The Monopolization of America

America used to have antitrust laws that stopped corporations from monopolizing markets. No longer. It is a hidden upward redistribution of money and power from the majority of Americans to corporate executives and wealthy shareholders.

You may think Americans have lots of choices, but take a closer look:

1. The four largest food companies control 82 percent of beef packing, 85 percent of soybean processing, 63 percent of pork packing, and 53 percent of chicken processing; 

2. There are many brands of toothpaste, but 70 percent of all of it comes from just two companies;

3. You may think they have choices for sunglasses, but they’re almost all from one company: Luxottica – which also owns nearly all the eyeglass retail outlets;

4. Practically every plastic hanger in America is now made by one company, Mainetti;

5. What brand of cat food should one buy? Looks like lots of brands but behind them are basically just two companies. 

6. What about pharmaceuticals? Yes, you can get low-cost generic versions. But drug companies are in effect paying the makers of generic drugs to delay cheaper versions. Such “pay for delay” agreements are illegal in other advanced economies, but antitrust enforcement has not laid a finger on them in America. The cost is an estimated $3.5 billion a year.

7. You think they have a lot of options for booking discount airline tickets and hotels online? Think again. They have only two. Expedia merged with Orbitz, so that is one company. And then there’s Priceline.

8. How about your cable and Internet service? Basically just four companies (and two of them just announced they’re going to merge). 

The problem with all this consolidation into a handful of giant firms is they don’t have to compete. Which means they can – and do – increase prices.

Such consolidation keeps down wages. Workers have less choice of whom to work for have a harder time getting a raise. When local labor markets are dominated by one major big box retailer, or one grocery chain, for example, those firms essentially set wage rates for the area. 

These massive corporations also have a lot of political clout. That’s one reason they’re consolidating: Power. Antitrust laws were supposed to stop what has been going on. But today, they’re almost a dead letter.

In the new economy, information and ideas are the most valuable forms of property. This is where the money is. Google and Facebook are now the first stops for many Americans seeking news. Meanwhile, Amazon is now the first stop for more than a half of American consumers seeking to buy anything. Contrary to the conventional view of an American economy bubbling with innovative small companies, the reality is quite different. The rate at which new businesses have formed in the United States has slowed markedly since the late 1970s. Big Tech’s sweeping patents, standard platforms, fleets of lawyers to litigate against potential rivals, and armies of lobbyists have created formidable barriers to new entrants. Google’s search engine is so dominant, “Google” has become a verb. The European Union filed formal antitrust charges against Google, accusing it of forcing search engine users into its own shopping platforms. And last June, it fined Google a record $2.7 billion. 

Economic and political power cannot be separated because dominant corporations gain political influence over how markets are organized, maintained, and enforced – which enlarges their economic power further. Big Tech — along with the drug, insurance, agriculture, and financial giants — is coming to dominate both U.S. economy and U.S. politics.

 

Reference:

 

The Monopolization of America: The Biggest Economic Problem You’re Hearing Almost Nothing About, Robert Reich (http://robertreich.org).