worked. The Senate voted 58 to 42 to reject Bork, who soon also quit his judgeship on the U.S. Court of Appeals for the District of Columbia Circuit. And the man himself would be transformed into a verb. The Oxford English Dictionary now defines “bork” as “to defame or vilify (a person) systematically, esp. in the mass media, usually with the aim of preventing his or her appointment to public office.”
Yet Bork ended up having a far more revolutionary effect on the political and social structure of the United States than even the most influential of justices. And it was due to a subject that did not appear in Kennedy’s speech—antimonopoly law. In 1978, while teaching at Yale, Bork had published a book titled The Antitrust Paradox, and it was this work more than any other that would be used to reshape how Americans not only regulate markets and corporations but understand the purpose of competition within society.
In that book, Bork made a long, intentionally arcane, often contradictory, and historically erroneous argument. But what would change America, and the world, was a four-point assertion early on in the text.
First, Bork held that “history” teaches that the sole goal of antimonopoly law is to promote the “welfare” of the “consumer.”
Second, the one clear means to achieve this end of consumer welfare is to promote “productive efficiency” that results in a lowering of the price of goods and services.
Third, antitrust law, like economics, is “a science.”
Fourth, the only way to understand how to enforce the law “with logical rigor” is to use economic “science” to understand the purpose of the law and to judge behaviors.
A more radical restatement of American antimonopoly law is hard to imagine.
For two centuries, Americans had used a vision of the liberty and independence of the citizen to guide their use of antimonopoly law. The result, as we have seen, was a wide and systematic distribution of power where possible, and where concentration was necessary, a reining in and neutralization of power. But Bork’s line of reasoning led in almost the exact opposite direction. The logic of consumerism, after all, goes like this: What do consumers want? Bigger piles of stuff. How do we get bigger piles of stuff? More efficient production. How do we produce more efficiently? Bigger manufacturers, bigger distributors, and bigger retailers. Who, ultimately, is the best friend of the consumer? The big monopolist.2
Autocrats like Louis XIV and Joseph Stalin have often used the concept of efficiency to defend the concentration of power and control in their own hands. So too America’s slave masters and, later, the monopolists of America’s plutocratic age. But such celebrations of efficiency never captured sway over the thinking of America’s citizens. Opposition tended to be immediate, absolute, and unrelenting.
One of the clearest statements of the basic American understanding of the dangers posed by aiming foremost at “efficiency” was by Louis Brandeis, in 1926, while he was serving on the Supreme Court. “Checks and balances were established in order that this should be ‘a government of laws and not of men,’” he wrote. The goal is “not to promote efficiency but to preclude the exercise of arbitrary power. The purpose [is] not to avoid friction, but, by means of the inevitable friction incident to the distribution [of power], to save the people from autocracy.”3
Bork’s work in The Antitrust Paradox was anything but innocent intellectual wildcatting. On the contrary, it was the culmination of a carefully planned overthrow of fundamental structures and strictures put in place in the early years of the Republic, an overthrow funded generously from the 1950s on by some of the richest and most powerful corporations and individuals in America.4
In the years since Ronald Reagan and Margaret Thatcher were first elected to power in the United States and Britain, many progressives and liberals have told the same basic story of decline and fall. According to this account, the reactionary forces centered their efforts on the overthrow of labor unions and the privatization of properties and activities that had been owned by, and managed by, the public.
What we see in the work of Robert Bork is that the reaction also had a third primary goal—or rather a much more fundamental goal. This was to lift all restrictions on the right of capitalists to concentrate their power, not merely in the form of banks and investment funds but especially in the form of the monopoly corporation, the capitalist’s main tool for exercising power within the political economy.5
Depending on the audience, Bork and his allies also spoke of how their work promoted individual liberty. Of course, this was not the liberty of the individual citizen to master one’s own self but rather the liberty of which Lincoln had warned so eloquently, in which it is the master who is loosed to lord over the individual.
And yet the efficiency argument ultimately won the day. In 1981, a mere three years after Bork published The Antitrust Paradox, the Reagan administration’s first antitrust enforcer, William Baxter, said the Justice Department would rely on an “efficiency test” to guide its response to concentrated economic power. Three years after that, Reagan’s second antitrust enforcer, J. Paul McGrath, in his first speech in office, declared that the main goal of antitrust enforcement would be “consumer welfare.”6
At a stroke, the main body of law that had undergirded the American System of Liberty was overthrown, not piecemeal but all at once, by this adoption of an entirely new set of guidelines and principles by which to interpret the law. It was a true coup, the single most dramatic reversal in political economic regulation in American history.
The ease of the success astounded even Robert Bork himself. In the introduction to a 1993 reissue of The Antitrust Paradox, he was able to report that over the previous 15 years “what has happened to antitrust amounts to a revolution.” He then admitted that he had not seen it coming. “I failed to anticipate the rapid improvements that were about to occur.”
Finally, Bork shared the main lesson he had learned. “My pessimism,” he concluded, had “resulted from a serious underestimation of the power of ideas.”7
It is a truism of American thought that our nation does not have a hard right or a hard left, or that these movements at most play a marginal role in our political life.
If we define hard right and hard left as openly advocating the complete overthrow of one-person, one-vote democracy, and the imposition of political dictatorship, be it of the “proletariat” or the oligarchs, then this belief is correct. But if we define hard left and hard right as advocating the complete overthrow of America’s open and democratic economic system of one person, one property, and the imposition of commercial and industrial dictatorship, be it by the private estate or the state, then this belief is false.
As we saw in chapter five, America’s hard right and hard left were on full display in the election of 1912. The hard right was exemplified by the banker J. P. Morgan’s tight control over most of America’s vital industrial sectors, as wielded through his financial control over the monopoly corporations that directed these activities. The hard left, with its vision of a dictatorship by the state over the actions of these monopoly corporations, was best exemplified by Teddy Roosevelt himself, as we saw in his Osawatomie speech.
It was this American left of the early twentieth century that first developed the concept of “consumer” as it would be understood over the next 100 years, and as Robert Bork and his allies would wield it politically beginning in the late 1970s. Although we can trace the origins of the concept to late nineteenth-century Germany, for a mature vision of the political purpose of the concept, we can turn to the 1914 book Drift and Mastery by Walter Lippmann, who was then Roosevelt’s close ally.
Lippmann’s basic argument can be boiled down to five short quotes:
What we see reflected in Lippmann’s reasoning is a fundamentally new claim about the nature of the American public and of how the public operates within the American political system.
The traditional view of how Americans come together—be it within the town square or legislature—was expressed by James Madison in “Federalist 51.” In discussing how to protect the interests of minorities against dictatorial majorities, Madison wrote of the natural separation of the public “into so many parts, interests and classes of citizens.” In this, Madison meant not merely differences in wealth but differences in profession, as he believed that farmers and mechanics, merchants and carters, craftsmen and sailors, all viewed the world in slightly different ways and hence sought different outcomes through their political activities.
Such distinctions, Madison wrote, will ensure “that the rights of individuals, or of the minority, will be in little danger from interested combinations of the majority … In a free government the security for civil rights must be the same as that for religious rights. It consists in the one case in the multiplicity of interests; and in the other in the multiplicity of sects.”
Lippmann himself does not take on Madison’s view directly, but his friend and colleague Walter Weyl did, in a book published at roughly the same time, called The New Democracy. “The producer,” Weyl wrote, “is highly differentiated. He is banker, lawyer, soldier, tailor, farmer, shoeblack, messenger boy. He is capitalist, workman, money lender, money borrower, urban worker, rural worker. The consumer, on the other hand, is undifferentiated. All men, women, and children who buy shoes … are interested in cheap good shoes.”9
This common interest, in turn, Weyl wrote, provides an immense political opening. “The consumers of most articles are overwhelmingly superior in numbers to the producers,” Weyl wrote.10 The “common hostility” to getting ripped off is what allows the individual, viewing the world through the eyes of a “consumer,” “to compromise conflicting interests within the group [and] to secure a united front against a common enemy.”11
In Madison’s view, the aim is to prevent the formation of a mob. In that of Lippmann and Weyl, the aim is precisely the opposite—to forge a mob that would in turn help to empower a strongman, in this case Teddy Roosevelt, to hammer “enemies”—in this instance the people who grow and make what we consume—into submission.
In the thinking of Lippmann and Weyl and their allies, we also see a new claim about the nature of the individual, one that has had important political and psychological effects. As we have seen, the American System of Liberty was based in fundamental ways on a conception of the citizen as a producer, maker, thinker. The citizen’s primary responsibility, according to this line of reasoning, is to fight for the liberty to sell or otherwise share what she has created, without restriction, at fair market prices.
The concept of “consumer,” by contrast, reinforces the idea that the individual, rather than desiring more liberty to create, really desires only more stuff. Over time, this alternative vision of the individual affects how we understand market and corporate structures and our place within them. As we cease to view ourselves as producers, we also cease to fight for the liberty to freely sell and share what we create. This in turn means we spend less time guarding against the concentration of power within the political economy and increasingly lose our ability even to recognize the clenching of the fist that will be used to beat us down. Having been transformed into mere subjects of another’s power, rather than stand and fight, we cower and whine.
Not surprisingly, Brandeis fully understood the danger of the concept of the consumer. In 1913, in an article in Harper’s Weekly, he belittled the idea that consumers could ever act as a coherent political group. All the capitalist had to do, Brandeis said, was dangle the promise of lower prices in their faces, and the army would collapse.
“Americans should be under no illusions as to the value or effect of price-cutting. It has been the most potent weapon of monopoly—a means of killing the small rival to which the great trusts have resorted most frequently. It is so simple, so effective. Far-seeing organized capital secures by this means the co-operation of the short-sighted unorganized consumer to his own undoing. Thoughtless or weak, he yields to the temptation of trifling immediate gain, and, selling his birthright for a mess of pottage, becomes himself an instrument of monopoly.”12
The idea that the Reagan administration would attempt to radically weaken or even overthrow America’s antimonopoly laws was not surprising in 1981, and it’s not surprising now. The Republican Party of Ronald Reagan was not the party of Dwight Eisenhower and Richard Nixon, both of whom operated within the policy framework provided by the New Freedom and the New Deal. The philosophy of Reagan’s Republican Party, by contrast, had been shaped by the libertarian musings of Milton Friedman, Ayn Rand, and Barry Goldwater. Reagan’s team came to power armed to fight for more liberty for the master. Their goal was not to capture power over the American System of Liberty; it was to destroy that system.
The big question, for Reagan officials, and for the American people, was how Democrats would react. Members of the Democratic Party had been the main architects of the modern antimonopoly regime and had long been its most staunch defenders. And indeed, the antimonopoly fires had burned hot right through the 1970s, fueled by leaders as diverse as Lyndon Johnson, Robert Kennedy, Teddy Kennedy, and Michigan senator Phil Hart.13
Yet when Baxter announced that henceforth antimonopoly enforcement would be subjected to an “efficiency test,” the outrage was limited.
In the Senate, the Ohio Democrat Howard Metzenbaum accused Baxter of breaking the law and wrote that he had shown “disdain” for “the entire political and social dimension” of America’s antimonopoly policy.14 Many moderate Republicans joined in opposition, with Pennsylvania senator Arlen Specter calling Baxter’s plan “a most unusual and extreme situation.”
What was far more noticeable, however, was the approval that came from across the aisle. Less than a month after Reagan took office, the New York Times ran an article about how big business “breathes easier” thanks to the new approach to antitrust. The article included a quote from Lester Thurow, identified as “a liberal economist” at the Massachusetts Institute of Technology. “Realistically, the Reagan Administration can only focus its deregulation efforts in one or two key areas,” Thurow said. “If I had to choose one, I’d get rid of antitrust.”15
The revolution in thinking in the Republican Party, in the years leading up to Reagan, has been well documented. Thanks to such works as Matt Stoller’s Goliath and Angus Burgin’s The Great Persuasion, we know the names of the main intellectuals who promoted liberty for the master.16 In addition to Bork, this list includes the economists Milton Friedman and Alan Greenspan, and the legal scholars Aaron Director and Richard Posner (whom we will discuss in more depth in the next chapter). We also know what think tanks and other institutions were enlisted in selling this idea, including the Heritage Foundation, the American Enterprise Institute, the Cato Institute, and Reason magazine. And we know who paid the bills; among them, in the early years, the Walgreen family and, in more recent times, the Koch brothers.17
Far less well understood is that a very similar intellectual and political revolution also took place in the Democratic Party during these same years, one that was in many ways very closely tied to the libertarian revolution in the Republican Party.
It’s important to recognize the role played by Ralph Nader, whose pioneering campaigns in the 1960s against unsafe automobiles and other products had jump-started the long-moribund consumer rights movement. Nader and other members of his team understood that concentration of power led to “many forms of injustice,” including lower productivity, less innovation, greater pollution, and corruption of the political system. Nevertheless, Nader and his team strongly embraced the idea that the prime goal of antitrust should be “consumer welfare,” as measured not only by safety and quality but also price.18
But Nader and his “raiders” were mainly activists, their influence more a matter of concentrated numbers than concentrated thought. The radical change in the Democratic Party’s approach to antitrust during these years, on the other hand, was mainly a product of a deeper and more substantive change in philosophy that was driven largely by an economist named John Kenneth Galbraith.
The story here leads directly back to that same great election of 1912. Even though that vote brought Woodrow Wilson and Louis Brandeis to power, it did not destroy the statist vision of Teddy Roosevelt and his friends. On the contrary, the basic ideas of Roosevelt’s campaign—that competition was wasteful, consolidation was efficient, and the state should direct the economy—were passed from generation to generation of progressive thinkers. One of the most important was Thorstein Veblen, whose books included The Engineers and the Price System. Another—as we saw in the last chapter—was the Columbia University economist Rexford Tugwell, who carried this line of thinking into the early days of New Deal.
By the 1970s, however, the single most important influence was Galbraith, who, in the words of the historian Sean Wilentz, “was the most renowned and, arguably, most influential liberal economist in the United States during the decades after the Second World War.”19
In some respects, Galbraith was a hero. A passionate opponent of the Vietnam War, he was also a pioneering environmentalist and an insightful critic of the effects of mass advertising. But like Teddy Roosevelt and the other statists of that line, Galbraith promoted a fundamentally materialistic and deterministic understanding of economics. And although his prose is often elegant and witty, Galbraith delivered his drolleries in an intentionally passive language designed to present certain political economic outcomes as all but inevitable.20
The one great exception to this rule came when Galbraith spoke of antitrust. Here his hatred was virulent. “The antitrust laws are … a blind alley along the path to reform … a cul-de-sac in which reform can safely be contained.” Their main purpose, he wrote, was to provide lawyers with “a rewarding pecuniary return,” much “in the manner of traditional automobile insurance.”21
The overarching economic effect of antitrust law, Galbraith added, was to keep many industries “in a limbo of nondevelopment or primitive development.”22 By contrast, the workers and executives in big business were doing just fine. “In the planning system,” he wrote, “workers are defended by unions and the state and favored by the market power of the employing corporation which allows it to pass the cost of wage settlements along to the public. Workers in this part of the economy are, relative to those in the market system, a favored caste.”23
Galbraith long feared being vilified as a Communist, and through the 1950s and 1960s he had hidden the centralizing, statist, command-and-control nature of his thinking behind vague observations about the similarity of the U.S. and Soviet political economies. But in the wake of the social revolutions of the late 1960s and early 1970s, Galbraith finally felt confident enough to dare to reveal his ultimate goal, which he did with a carefully constructed two-step argument toward the end of his 1973 book Economics and the Public Purpose.
Of America’s independent retailers, farmers, and light manufacturers, he wrote, “The only answer for these industries is full organization under public ownership. This is the new socialism which searches not for the positions of power in the economy but for the positions of weakness.”24
Galbraith then turned his eye toward big industry. “But the story is not yet complete,” he went on. “The case for socialism is imperative in the weakest areas of the economy. It is also paradoxically compelling in the parts of exceptional strength. It is here the answer, or part of the answer, to the power of the planning system that derives from bureaucratic symbiosis.”25
In retrospect, standing in the America of today, within a political economy characterized by such vast concentrations of private and unaccountable power, in a society so deeply warped and twisted by the pro-monopoly policies of Ronald Reagan, Bill Clinton, and Donald Trump, the naïveté of Galbraith’s thinking is as bright as Death Valley at noontime.
Yet the influence of Galbraith’s work spread far beyond the influence of those like Thurow, who joined in advocating for the complete overthrow of antitrust laws. We see it in the thinking of Nader and his team, who adopted large parts of Galbraith’s analysis and openly advocated for breaking the power of America’s independent businesspeople and unionized working people.26 We see it in the thinking of many of the progressive antitrust scholars of Galbraith’s day. This includes Alfred Kahn, an economist who—as Jimmy Carter’s “inflation czar” in the 1970s—played a major role in taking apart the market structures of the New Deal. Kahn had somehow concluded that the wealth and power of flight attendants, truck drivers, assembly-line workers, and other middle-class union members was the main factor driving prices in America up, rather than the OPEC oil cartel and unsettled debt from the Vietnam War. “I’d love the Teamsters to be worse off. I’d love the automobile workers to be worse off,” Kahn said in 1981, soon after Carter had lost his bid for reelection. “[T]here’s no way of making improvements for the consumer without limiting the monopoly profits of either the workers or the laborers.”27
Even more importantly, the influence includes Donald Turner, a legal scholar who headed the Justice Department’s Antitrust Division under President Johnson. After being bullied by the imperious Galbraith in a Senate hearing, Turner would drift from the Brandeisian structuralist approach to antitrust to a reliance on economics, thereby helping to lay the groundwork for Bork’s success in the early 1980s.28
In other words, some of the leading progressives of the 1960s and 1970s consciously strove to break three of the main constituencies of the Democratic Party of the twentieth century—the unionized worker, the independent business owner, and the farmer. And they used the same concept of “consumer welfare” employed by Bork to help construct corporations powerful enough to smash individual American workers, farmers, and entrepreneurs into complete and abject submission.
For our purposes, however, it is the career of Robert Reich that is perhaps most important, not merely to illustrate what went wrong but also to illustrate how it can be made right again. Reich today is known as one of the most energetic fighters for the economic and political well-being of the American people. This includes speaking out strongly against efforts to concentrate economic power. Yet from the mid-1970s to the mid-1990s few people did more to pave the way for the monopolist’s takeover of America. This is due, in large part, to the fact that Reich, more than any other American intellectual of the last 40 years, fused the thinking of Galbraith to that of Bork.
Reich’s debt to Galbraith is mainly as a teacher. Like other young scholars of his generation, Reich viewed Galbraith as the master explainer of political economics. And we see Galbraith’s influence throughout Reich’s body of work, from his early books of the 1980s right through Saving Capitalism in 2015, which Reich dedicates to Galbraith, and in which he includes a resoundingly clear call to “Restor[e] Countervailing Power,” a nod to what was perhaps Galbraith’s single most important concept.29
Reich’s debt to Bork is more personal. At Yale Law School in the early 1970s, where he was in the same class as Bill and Hillary Clinton, Reich studied antitrust law with Bork. He soon followed Bork to Washington, where he worked for Bork in his new position as solicitor general in the Ford administration. Then in the late 1970s, Reich carried his hybridized mix of Galbraithian and Borkian competition thinking into a stint as the head of the Office of Policy Planning at the Federal Trade Commission, having been appointed by Jimmy Carter.
Most importantly, in 1991 Reich would publish a book he titled Work of Nations. Written in the immediate aftermath of the collapse of the Soviet Union, the book is perhaps the single most libertarian political economic work ever published by a self-described progressive. The power of both the business corporation and the nation-state had all but vanished, Reich wrote. The idea that people should regulate either the national political economy or international trade was, Reich contended from his perch between the statism of Galbraith and the estatism of Bork, a “naively vestigial” albeit also somewhat “charming” belief.30
During the 1992 presidential election, Work of Nations would be called the single best “primer” for understanding Bill Clinton’s approach to political economics. And indeed, given the radical pro-monopolism of the Clinton administration, this proved, sadly, to be all too true.31
Acknowledging mistakes is rare. But it is important to do so. And perhaps the single best reason to accept Reich’s work today at face value is that, in 2015, as I noted in the introduction, he did precisely that. In an article titled “The Political Roots of Widening Inequality” in the American Prospect, Reich admitted that he had been wrong to blame “globalization and technological change” for the sharp decline in the wealth and well-being of the working people of America and around the world.
“While the explanation I offered a quarter-century ago for what has happened is still relevant,” Reich wrote, “indeed, it has become the standard, widely accepted explanation—I’ve come to believe it overlooks a critically important phenomenon: the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs. And the governmental solutions I have propounded, while I believe them still useful, are in some ways beside the point because they take insufficient account of the government’s more basic role in setting the rules of the economic game.”
“Most fundamentally,” Reich concludes, “the standard explanation for what has happened ignores power.”32
Yes, here again, we see the highly passive language that helped get us into the mess in the first place. Yes, Reich still largely ignores his own role in greasing the skids that carried us toward autocracy. But at least Reich’s acknowledgment of his role in creating the “standard explanation,” which for a generation helped to hide the slow-motion political catastrophe of monopolization from his fellow progressives, allows us to understand what happened.
Reich in recent years has worked enormously hard to make amends. In doing so he provides a fine model for so many others of the “libertarian” generation—from both parties—who sold out their fellow citizens, perhaps to fatten their bank accounts or maybe just for a few hours in the flickering spotlight of fame.33
In the early 1980s, under assault by the combined forces of the right and the left, both wielding their freshly burnished concept of “consumer welfare” and their promise of lower prices achieved through the corporate dictatorship over particular sectors of the political economy, the American System of Liberty collapsed.
First to fall was the simple “bright line” system for structuring markets and divvying out property and opportunity. Put into place in the earliest days of the Republic, this system was perhaps best exemplified in the 160-acre rule for divvying up America’s farmlands.
The battle over this system of bright-line rules took place far from public view, within the walls of the Antitrust Division of the Justice Department. The field of battle was a relatively short document—called the “Merger Guidelines”—published by the Antitrust Division to ensure that law enforcers, the courts, and the business community all clearly understood the exact goals of America’s antitrust laws.
According to the guidelines published in 1968 by the generally populist administration of Lyndon Johnson, the main goal of antitrust enforcement was “identification and prevention of those mergers which alter market structure in ways likely now or eventually to encourage or permit non-competitive conduct.”34 And what was acceptable market structure? According to the Justice Department in 1968, it was that the top four companies within a market could together control no more than 75 percent of that market. The guidelines then made absolutely clear that the U.S. government would challenge any merger whatsoever if pursued by any corporation that already controlled 25 percent of any market.
Further, the guidelines emphasized that this simple rule would hold fast even if the corporations pursuing the merger could absolutely prove that the deal would result in efficiencies in the production and distribution of goods and services. On this issue, the guidelines were blunt. “[T]he Department will not accept” any such efficiency argument “as a justification for an acquisition.”35
Reagan administration officials published new guidelines in 1982, then again in 1984. At a glance, the guidelines don’t read all that differently than those published by the Johnson administration in 1968. But on close inspection, two changes stand out. First, the prime goal of enforcement became the promotion of “efficiencies” within the economy. Or as the 1984 guidelines put it, “The primary benefit of mergers to the economy is their efficiency-enhancing potential.” This meant henceforth, that the Justice Department would “allow firms to achieve available efficiencies through mergers without interference.”36
Second, the Justice Department now intended to measure such efficiencies by studying the potential effect of any particular merger on the price of the good or service being produced. To make this clear, Reagan administration officials wrote the words “price” and “pricing” 117 times in the 1984 guidelines. By contrast, in the 1968 guidelines, the words “price” and “pricing” appear but eight times.37
In practice, the change could not have been more radical. From this moment on, as long as executives could make the most rudimentary case that a merger would result in efficiencies that might eventually lower the price of some good or service, they had a license to consolidate, no matter what the political or social effects of the deal. And in case anyone chose to challenge the merger, rather than judges deciding the case based on simple rules, such as the percentage of a market controlled by each corporation, the decision whether to approve the deal would now be handled mainly by economists. These “experts” were expected (as we will discuss in more detail in the next chapter) to “scientifically” measure the “price effects” of a particular deal so as to be able to deliver a firm conclusion about the theoretical efficiencies it would create.
The second pillar of traditional antimonopoly law to fall was the regime designed to prevent price discrimination at the national, regional, or local level.
Here again, it was Bork, in The Antitrust Paradox, who made the key arguments in favor of changes that would clear the way for the radical concentration not merely of power within the political economy but also of direct control over the lives and livelihoods of individual citizens and businesses.
Bork began his attack on the laws designed to prevent price discrimination by first nodding recognition to the idea that price discrimination might indeed pose a big problem. “[T]he question remains whether antitrust should try to deal with price discrimination in some other fashion,” he wrote. “This is a more difficult question.”
Then, in the same sentence, Bork proceeded to dismiss this “difficult question” based on nothing more than personal whim. “[T]he better guess, it seems to me, is that antitrust policy would do well to ignore price discrimination.”38
A few pages later, Bork went much further and delivered a straightforward defense of price discrimination from the point of view of the seller. “The basic theory of price discrimination is quite simple,” he wrote. “When the demand elasticities of customers are different, no single price can extract the maximum return from each. If they can be segregated … the monopolist can charge them different prices and so extract the maximum return from each class.”39
Bork then used the same sleight of hand he wielded throughout The Antitrust Paradox and claimed that what was good for the monopolist was also good for the public. “There is more to the argument than this, however,” he wrote. “The case for allowing discrimination freely is strengthened by the observation that the more a monopolist is able to discriminate, the more likely becomes the favorable outcome of an increase in output.”40 Translated into the language of Brandeis, Bork was saying, in essence, that in exchange for your traditional liberty from manipulation and exploitation by all-powerful monopolists, at least we promise you a mess of pottage.
The actual subversion of the body of U.S. law designed to prevent personalized discrimination in pricing and terms, hence the centralized private control and manipulation of the flow of commerce and information in America, came in three blows.
First, a coalition led by Ralph Nader and other progressives in 1975 convinced Congress to pass the Consumer Goods Pricing Act, which overturned the Miller-Tydings Act and dealt a fatal blow to the flawed system of state-level fair trade laws and resale price maintenance.
Second, and far more important, in the 1980s the Reagan administration essentially ceased to enforce the Robinson-Patman law against price discrimination. In the 1960s the government brought 518 cases under the law. In eight years in office, the Reagan administration brought five.41
The third and most dangerous change would not be clear until the last years of the twentieth century. This was the decision by first the Clinton administration and then the administration of George W. Bush—both of which were fully under the influence of Bork’s pro-monopoly philosophy—to exempt communication monopolists, such as cable and mobile phone corporations and Internet platforms like Google and Amazon, from any and all laws prohibiting such discrimination.
When Edmund Burke used the floor of Parliament to assail the British East India Company in 1783, he focused both on the corporation’s immense political power and on how it used that power in ways that destroyed the economy and shattered social balances across wide regions of India.
“The East India charter is a charter to establish monopoly, and to create power,” Burke said. The problem was that there were no checks, no limits, on that power, which left the corporation free to extract all it could from the people and places under its control, to the point of absolute destitution.42
For the next 200 years, as we have discussed in depth, a prime goal of American antimonopoly policy was precisely to protect the citizen as a creator and producer of goods and services from the brute extractive power of such trading monopolies. Americans understood that the threat posed by these institutions was not only the potential loss of control over the production of goods vital to the independence of the nation. They understood the threat also to be the capture, manipulation, and ultimate destruction of the companies and individuals made subject to the power of monopolists who controlled the gate to the market. Hence, the practical aim became, as we have seen, to use antimonopoly to protect the liberties and properties of the citizen as creator by breaking or neutralizing any and all dangerous concentrations of private power over the market.
But the overthrow of the bright-line approach to making markets in the early 1980s, combined with the overthrow of the even more ancient rules against price discrimination and predation, cleared the way for the return of monopoly trading companies on a scale as grand and terrifying as the East India Company of the eighteenth century.
Even before the Reagan administration had published its new merger guidelines, American capitalists had begun to dust off corporate models that had sat on the shelf since the days of the New Deal and New Freedom. Foremost was the use of the chain store to capture control over entire systems of retail and production.
In some instances, capitalists would provide a retail corporation piles of cash big enough to allow them to undersell and bankrupt most rivals. This was the basic approach of Walmart, Target, and Staples. In other instances, the capitalists would provide a retail corporation with sufficient money to buy up all their rivals. One such effort brought nearly 1,000 department stores, in just about every city across the nation, under the banner of Macy’s by 2005. Another such effort brought most of the retail eyeglass market under the banner of EssilorLuxottica by 2019, either through direct control of the retailers themselves or through control over the manufacturing of frames and lenses.
For years, politicians and writers assured America’s citizens that the new trading company monopolies were a great boon for which they should be enormously grateful. No such celebration of “consumerism” and “discounterism” was more influential than Robert Reich’s. In 2007, even as America’s heavily monopolized economy was beginning to collapse into the Great Recession, Reich in his book Supercapitalism explained how it was we, the consumers, who were the true masters of America’s political economy, not the financiers who were concentrating these powers.
“[E]conomic power has shifted to consumers and investors, and away from large corporations and unionized workers,” Reich wrote. And what had we demanded, with our new power? Efficiency. “We as consumers have threatened to take our business elsewhere unless they do things as efficiently as possible,” Reich explained. It was via “consumer intermediaries like Wal-Mart,” he said, that we applied our pressure and delivered our threats to the companies and people who actually supplied us with goods and services.43
Today it is clear that, rather than carry out the diktats of the all-powerful consumer, the masters of Walmart and Amazon and other market-bestriding trading monopolies chose instead to use their gatekeeper power to impose a series of taxes, and economic levies and social revolutions, on the rest of us.
Consider, for instance, the personal properties that for 200 years served to ensure the economic self-sufficiency and political independence of millions of American families. Over the last generation, capitalists from America and around the world were left largely free to use massive trading companies simply to seize millions of these properties—in the form of the family farm, family store, and family manufacturer—for themselves. They did so largely by driving these enterprises out of business. Indeed, since the early 1980s, the American people have been the victims of perhaps the greatest seizure of personal properties in history, other than in the early years of Soviet Russia and Maoist China.
This mass expropriation of independent farms and businesses by capitalists wielding trading companies, in turn, has been the single most powerful driver of the degradation of democratic community in America. For two centuries, Americans used antimonopoly to ensure that the businesses that served the cities and towns of America would be run by the people who lived in them. Today, it is the masters of these globe-spanning corporations who increasingly control our communities as distant—and largely absentee—landlords.
Even more immediately dangerous are the effects of the brute extractive power of such trading monopolies on the people, and systems of human industry, over which they exercise control. Exactly as was true of the East India Company, trading monopolies like Walmart and Amazon today use their gatekeeper power to regulate and govern, through increasingly autocratic means, the people who depend on them to get to market. One result has been the steady extortion of wealth and power from the people who actually make the goods and services we buy. As I detailed in my last book, Cornered, this extraction often continues to the point—exactly as was true of the East India Company—of their complete destruction.
Importantly, this trading company model can be applied beyond retail. Over the last generation, corporations as diverse as Boeing, General Electric, Monsanto, and the BNSF railway have reorganized their operations in ways designed to enable the financiers who “own” these institutions to exercise greater control over, and to extract ever more wealth from, the people and companies who actually create the products and services these corporations sell. Often they do so to the point of destroying even the most vital of skills and capacities, such as the ability to develop safe software for airliners like Boeing’s 737 MAX.44
It is natural to believe that the main harm of monopolists is that they charge citizens ever more for the same good or service. And today’s monopolists certainly do, for everything from drugs to milk to airline seats to hospital beds to eyeglasses to syringes.45 But as Americans well understood for the first two centuries of our nation, the far bigger danger posed by trading monopolists comes from their power to pay the citizens and companies under their sway ever less for the same work.
And indeed, just about every ill in our society today is the result of, or has been greatly worsened by, the destruction of America’s open market systems and the concentration of power by these immense trading companies over the American people in their roles as the creators, makers, growers, and providers of the goods and services we then consume.
The executives of these corporations have used concentrated power to drive down wages and benefits, which makes it often vastly harder to change jobs. They have used that power to drive manufacturing offshore and to drive down the quality and variety of even basic products and services. They have used that power to drive farmers off their land and to drive livestock into industrial warehouses. They have used that power to drive fossil fuels into our cars and homes and hydrocarbons into our atmosphere. They have used that power to drive newspapers into bankruptcy and to drive foreign propaganda into our elections. They have used that power to drive musicians and book authors and scriptwriters out of business. They have used that power to block us from placing the most simple of renewable technologies in our own homes and to destroy vital systems of technological innovation, including the human skills needed to address the disruption of climate change.46
Perhaps most outrageously, the executives of these corporations have taken advantage of their monopoly power to strip many of our most vital industrial and financial systems of the most basic forms of redundancy and resiliency. This has created existential threats to both the United States and the world as a whole. This was made shockingly clear when the Covid-19 crisis revealed that the United States had come to rely on Chinese factories for our supply of even the most simple facemasks and cotton swabs, and that entire systems of production depended on single factories on the far side of the world.
A generation ago, there were multiple sources of supply in the United States and around the world for almost every imaginable industrial product and for every imaginable component of those products, including every important metal, chemical, and electronic device. As a result, it was all but impossible for any individual nation-state or corporation to be able to threaten the basic well-being of the American people through any action short of war.
Since then, however, the executives and financiers who control our trading monopolies have used their power to shut down vast portions of the industrial capacity of the United States and our closest allies in Europe and Asia, in the theory that doing so would result in more efficient systems of production.
One result has been to open the United States to entirely new forms of coercion, as actors ranging from the Chinese state to Kim Jong-un to democracy protesters in Hong Kong can now plausibly threaten to disrupt the manufacture and transportation of goods that are vital to the well-being of the American people.
Another result has been to open the United States, and indeed the whole world, to the threat that these vital systems of supply might suddenly collapse, perhaps in catastrophic fashion. The concentration of essential industrial capacities in single locations has created numerous “single points of failure” within these systems. This means, as I detailed in my first book, End of the Line, that a wide variety of events—not only political conflict but earthquakes, financial crashes, and epidemics—can today disrupt the normal flow of trade even to the point of triggering complete social collapse.47
Under the “consumer welfare” model of economic organization, in other words, in exchange for the theoretical benefit of a few pennies in savings, a few financiers and their C-suite allies constructed systems of autocratic corporate control over us, then used their new power to strip us of our wealth, our liberty, our dignity, and our most basic forms of security.
In 2001, a Berkeley economics professor named Hal Varian co-wrote a paper titled “Conditioning Prices on Purchase History.” Varian was already a highly successful author of what are now standard microeconomics textbooks for the information economy.
Although the paper may seem highly arcane, Varian was very clear about his purpose. He wanted to examine whether the technologies and structures of online commerce made it easier for sellers to charge different people different prices for the same product, or to charge different people the same price for different-quality versions of the same product.
“The rapid advance in information technology now makes it feasible for sellers to condition their price offers on consumers’ prior purchase behavior,” Varian and his co-author wrote. “In this paper we examine when it is profitable to engage in this form of price discrimination.”
Varian’s conclusion? Yes, it is absolutely profitable if you are an online seller. “[I]f enough customers are myopic, or the costs of anonymizing technologies are too high, sellers will want to condition pricing on purchase history.”
And for the buyer, Varian included a warning. “[P]urchasing at a high price is not the best strategy, since it guarantees that [you, the consumer] will face a high price in the future.”48
In other words, online sellers can study you and use what they learn about you to manipulate you and fleece you, by providing you with prices, terms of service, and information tailored specifically to exploit your personal weaknesses and needs. And there’s almost nothing you can do about it.
Within a year of his paper, Varian would head in an entirely new direction in his career. In 2002, two years before Google went public, CEO Eric Schmidt hired Varian as a consultant to help the corporation develop its new business plan. By 2007 Varian had risen to the position of chief economist within Google. Today Varian is, by almost any measure, immensely successful. Not only is he relatively rich, he can correctly claim that his economic vision is at the center of the most awesome and sophisticated systems for manipulating human behavior ever built by private enterprise—namely Google and Amazon.
What made the work of Varian and his co-author so especially valuable was that he was able to show how corporations could apply first-degree price discrimination to buyers. Until the Internet, retailers had largely lacked any real ability to engage in routine price discrimination, whether they believed the practice to be legal or not. Varian, however, was able to describe in very simple terms that in the online world then fast emerging, in which essential platform monopolists were able to study you, the buyer, in a myriad of ways, first-degree price discrimination was not only feasible but could also be highly profitable.
For most of American history, when citizens fought against price discrimination, the danger they saw was that a gatekeeper would use such tools to manipulate and exploit citizens in their capacity as sellers of goods and services. Citizens viewed such discrimination as essentially political in nature. Not only was it a way to extort the seller unto his last penny but it was a way to capture control over the seller and manipulate the actions and words of the seller not only in the commercial realm but in the political. The danger they saw, in short, was that the gatekeeper would use his power to turn the seller into a stooge.
As we saw earlier in this chapter, thanks to the writings of Robert Bork and his allies, over the last generation most traditional restrictions on price discrimination have been taken down or blithely set aside and ignored. As a result, corporations such as Walmart, Comcast, Google, and Amazon are now largely free to treat you, as a seller of goods or work or ideas, differently than they treat your competitors.
Nowhere is this truer, or more important politically, than in those parts of the economy controlled by the online platform monopolists. As we saw in chapter two, it is the collapse of traditional antidiscrimination laws that provides Amazon with its license to manipulate the actions of book publishers. And that provides Uber with its license to arbitrarily manipulate the actions of drivers. And that provides Tyson with its license to arbitrarily manipulate the actions of farmers.
The stoogification of America, in other words, is already well under way. It is trained on you and your neighbors, in your capacity as producers and creators.
Thanks to the work of Varian and other thinkers, the world’s biggest corporations have now perfected the ability to apply these same basic manipulative tools to you as a buyer. As Varian understood two decades ago, Google and similar digital platforms can gather and store vast amounts of information about you, then use that information to deliver you different prices and different services than they deliver to your neighbor, your partner, your co-worker, your rival. Their goal is not only to extract more money from you. It is to learn how to manipulate your behavior ever more perfectly, day after day after day.
And today Google, Amazon, and a growing number of other online platforms do precisely that. Even old-line retailers like Walmart do so, right in their stores, through the use of such tools as personalized coupons. Such discrimination is also becoming common in sectors of the economy far from the consumer realm where we spend most of our time. Monsanto, for instance, routinely prices its seeds and chemicals based on its knowledge of how much a particular farmer earned selling last year’s crop. If the farmer had a bumper year, she must pay Monsanto more.
In the case of Google, the license to deliver different pricing directly actually does not matter all that much. The corporation simply does not sell that many goods or services directly to you. Instead Google makes almost all its money off the sale of advertising to companies that do aim to sell something directly to you.
What makes Google so attractive to these buyers of advertising is not that it has a license to price differently but that it has a license to deliver you a different service than it delivers to other people, in the form of different information. Google may provide you different search results. Or a different route on a map. Or different music on YouTube. Or different news or political information. In other words, Google is selling its ability to manipulate you.
The fundamental danger lies not in the algorithms these corporations use. Nor does it lie in the vast tranches of data they collect. Nor even, necessarily, in the monopoly nature of their business structures.
None of these things, on their own, make Google and Amazon and Facebook—and a few other similar corporations—so especially dangerous. What makes them dangerous is their license to manipulate you in ways designed to alter your behavior, to alter your purchases, to alter your pathway through the world, to alter your vote, to alter your thought.
That’s why, time and again in American history, citizens have required every essential intermediary to treat everyone the same and banned personalized discrimination in pricing and in terms of service.
The most terrifying of all of Robert Bork’s legacies was to create the legal license that allows Google, Amazon, and Facebook to discriminate among individual sellers and buyers, hence to manipulate these people and these companies. The legacy of Hal Varian was to identify the intellectual tools that enable Google, Amazon, and Facebook to understand how to discriminate in ways that have been not merely profitable but enormously so, and that give these corporations increasingly terrifying powers over the individual.
The practical immediate effects of this concentration of power and control are far too many to list here. But three especially stand out:
The collapse of open market systems, as online platforms like Amazon use their knowledge of the citizen as both seller and buyer to determine not merely the pricing and terms of transactions but even who gets to deal with whom.
The collapse of open democracy, both at home and in some of our closest allies around the world. This results from the practice by Google and Facebook of renting out their manipulation machines to almost any comer, in ways that degrade and destroy the systems designed to provide citizens with reasonably trustworthy news and information. It results also from the exploitation by Google, Facebook, and Amazon of their license to open and close the gate to the market as they alone see fit, which in turn gives them effective political control over anyone who depends on them to sell their services and wares.
The collapse of the public, and of society itself. As pricing and other forms of information are personalized for each individual by corporations engineered to know every financial and psychological secret, citizens are fast losing their ability to identify common interests and to concentrate their thinking in the ways necessary to concentrate their will.
Here in America, the license that Google and Amazon and Facebook enjoy to deliver different prices and different information to each of us is license to shatter our society into 320 million individuals, every one of whom now orbits separately around these immense centralized powers, every one of whom is now directed individually from afar, a tiny satellite drifting outside any real community in cold dark space.
But then again, maybe it’s all for our own good. As Varian wrote in that pioneering paper so many years ago, personalized manipulation by the monopolist of the individual may ultimately “have positive effects on consumer welfare.”49
Thank goodness. More pottage, for the enthralled.