Robert B. Reich's Blog, page 57
May 11, 2018
Trump’s Drug Pricing Scam
May 7, 2018
The Financial Hardships of Trump’s Friends
recently granted to an oil refinery owned by Carl Icahn a...
May 6, 2018
THE MONOPOLIZATION OF AMERICA: The Biggest Economic Problem...
THE MONOPOLIZATION OF AMERICA: The Biggest Economic Problem You’re Hearing Almost Nothing About
Not long ago I visited some farmers in Missouri whose profits
are disappearing. Why? Monsanto alone owns the key genetic traits to more than
90 percent of the soybeans planted by farmers in the United States, and 80
percent of the corn. Which means Monsanto can charge farmers much higher
prices.
Farmers are getting squeezed from the other side, too,
because the food processors they sell their produce to are also consolidating
into mega companies that have so much market power they can cut the prices they
pay to farmers.
This doesn’t mean lower food prices to you. It means more
profits to the monopolists.
Monopolies All Around
America used to have antitrust laws that stopped corporations
from monopolizing markets, and often broke up the biggest culprits. No longer.
It’s a hidden upward redistribution of money and power from the majority of
Americans to corporate executives and wealthy shareholders.
You may think you 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 you have your choice of 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 you buy? Looks like lots of brands but behind them are basically just two companies.
6. What about your 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 hasn’t laid a finger on them in
America. They cost you and me an estimated $3.5 billion a year.
7. You think your health insurance will cover the costs? Health
insurers are consolidating, too. Which is one reason your health insurance
premiums, copayments, and deductibles are soaring.
8. You think you have a lot of options for booking discount airline
tickets and hotels online? Think again. You have only two. Expedia merged with
Orbitz, so that’s one company. And then there’s Priceline.
9. How about your cable and Internet service? Basically just four
companies (and two of them just announced they’re going to merge).
Why the Monopolization of America is a Huge Problem
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 – jack up your prices.
Such consolidation keeps down wages. Workers with 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’s been going on. But today, they’re almost a dead letter. This hurts
you.
We’ve Forgotten History
The first antitrust law came in 1890 when Senator John Sherman
responded to public anger about the economic and political power of the huge
railroad, steel, telegraph, and oil cartels – then called “trusts” – that were
essentially running America.
A handful of corporate chieftains known as “robber barons” presided
over all this – collecting great riches at the expense of workers who toiled
long hours often in dangerous conditions for little pay. Corporations gouged
consumers and corrupted politics.
Then in 1901, progressive reformer Teddy Roosevelt became
president. By this time, the American public was demanding action.
In his first
message to Congress in December 1901, only two months after assuming the
presidency, Roosevelt warned, “There is a widespread conviction in the minds of
the American people that the great corporations known as the trusts are in
certain of their features and tendencies hurtful to the general welfare.”
Roosevelt used the Sherman Antitrust Act to go after the
Northern Securities Company, a giant railroad trust run by J. P. Morgan, the
nation’s most powerful businessman. The U.S. Supreme Court backed Roosevelt and
ordered the company dismantled.
In 1911, John D. Rockefeller’s Standard Oil Trust was broken up,
too. But in its decision, the Supreme Court effectively altered the Sherman
Act, saying that monopolistic restraints of trade were objectionable if they were “unreasonable” – and that determination was to be made by the courts. What
was an unreasonable restraint of trade?
In the presidential election of 1912, Roosevelt, running again
for president but this time as a third party candidate, said he would allow
some concentration of industries where there were economic efficiencies due to large
scale. He’d then he’d have experts regulate these large corporations for the
public benefit.
Woodrow Wilson, who ended up winning the election, and his
adviser Louis Brandeis, took a different view. They didn’t think regulation
would work, and thought all monopolies should be broken up.
For the next 65 years, both views dominated. We had strong
antitrust enforcement along with regulations that held big corporations in
check.
Most big mergers were prohibited. Even large size was thought to be a
problem. In 1945, in the case of United States v. Alcoa (1945), the Supreme
Court ruled that even though Alcoa hadn’t pursued a monopoly, it had become one
by becoming so large that it was guilty of violating the Sherman Act.
What Happened to Antitrust?
All this changed in the 1980s, after Robert Bork – who,
incidentally, I studied antitrust law with at Yale Law School, and then worked
for when he became Solicitor General under President Ford – wrote an
influential book called The Antitrust Paradox, which argued that the sole
purpose of the Sherman Act is consumer welfare.
Bork argued that mergers and large size almost always create
efficiencies that bring down prices, and therefore should be legal. Bork’s
ideas were consistent with the conservative Chicago School of Economics, and
found a ready audience in the Reagan White House.
Bork was wrong. But since then, even under Democratic administrations, antitrust has
all but disappeared.
The Monopolization of High Tech
We’re seeing declining competition even in cutting-edge,
high-tech industries.
In the new economy, information and ideas are the most
valuable forms of property. This is where the money is.
We haven’t seen
concentration on this scale ever before.
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. Talk about power.
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.
But not in
America.
It’s Time to Revive Antitrust
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.
One of the original goals of the antitrust laws was to prevent this.
Big Tech — along with the drug, insurance, agriculture, and
financial giants — is coming to dominate both our economy and our politics.
There’s only one answer: It
is time to revive antitrust.
April 28, 2018
How To Stop Trump
April 22, 2018
The Shameful Silence of the CEOs
April 21, 2018
CAN TRUMP FIRE SPECIAL COUNSEL ROBERT MUELLER?Yes, but at a huge...
CAN TRUMP FIRE SPECIAL COUNSEL ROBERT MUELLER?
Yes, but at a huge cost to our system, and to Trump’s presidency.
Begin with the law: Justice Department regulations issued in 1999, in the wake of Kenneth Starr’s investigation of Bill Clinton, say that only an Attorney General can remove a special counsel, and not just for any reason. Such a removal must be based on a finding that the special counsel was guilty of “misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies.”
Attorney General Jeff Sessions has recused himself from overseeing the Mueller investigation, so the Deputy Attorney General, Rod Rosenstein, is in charge. If Trump directed Rosenstein to fire Mueller, Rosenstein would have to find “good cause” to remove Mueller, or repeal the Department’s regulation requiring such a finding, and then fire Mueller.
If Rosenstein refused, Trump could fire Rosenstein, and direct the next official in line to fire Mueller. And he could keep firing people down the chain of command until he got someone who would fire Mueller.
Richard Nixon did something like this in what came to be known as the “Saturday Night Massacre,“ ordering Attorney General Elliott Richardson to fire the Watergate Special Prosecutor Archibald Cox. When Richardson refused and resigned in protest, Nixon then ordered Deputy Attorney General William Ruckelshaus to fire Cox. Ruckelshaus also refused, and resigned. Nixon then ordered the Solicitor General, Robert Bork, who was then acting head of the Department, to fire Cox. Bork did the deed.
There’s an alternative open to Trump. He could simply order Attorney General Sessions to repeal the special counsel regulations, and then Trump could fire Mueller himself.
But, as the Nixon saga showed, these routes would be perilous – both for Trump’s presidency and for our system of government, because they would undermine public trust in the impartiality of our system of justice and in the office of the presidency.
They would also further divide the country between Trump supporters who believe the Mueller investigation to be part of a conspiracy to undermine the Trump presidency, and the vast majority of Americans who are more likely to believe, as a result of these actions, that Trump has done something that he wants to hide at all costs.
The question is whether Trump is willing to risk it, nonetheless
April 19, 2018
A THIRD PARTY? HOW NOT TO SETTLE FOR THE LESSER OF TWO EVILSAre...
A THIRD PARTY? HOW NOT TO SETTLE FOR THE LESSER OF TWO EVILS
Are you happy with the electoral choices provided you by the two major parties? If not, should you vote for a third party candidate?
Not so fast. Remember what happened in 2016, when Libertarian Gary Johnson got 3.2 percent of the popular vote and Green Party candidate Jill Stein got 1.06 percent. Enough votes that, had they gone to Hillary Clinton, she’d have won the Electoral College, and Donald Trump wouldn’t be in the White House.
Oh, and anyone remember what happened in 2000, when the votes that went to Ralph Nader all but sealed the fate of Al Gore, and gave us George W. Bush.
You see the problem? In a winner-take-all system like ours, votes for third party candidates siphon away votes from the major party candidate whose views are closest to that third-party candidate. So by not voting for the lesser of two evils, if that’s what you want to call them, you end up with the worse of two evils.
But here’s the good news. You’ve got at least 2 ways to avoid the lesser of two evils other than voting for a third party candidate.
First, you could build support for your favorite primary candidate inside one of the major parties – like some of you did for Bernie Sanders in the 2016 Democratic primaries.
But, you might say, look what happened to Bernie! The Democratic Party establishment rigged the game against him.
I don’t want to open up this particular can of worms, but if a party establishment has a chokehold on the primaries – the answer isn’t to go with a third party and end up with the worse of two evils, but to organize and mobilize inside the party to break that choke hold, as some would say the Tea Party has done in the GOP.
Never underestimate the power of grassroots activism focused like a laser on taking over a major political party that has ossified.
Another way to avoid the lesser of two evils: Get your state to institute ranked-choice voting, also known as instant-runoff voting, which allows voters to rank candidates in order of preference.
The process is simple: In the first round, only voters’ first choices are counted. If a candidate gets a majority, that’s the end of it: That candidate wins. If no candidate gets a majority, the candidate who received the fewest votes is eliminated, and then the second choices of voters who preferred that candidate are counted.
If that gives a majority to one candidate, that candidate wins. If there’s still no one with a majority, the process continues, until one candidate gets a majority.
Ranked-choice voting isn’t perfect, but it enables you to vote your conscience –even for a third-party candidate – without the worry that you’re giving ground to the candidate you like least.
The idea is gaining popularity. Last year, some form of ranked-choice voting was proposed in 19 states. In 2016, citizens in Maine initiated a referendum for ranked-choice voting and won. It’s already being used in statewide special elections in North Carolina, and in 10 major cities.
You don’t have to settle for the lesser of two evils. But in order to get the candidates you want elected you need to get involved, now. In the primaries. And in changing your state to ranked-choice voting.
It’s our democracy. Whether it works, is up to us.
April 15, 2018
While China Picks Winners, Trump Picks Losers
April 8, 2018
The Truth About an Untethered Trump
White House – who has replaced most of the adults around him with...
April 7, 2018
5 REASONS THE NRA IS WRONGThe next time you hear someone...
5 REASONS THE NRA IS WRONG
The next time you hear someone repeating pro-gun NRA propaganda, respond with these five points:
1. Gun laws save lives. Consider the federal assault weapons
ban. After it became law in 1994, gun massacres – defined as instances of gun
violence in which six or more people were shot and killed – fell by 37
percent. The number of people dying from mass shootings fell by 43 percent. But
when Republicans in Congress let the ban lapse in 2004, gun massacres more than
doubled.
2. The Second Amendment was never intended to permit mass slaughter.
When the Constitution was written more than 200 years ago, the framers’ goal
was permit a “well-regulated militia,” not to enable Americans to
terrorize their communities.
3. More guns have not, and will not, make us safer. More than 30
studies show that guns are linked to an increased risk for violence and
homicide. In 1996, Australia initiated a mandatory buyback program to
reduce `the number of guns in private ownership. Their firearm homicide rate
fell 42 percent in the seven years that followed.
4. The vast majority of Americans want stronger gun safety laws.
According to Gallup, 96 percent of Americans support universal background
checks, 75 percent support a 30-day waiting period for all gun sales, and 70
percent favor requiring all privately owned guns to be registered with the
police. Even the vast majority of gun owners are in favor of common-sense gun
safety laws.
5. The National Rifle Association is a special interest group
with a stranglehold on the Republican Party. In 2016, the group spent a record
$55 million on elections. Their real goal is to protect a few big gun
manufacturers who want to enlarge their profits.
America
is better than the NRA. America is the young people from Parkland, Florida, who
are telling legislators to act like adults. It’s time all of us listen.
Robert B. Reich's Blog
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