It’s no secret at this point in the 2016 election cycle that the American electorate is mad.
Voters hate the status quo. They can’t stand Washington. And in poll after poll, they report believing not only that the U.S. economy “isn’t working,” in some abstract sense, but that it has been actively designed to harm them. According to a new poll by Marketplace and Edison Research, 71% of Americans believe that the U.S. economy is rigged against them.
Pundits explain this extraordinary, collective anger, which has helped, in part, to propel Republican presumptive nominee Donald Trump and Democratic candidate Sen. Bernie Sanders to national prominence, as a response to the shifting global economy. Over the last twenty-five years, mass automation, outsourcing, and rapid globalization have resulted in millions of particularly lower- and middle-class Americans either losing their jobs entirely, or ending up with worse-paying gigs.
But in the last few months, a growing number of both Republican and Democratic lawmakers have begun to suggest another explanation for this widespread feeling of malaise: Bigness.
Their argument, in a nutshell, is that too many American businesses have been allowed to get too big, too powerful, and to exert too much influence over politicians in both statehouses and Washington, DC.
While corporate giants, like the Comcasts, Amazons and United Airlines of the world, may not technically qualify as monopolies, since most have a few competitors, they end up acting like them, with all the attendant problems: higher prices, worse customer service, potential price collusion and anti-competitive practices, and an outsized influence over the political process.
Worst of all, from an economist’s perspective, these industry goliaths have the power to act as dams in the free flowing river of the American economy: their dominance over a given market make it harder, and in some cases nearly impossible, for independent American entrepreneurs—those famed “small business men,” the protagonists of the American Dream—to compete in the free market.
On Wednesday, Massachusetts Sen. Elizabeth Warren, known for her liberal firebrand approach, became the unlikely champion for reinstating this version of free market capitalism.
In a keynote address at an event hosted by non-partisan think tank New America’s Open Markets program, she called for a new era of modern trust-busting—not on the grounds of some liberal, anti-corporate argument, but as the vehicle to create a more competitive free market economy. “I love markets. Strong, healthy markets are the key to a strong, healthy America,” Warren said. “That’s the reason I am here today. Because anyone who loves markets knows that for markets to work, there has to be competition.”
Earlier that same day, the Center for American Progress, a liberal think tank influential with presumptive Democratic Hillary Clinton, released a report using similar language. It called for tougher anti-trust enforcement on the grounds that large, incumbent corporations have the power to block the “entry of new firms…innovation can be stifled; product quality can be degraded; the prices paid to workers and suppliers can be reduced; and influence with government officials can be increased.”
In April, the Obama administration issued an executive order on competition that hinged on the same idea. “Certain business practices such as unlawful collusion, illegal bid rigging, price fixing, and wage setting, as well as anticompetitive exclusionary conduct and mergers stifle competition and erode the foundation of America’s economic vitality,” the report read.
In March, Republican lawmakers—including conservative, Tea Party heroes like Utah Sen. Mike Lee—echoed the sentiment at a Senate Judiciary subcommittee hearing on antitrust oversight, the first meeting of that committee in three years.
They argued that the Federal Trade Commission and the Department of Justice, the two agencies primarily responsible for preventing monopolies, were falling down on the job. Why, they asked FTC Chair Edith Ramirez, was 2015 the biggest year for mergers in the history of the U.S., with $3.8 trillion dollars worth of mergers and acquisitions on the books?
Iowa Republican Chuck Grassley pointed out that widespread consolidation in the agricultural industry can have negative effects not only on food safety, but on the entire food-supply chain. Utah Republican Orrin Hatch, meanwhile, cited a 2015 Wall Street Journal investigation that appeared to show that Google was giving its own companies preference in its search results—an illegal, anticompetitive business practice.
Connecticut Democrat Richard Blumenthal also piled on, suggesting that the recent string of mergers and acquisitions in the airline industry, which has resulted in just four carriers owning 80% of the market, has made it possible for companies to collude with one another on ticket prices.
In some ways, this relatively new concern about monopoly power, which has just cropped up on the national political scene in the last few months, reflects a much older—and often conservative—argument.
Adam Smith, the conservative icon and father of free market capitalism, warned in his famous 1776 tome, The Wealth of Nations, against the danger of too few companies amassing too much economic power. The primary roles of good government, Smith wrote, is to enact laws and regulations that keep the markets open and free—that prevent individual firms from controlling supply chains, manipulating consumer prices, exploiting the free movement of labor, squelching new innovation, and pressuring politicians to act on their behalf.
In response to the rise of monopolies in the Gilded Age, famous “trust busters” like Teddy Roosevelt and William Howard Taft wielded anti-trust law to dismantle firms, like Standard Oil and, later, AT&T, that had gotten too large on precisely these grounds.
Since the 1970s, the U.S. government has been less ambitious about anti-trust enforcement, largely on the grounds that the bigger the company, the more efficient it is. After all, large corporations, like Walmart, for example, are able to keep consumer prices low by negotiating lower prices with suppliers. Walmart will end up paying much less for a shipment of jeans from, say, Levi’s, than a family-owned retail outlet will.
But in recent months, as economic populism sweeps the American electorate on both the right and the left, Republican and Democratic lawmakers are giving this thirty-year-old economic theory a second look. Perhaps, they argue, the emphasis on low consumer prices has come at too high a cost.