There was a time when monopolistic control over sectors of the US economy was vigorously checked through antitrust enforcement, but the neoliberal ideology of the Chicago economists (Milton Friedman et al) has eroded competition in America by convincing regulators that monopolies only need to be policed under very specific (and almost unheard-of) circumstances.
The result has been a catastrophe for the American economy, devastating small businesses, minority-owned businesses, the middle class, the justice system, and the economy as a whole. The system is propped up by $1000/hour “experts” who defend this vacuous ideology, colonizing both political parties.
Nobel economist Joseph Stiglitz provides a concise, comprehensible and comprehensive look at the monopoly problem in America in the transcript of a speech he gave last month at the Roosevelt Institute and the George Washington Institute of Public Policy. He describes how the Chicago school’s dominance of policy has allowed corporations to suppress productivity, duck taxes, lower wages, erode labor organizing, and increase inequality, destabilizing the world and setting the board up for the growth of toxic ideas like Brexit and Trumpism. He recommends the Roosevelt Institute’s Rewrite the Racial Rules: Building an Inclusive American Economy as a prescription for righting this situation, and offers a handful of specific recommendations of his own.
The adverse consequences of the resulting inequality are obvious. But there are numerous indirect consequences, which result in a more poorly performing economy. First, this wealth originating from the capitalization of rents, what I shall call rent-wealth, crowds out capital formation. The weak capital formation of recent years is part and parcel of the growth of rents and rent-wealth—leading to economic stagnation. Secondly, with monopolies, the marginal return to investment is lower than the average return—they know that their prices may decline if they produce more—explaining the anomalous result of huge corporate profits but low corporate investment rates, even as the cost of capital has plummeted. Third, the distortions in the allocation of resources associated with market power lead to a less efficient economy. Fourth, in particular, market power has been used to stifle innovation—just the opposite of the claim of the Chicago School. There is evidence of a decline in the pace of creation of new innovative firms, and especially of new firms headed by young entrepreneurs. Fifthly, the ability of these new behemoths to avoid taxation means that the public is being deprived of essential revenues to invest in infrastructure, people, and technology—contributing again to our economy’s stagnation and distorting our economy by giving these firms an unfair competitive advantage. Sixthly, with money moving from the bottom of the pyramid to the top, which spends a smaller share of income, aggregate demand is weakened, unless offset by other macro-policies. In the decade since the beginning of the Great Recession, fiscal policy has been restrained and, given those constraints, monetary policy has been unable to fill the breach.
America Has a Monopoly Problem—and It’s Huge
[Joseph E. Stiglitz/The Nation]