Many people blame the great real estate bubble of recent years. The idea here is that once a bubble pops it can destroy more real-world business activity—and jobs—than it creates as it expands. There is some truth to this. But it doesn’t explain why, even when the real estate bubble was at its most inflated, so few jobs were created compared to the tech-stock bubble of the late ’90s. Between 2000 and 2007 American businesses created only seven million jobs, before the great recession destroyed more than that. In the ’90s prior to the dot-com bust, they created more than twenty-two million jobs.
Others point to the diffusion of new technologies that reduce the number of workers needed to produce and sell manufactured products like cars and services like airline reservations. But throughout economic history, even as new technologies like the assembly line and the personal computer destroyed large numbers of jobs, they also empowered people to create new and different ones, often in greater numbers. Yet others blame foreign competition and offshoring, and point to all the jobs lost to China, India, or Mexico. Here, too, there is some truth. But U.S. governments have been liberalizing our trade laws for decades; although this has radically changed the type of jobs available to American workers—shifting vast chunks of the U.S. manufacturing sector overseas, for instance—there is little evidence that this has resulted in any lasting decline in the number of jobs in America.
Moreover, recent Labor Department statistics show that the loss of jobs here at home, be it the result of sudden economic crashes or technological progress or trade liberalization, does not appear to be our main problem at all. Though few people realize it, the rate of job destruction in the private sector is now 20 percent lower than it was in the late ’90s, when managers at America’s corporations embraced outsourcing and downsizing with an often manic intensity. Rather, the lack of net job growth over the last decade is due mainly to the creation of fewer new jobs. As recent Labor Department statistics show, even during the peak years of the housing boom, job creation by existing businesses was 14 percent lower than it was in the late ’90s.
The problem of weak job creation certainly can’t be due to increased business taxes and regulation, since both were slashed during the Bush years. Nor can the explanation be insufficient consumer demand; throughout most of the last decade, consumers and the federal government engaged in a consumption binge of world-historical proportions.
Other, more plausible explanations have been floated for why the rate of job creation seems to have fallen. One is that the federal government made too few investments in the 1980s and ’90s in things like basic R&D, so the pipeline of technological innovation on which new jobs depend began to run dry in the 2000s. Another is that a basic shift in competitiveness has taken place—that countries like India, with educated but relatively low-cost workforces, have become more natural homes for jobs-producing sectors like IT.
But while the mystery of what killed the great American jobs machine has yielded no shortage of debatable answers, one of the more compelling potential explanations has been conspicuously absent from the national conversation: monopolization. The word itself feels anachronistic, a relic from the age of the Rockefellers and Carnegies. But the fact that the term has faded from our daily discourse doesn’t mean the thing itself has vanished—in fact, the opposite is true. In nearly every sector of our economy, far fewer firms control far greater shares of their markets than they did a generation ago.
Indeed, in the years after officials in the Reagan administration radically altered how our government enforces our antimonopoly laws, the American economy underwent a truly revolutionary restructuring. Four great waves of mergers and acquisitions—in the mid-1980s, early ’90s, late ’90s, and between 2003 and 2007—transformed America’s industrial landscape at least as much as globalization. Over the same two decades, meanwhile, the spread of mega-retailers like Wal-Mart and Home Depot and agricultural behemoths like Smithfield and Tyson’s resulted in a more piecemeal approach to consolidation, through the destruction or displacement of countless independent family-owned businesses.
It is now widely accepted among scholars that small businesses are responsible for most of the net job creation in the United States. It is also widely agreed that small businesses tend to be more inventive, producing more patents per employee, for example, than do larger firms. Less well established is what role concentration plays in suppressing new business formation and the expansion of existing businesses, along with the jobs and innovation that go with such growth. Evidence is growing, however, that the radical, wide-ranging consolidation of recent years has reduced job creation at both big and small firms simultaneously. At one extreme, ever more dominant Goliaths increasingly lack any real incentive to create new jobs; after all, many can increase their earnings merely by using their power to charge customers more or pay suppliers less. At the other extreme, the people who run our small enterprises enjoy fewer opportunities than in the past to grow their businesses. The Goliaths of today are so big and so adept at protecting their turf that they leave few niches open to exploit.
Over the next few years, we can use our government to do many things to promote the creation of new and better jobs in America. But even the most aggressive stimulus packages and tax cutting will do little to restore the sort of open market competition that, over the years, has proven to be such an important impetus to the creation of wealth, well-being, and work. Consolidation is certainly not the only factor at play. But any policymaker who is really serious about creating new jobs in America would be unwise to continue to ignore our new monopolies.
It’s not as if Americans are entirely unaware of how consolidated our economic landscape is, or that this is a perilous way to do business. The financial crisis taught us how dangerously concentrated our financial sector has become, particularly since Washington responded to the near-catastrophic collapse of banks deemed “too big to fail” by making them even bigger. Today, America’s five largest banks control a stunning 48 percent of bank assets, double their share in 2000 (and that’s actually one of the lessconsolidated sectors of our economy). Similarly, the debate over health insurance reform awakened many of us to the fact that, in many communities across America, insurance companies enjoy what amounts to monopoly power. Some of us are aware, too, through documentaries likeFood, Inc., of how concentrated agribusiness and food processing have become, and of the problems with food quality and safety that can result.
Even so, most Americans still believe that our economy remains the most wide open, competitive, and vibrant market system the world has ever seen. Unfortunately, the stories we have told ourselves about competition in America over the past quarter century are simply no longer true.
Perhaps the easiest way to understand this is to take a quick walk around a typical grocery or big-box store, and look more closely at what has taken place in these citadels of consumer choice in the generation since we stopped enforcing our antitrust laws.
The first proof is found in the store itself. If you are stocking up on basic goods, there’s a good chance you are wandering the aisles of a Wal-Mart. After all, the company is legendarily dominant in retail, controlling, for instance, 25 percent of groceries sales in some states and 40 percent of DVD sales nationwide.
But at least the plethora of different brands vying for your attention on the store shelves suggests a healthy, competitive marketplace, right? Well, let’s take a closer look.
In the health aisle, the vast array of toothpaste options on display is mostly the work of two companies: Colgate-Palmolive and Procter & Gamble, which split nearly 70 percent of the U.S. market and control even such seemingly independent brands as Tom’s of Maine. And in many stores the competition between most brands is mostly choreographed anyway. Under a system known as “category management,” retailers like Wal-Mart and their largest suppliers openly cooperate in determining everything from price to product placement.
Over in the cold case we find an even greater array of beer options, designed to satisfy almost any taste. We can choose among the old standbys like Budweiser, Coors, and Miller Lite. Or from a cornucopia of smaller brands, imports and specialty brews like Stella Artois, Redbridge, Rolling Rock, Beck’s, Blue Moon, and Stone Mill Pale Ale. But all these brands—indeed more than 80 percent of all beers in America—are controlled by two companies, Anheuser-Busch Inbev and MillerCoors.
Need milk? In many parts of the country, the choices you see in the Wal-Mart dairy section are almost entirely an illusion. In many stores, for instance, you can pick among jugs labeled with the names PET Dairy, Mayfield, or Horizon. But don’t waste too much time deciding: all three brands are owned by Dean Foods, the nation’s largest dairy processor, and Wal-Mart’s own Great Value brand containers are sometimes filled by Dean as well. Indeed, around 70 percent of milk sold in New England—and up to 80 percent of milk peddled in some other parts of the country—comes from Dean plants. Besides dominating the retail dairy market, Dean has been accused of collaborating with Dairy Farmers of America, another giant company that buys milk from independent farmers and provides it to Dean for processing and distribution, to drive down the price farmers are paid while inflating its own profits.
The food on offer outside of the refrigerator aisle isn’t much better. The boxes on the shelves are largely filled with the corn-derived products that are the basic building block of most modern processed food; about 80 percent of all the corn seed in America and 95 percent of soybean seeds contain patented genes produced by a single company: Monsanto. And things are just as bad farther down the ingredients list—take an additive like ascorbic acid (Vitamin C), produced by a Chinese cartel that holds more than 85 percent of the U.S. market.
How about pet food? There sure seems to be a bewildering array of options. But if you paid close attention to coverage of the massive pet food recall of 2007, you will remember that five of the top six independent brands—including those marketed by Colgate-Palmolive, Mars, and Procter & Gamble—relied on a single contract manufacturer, Menu Foods, as did seventeen of the top twenty food retailers in the United States that sell “private-label” wet pet foods under their store brands, including Safeway, Kroger, and Wal-Mart. The Menu Foods recall covered products that had been retailed under a phenomenal 150 different product names.
Heading out to the parking lot should give us some respite from all of this—surely the vehicles here reflect a last bastion of American-style competition, no? After all, more than a dozen big carmakers sell hundreds of different models in America. But it’s a funny kind of competition, one that’s not nearly as competitive as it looks. To begin with, more than two-thirds of the iron ore used to make the steel in all those cars is likely provided by just three firms (two of which are trying to merge). And it doesn’t stop there. A decade ago, all the big carmakers were for the most part vertically integrated, and they kept their supply systems largely separate from one another. Today, however, the outsourcing revolution, combined with monopolization within the supply base, means the big companies increasingly rely on the same outside suppliers—even the same factories—for components like piston rings and windshield-wiper blades and door handles. Ever wonder why Toyota came out so strongly in favor of a bailout for General Motors last year? One reason is they knew if that giant fell suddenly, it would knock over many of the suppliers that they themselves—as well as Nissan and Honda—depend on to make their own cars.
And don’t fool yourself that this process of monopolization affects only America’s working classes. What’s happened to down-market retail has happened to department stores as well. Think Macy’s competes with Bloomingdale’s? Think again. Both are units of a holding company called Macy’s Inc., which, under its old name, Federated, spent the last two decades rolling up control of such department store brand names as Marshall Field’s, Hecht’s, Broadway, and Bon Marché. A generation ago, even most midsized cities in America could boast of multiple independent department stores. Today a single company controls roughly 800 outlets, in a chain that stretches from the Atlantic to the Pacific.
In school, many of us learned that the greatest dangers posed by monopolization are political in nature—namely, consolidation of power in the hands of the few and the destruction of the property and liberty of individual citizens. Most of us probably also learned in seventh-grade civics class how firms with monopoly power can gouge consumers by jacking up prices. (And indeed they often do; a recent study of mergers found that in four out of five cases, the merged firms increased prices on products ranging from Quaker State motor oil to Chex brand breakfast cereals.) Similarly, it’s not hard to understand how monopolization can reduce the bargaining power of workers, who suddenly find themselves with fewer places to sell their labor.
The way corporate consolidation destroys jobs is clear enough, too—it dominates the headlines whenever a big merger is announced. Consider two recent deals in the drug industry. The first came in January 2009 when Pﬁzer, the world’s largest drug company, announced plans for a $68 billion takeover of Wyeth. The second came in March 2009, when executives at number two Merck said they planned to spend $41.1 billion to buy Schering-Plough. Managers all but bragged of the number of workers who would be rendered “redundant” by the deal—the first killed off 19,000 jobs, the second 16,000.
Nevertheless, America’s problem in recent years hasn’t been job destruction, it’s been a fall-off in job creation. Consolidation causes problems here, too, in a variety of ways. First, it can reduce the impetus of big firms to invest in innovation, a chief source of new jobs. The Austrian economist Joseph Schumpeter famously theorized that monopolists would invest their outsized profits into new R&D to enable themselves to innovate and thus stay ahead of potential rivals—an argument that defenders of consolidation have long relied on. But numerous empirical studies in recent years have found the opposite to be true: competition is a greater spur to innovation than monopoly is. In one widely cited study, for instance, Philippe Aghion of Harvard University and Peter Howitt of Brown University looked at British manufacturing firms from 1968 to 1997, when the UK’s economy was integrating with Europe and hence subject to the EU’s antitrust policies. They found that on balance these firms became more innovative—as measured by patent applications and R&D spending—as they were forced to compete more directly with their continental rivals.
The opposite trend took place in some of America’s biggest industrial firms in the years after 1981, when the Reagan administration all but abandoned antitrust enforcement. Many of the most successful U.S. companies adopted a winner-take-all approach to their industries that allowed them to shortchange innovation and productive expansion. Prior to 1981, for instance, General Electric invested heavily in R&D in many fields, seeking to compete in as many markets as possible; after 1981 it pulled back its resources, focusing instead on gathering sufficient power to govern the pace of technological change.
Consolidation in the retail sector can also inhibit job growth. As behemoth retailers garner ever more power over the sale of some product or service, they also gain an ever greater ability to strip away the profits that once would have made their way into the hands of their suppliers. The money that the managers and workers at these smaller companies would have used to expand their business, or upgrade their machinery and skills, is instead transferred to the bottom lines of dominant retailers and traders and thence to shareholders. Or it may be simply destroyed through pricing wars. A good example is the pre-Christmas book battle between Amazon and Wal-Mart, in which the two giant conglomerates pushed down the prices of hardcover best sellers to lure buyers into their stores and Web sites. In many cases, the two companies actually sold the books for less than they bought them, treating them as “loss leaders” and expecting to recoup the loss through the sale of other, more expensive products. Although consumers welcomed the opportunity to pay $9.99 for the latest Stephen King novel priced elsewhere above $30, the move caused a near panic among publishers. Even though the low prices may have resulted in the sale of more books, the longer-term effect is to radically lower what consumers will expect to pay for books, which will in turn reduce the funds available to publishers to develop and edit future prospects.
Another way that monopolization can inhibit the creation of new jobs is the practice of entrenched corporations using their power to buy up, and sometimes stash away, new technologies, rather than building them themselves. Prior to the 1980s, if a company wanted to enter a new area of business, it would typically have had to open a new division, hire talent, and invest in R&D in order to compete with existing companies in that area. Now it can simply buy them. There is a whole business model based on this idea, sometimes called “innovation through acquisition.” The model is often associated with the Internet technology company Cisco, which, starting in the early ’90s and continuing apace afterward, gobbled up more than 100 smaller companies. Other tech titans, including Oracle, have in recent years adopted much the same basic approach. Even Google, many people’s notion of an enlightened, innovative corporate Goliath, has acquired many of its game-changing technologies—such as Google Earth, Google Analytics, and Google Docs—from smaller start-ups that Google bought out. As the falloff in IPOs over the last decade seems to confirm, one practical result of all this is that fewer and fewer entrepreneurs at start-up companies even attempt any longer to build their firms into ventures able to produce not merely new products but new jobs and new competition into established companies. Instead, increasingly their goal, once they have proven that a viable business can be built around a particular technology, is simply to sell out to one of the behemoths.
Finally, dominant firms can hurt job growth by using their power to hamper the ability of start-ups and smaller rivals to bring new products to market. Google has been accused of doing this by placing its own services—maps, price comparisons—at the top of its search results while pushing competitors in those services farther down, where they are less likely to be seen—or in some cases off Google entirely. Google, however, is a Boy Scout compared to the bullying behavior of Intel, which over the years has leveraged its 90 percent share of the computer microchip market to impede its only real rival, Advanced Micro Devices, a company renowned for its innovative products. Intel has abused its power so flagrantly, in fact, that it has attracted an antitrust suit from New York State and been slapped with hefty fines or reprimands by antitrust regulators in South Korea, Japan, and the European Union. The EU alone is demanding a record $1.5 billion from the firm.
To understand just how disadvantaged small innovative companies are in markets dominated by behemoths, consider the plight of Retractable Technologies, Inc., of Little Elm, Texas. The company manufactures a type of “safety syringe” invented by its founder, an engineer named Thomas Shaw. The device uses a spring to pull the needle into the body of the syringe once the plunger is fully depressed. This helps to prevent the sort of “needlestick” injuries that every year result in some 6,000 health workers being infected by diseases such as hepatitis and HIV. Since starting the company in 1994, Shaw has carved out a modest market niche, selling his lifesaving product to nursing homes, doctors’ offices, federal prisons, VA hospitals, and international health organizations for distribution in the Third World. But he’s not been able to break into the mainstream U.S. hospital market. The reason, he says, is that a company called Becton Dickinson & Co. controls some 90 percent of syringe sales in America and enjoys enough power over hospital supply purchasing groups to all but block adoption of Shaw’s device. In 1998, Shaw sued, charging restraint of trade, and in 2004 won what looked like a stunning victory: Becton Dickinson agreed to settle for $100 million, and the purchasing groups promised to change their business practices. But according to executives at Retractable Technologies, things have only gotten worse. “We probably have less of our products in hospitals today than we did ten years ago,” says Shaw, who just won a patent-infringement case against Becton Dickinson and is pursuing another antitrust suit against the company. “I have spent what should have been the most creative, productive years of my life sitting in depositions. By the time I’m done fighting, my patents will have expired.”
A few years back, Bess Weatherman, the managing director of the health care division of the private equity firm Warburg Pincus, spelled out the effect of such monopoly power on investments in new health care technologies. In a Senate hearing, Weatherman testified that “companies subject to, or potentially subject to, anti-competitive practices … will not be funded by venture capital. As a result, many of their innovations will die, even if they offer a dramatic improvement over an existing solution.”
The degree of consolidation in many industries today bears a striking resemblance to that of the late Gilded Age. So too the arguments that today’s monopolists use to justify consolidation. In the late nineteenth century, men like John D. Rockefeller, Andrew Carnegie, and J. P. Morgan often defended themselves against antimonopoly activists with the argument that one giant vertically integrated company could deliver oil or steel more efficiently than could many firms in competition with one another. This “efficiency” argument appealed to a broad range of opinion, from European socialists to many American progressives. Even Theodore Roosevelt, despite his reputation as a “trust buster,” accepted the notion that competition was wasteful. He hewed instead to a philosophy of “corporatism,” which held that giant enterprises could best be managed through a mix of government and private power according to “scientific” principles to ensure their maximum utility to the public. When antitrust law was put to use during these years, it was often in ways that aided the monopolists: it was used to break up labor unions, farmers’ cooperatives, and small business alliances. The one big exception to this rule was the administration of Woodrow Wilson, who was elected in 1912 by a Democratic Party largely dominated by populists. But the outbreak of war in 1914 swiftly put an end to the populist effort to force big businesses to compete and to leave small businesses in peace. Herbert Hoover was a fervent believer in corporatism, as were the New Dealers who succeeded him. When they brought their National Industrial Recovery Act to Congress in June 1933, one of the act’s central provisions called for suspension of America’s antitrust laws.
The modern era of antitrust enforcement began in 1935, when the Supreme Court declared the NIRA unconstitutional. In the aftermath of that decision, populists in Congress and the administration moved swiftly to take the New Deal in a radically different direction. Unlike the corporatists, the populists believed that the central goal of government in the political economy should be to protect the individual citizen and society as a whole from the consolidation of power by the few. Antitrust laws were integral to this notion. In the immediate aftermath of the NIRA decision, Congress passed laws like the Robinson-Patman Anti-Price Discrimination Act and the Miller-Tydings Fair Trade Act, which restricted the power that big retailers could bring to bear on smaller rivals and on producers. By 1937, Roosevelt officials were shaping a “second” New Deal centered largely around the engineering of competition among large companies.
Populists have often been charged with being naive romantics who pine for a lost agrarian utopia. Yet in practice, most New Deal–era populists were perfectly at ease with concentration of power; they simply wanted the government to create at least some competition wherever possible and to regulate monopoly in those cases—like the provision of water or natural gas—where competition truly seemed wasteful. Indeed, many of the populists were strong proponents of industrial efficiency; they just didn’t believe that unregulated industrial monopoly ever was more efficient than competition among at least a few industrial firms. Under the direction of Thurmond Arnold, the antitrust division of the Department of Justice set out to engineer rivalries within large industries wherever possible. In the late 1930s, for example, the government brought an antitrust suit against Alcoa, which had commanded a monopoly over aluminum production. As the suit dragged on through the ’40s, the government sped up the process by selling aluminum plants built with public money during World War II to Alcoa’s would-be competitors, Kaiser and Reynolds.
The result of the second New Deal was an economy in which competition was regulated in three basic ways. “Natural” monopolies like water or gas service were left in place, and regulated or controlled directly by government. Heavy industry was allowed to concentrate operations to a large degree, but individual firms were made subject to antitrust law and forced to compete with one another. And in sectors of the economy where efficiencies of concentration were far harder to prove—retail, restaurants, services, farming—the government protected open markets.
One result was a remarkably democratic distribution of political economic power out to citizens and communities across America. Another was an astounding burst of innovation. As the industrial historian David Hounshell has documented, the new competition among large corporations led companies like DuPont and General Electric to ramp up their R&D activities and fashion the resulting technologies into marketable products. Smaller firms, meanwhile, were carefully protected from Goliaths, enabling entrepreneurs to develop not merely ideas but often entire companies to bring the ideas to market.
Antitrust enforcers weren’t content simply to prevent giant firms from closing off markets. In dozens of cases between 1945 and 1981, antitrust officials forced large companies like AT&T, RCA, IBM, GE, and Xerox to make available, for free, the technologies they had developed in-house or gathered through acquisition. Over the thirty-seven years this policy was in place, American entrepreneurs gained access to tens of thousands of ideas—some patented, some not—including the technologies at the heart of the semiconductor. The effect was transformative. In Inventing the Electronic Century, the industrial historian Alfred D. Chandler Jr. argued that the explosive growth of Silicon Valley in subsequent decades was largely set in motion by these policies and the “middle-level bureaucrats” in the Justice Department’s Antitrust Division who enforced them in the field.
While this was happening, a group of thinkers centered around the economist Milton Friedman began to develop arguments in favor of resurrecting the laissez-faire political economic theories of the nineteenth-century monopolists. Their basic contention was that America’s markets and America’s industrial activities should be governed by private individuals. They held that when public officials participated in the management of industrial corporations or used antitrust law to protect open markets, such actions merely distracted the private executives in charge of these institutions from the task at hand.
In his 1962 collection of essays, Capitalism and Freedom, Friedman argued against any application of antitrust law aside from breaking up labor unions and guilds like the American Medical Association that threatened to encumber the work of the capitalists. In his book, Friedman also developed a more palatable term for laissez faire: “free market.” Another leader of this movement, future Federal Reserve Chairman Alan Greenspan, focused on rehabilitating the efficiency argument that monopolists like Rockefeller and Morgan had once employed to justify their near- total domination of their industries.
The Chicago School thinkers—so named because many of its members taught at the University of Chicago—found their champion in Ronald Reagan, who brought their theories with him into the White House in 1981. Almost as soon as Reagan’s team took power, they made clear that one of their very first targets would be the antitrust laws. William F. Baxter, the head of the Justice Department’s Antitrust Division under Reagan, announced his intentions to “pursue an antitrust policy based on efficiency considerations.” The declaration was met by a strong bipartisan outcry in Congress, but the Reagan team skillfully reframed their ideas in terms that fit the policy mood of the era. The administration borrowed a page from Chicago School legal scholar Robert Bork, who in his 1978 book The Antitrust Paradox had made the case for the old efficiency argument in language adopted from the then-flourishing consumer movement. The reason to promote efficiency, Bork wrote, was to increase the “welfare” of the consumer. The basic argument was as simple as it was subversive: given that consumers benefit from lower prices, and given that greater scale and scope gives managers the power to drive down prices, we should embrace concentration rather than resist it.
Beginning in Reagan’s first term, antitrust enforcement all but ended. Throughout the 1980s, the opponents of antitrust sometimes buttressed their arguments by stoking fears about the supposed dangers posed to American manufacturers by their Japanese rivals. But for the most part such arguments proved unnecessary, as the government had already largely retired from the field, leaving corporations largely to their own devices. By the time Reagan left office, laissez faire had become conventional wisdom. The Clinton administration was more activist, cracking down on price-fixing schemes and bringing a high-profile antitrust action against Microsoft. But for the most part it accepted the new corporate consolidation guidelines that the Reagan team had devised. Waves of mergers and acquisitions came and went with few calls to reexamine our thinking about antitrust. In no small part this was because the economy as a whole seemed to be performing quite well; not only did prices for many goods fall, but for a short while toward the end of the Clinton years there was actually a shortage of workers in America. As the twentieth century drew to a close, the United States was in the midst of the longest period of sustained economic growth in its history.
But as we’ve seen, the great burst of business activity in the 1980s and ’90s was to a significant extent the result of actions taken by the federal government during previous decades of anti-trust enforcement. Indeed, many of the companies we most associate with the ’90s tech boom—Apple, Microsoft, Oracle, Genentech—were actually founded in the 1970s, went public in the ’80s, and eventually grew big enough to force establishment behemoths like IBM to revolutionize their management philosophies and business models in order to compete. It is this dynamic—of radically innovative start-ups growing in size and eventually challenging the status quo—that drives most jobs creation. And it was precisely this dynamic that the pro-consolidation policies launched in the Reagan years would eventually upset. By the time the 2000s rolled around, industry after industry had been consolidated; the “innovation by acquisition” trend was in high gear; antitrust enforcement was reaching a new low in George W. Bush’s administration; and a plethora of global capital, unable to find enough attractive growing companies to invest in, started flowing into subprime mortgages and other financial exotica. The rest, as they say, is history.
That, at least, is one possible explanation for why the American jobs machine seems to have failed in the last decade. As we’ve noted, there are others as well, having to do with changes in technology and international trade. These other theories are open to debate, but at least they’re beingdebated. What isn’t getting talked about is the role industry consolidation might be playing in all this. That needs to change.
As we seek new ways to jump-start America’s job growth, we would be wise not to rely only on big government or big business to accomplish the task for us. Indeed, the new and better jobs of tomorrow will be created not by any such abstract powers but by very real people—such as our own more entrepreneurial neighbors, cousins, and children—working in big corporations made subject to competition and working in small ventures launched specifically to compete. These entrepreneurs will be able to do so only after we have used our antimonopoly laws to clear away the great private powers that now stand in their way.
When we get serious about this task, we will find that an entire political economic model lies ready for our use—the one shaped largely by the populists in Congress and the Roosevelt administration during the second New Deal. Before we can make use of this ready-made system for distributing power and opportunity, however, we will first have to break up the intellectual monopoly that has been forged over so much political economic policymaking in Washington today. The generation of political economists who understood the theory and practice of antitrust as devised by the late New Dealers are mostly retired or dead, and the academic economists who today dominate most discussions either have little understanding of the political nature of antimonopoly law or are openly hostile.
That’s why our first step must be to repopulate our discussions of political economics with the voices of the people who actually make our economy go. After all, real entrepreneurs and real scientists and real executives and real bankers and real farmers and real software engineers and real venture capitalists tend to understand quite well how real power is used against them. Just as it is they who know better than anyone else what freedoms they require to go about the task of putting their fellow Americans back to work.