Last week a federal court approved the $85.4 billion merger of AT&T and Time Warner over the objection of the US Justice Department which, in President Trump’s words, opposed the deal “because it’s too much concentration of power in the hands of too few.” (New York Times, 6/13/18). District Court Justice Richard Leon dismissed the government’s case out of hand, arguing they failed to prove the consolidation would result in reduced choices or increased prices for consumers; he also warned that an appeal would be fruitless and recommended against it. Immediately following the decision Comcast launched a $65 billion challenge to take over 21st Century Fox, topping Disney’s previous offer. Analysts believe a wave of consolidations will surely follow, further entrenching power and profit at the top of the corporate pyramid.
Judge Leon’s consumer benefit theory of antitrust, originally hatched by conservative scholar and failed Supreme Court nominee Robert Bork, is legally and morally suspect. First, it’s hard to know what the effects on choice and price to the consumer will be before the deal is consummated, and probably not for many years to come. Is anyone happy with their cable bill? Second, many economists believe that corporate consolidation, excess profits and power are a key cause of stagnant wage growth and rising economic inequality in recent decades, as well as loss of political power of ordinary voters v. highly funded special interests. Hence, even if consumer choices remain plentiful and prices reasonable (a big IF), workers are hurt by their loss of bargaining power and voters by their reduced influence at the ballot box. This should be cause for concern among all of us.
A recent article in The Economist (no liberal rag) entitled “Profits Too High: America Needs a Giant Dose of Competition confirms these facts. It reports American Airlines, nearly bankrupt a decade ago, earned $24 billion in profits last year – the same as Google! – following consolidation of the airline industry into four major players. A similar pattern exists in other major industries. US companies have engaged in $trillions of mergers over the past decade, with many more expected to follow, as they sit on over $800 billion in idle cash before the recent tax cut bonanza.
The article concludes that US company profits are too high, that most firms “are more adept at siphoning off cash than creating wealth, and that this deepens inequality by dampening wages and raising consumer prices above a competitive level. Concentrated economic power also stifles innovation and retards the growth and formation of small businesses. According to David Leonhardt of the New York Times (6/18/18) large companies now employ the majority of US workers, reversing historical trends. As a result, over 2/3 of Americans, across the political spectrum, believe the economy is “rigged” (remember that word?) in favor of huge corporations and against them. Similar or greater numbers doubtless exist for the U.S. political system, hence the dueling populisms and strange outcome of the 2016 election.
Americans are feeling an increasing sense of powerlessness and insecurity over their personal lives, which produces anxiety, anger and the search for a strongman to restore order and a lost, largely mythical “golden age.” We have been through this before, in the Populist, Progressive and New Deal periods. We have been able to increase democracy and dampen inequality through a combination of political and economic reforms that are still within our grasp, should we resolutely reach for them. Higher progressive taxes, especially on huge individual fortunes and concentrated industries, jobs and training programs and income supports for lower paid workers are the obvious place to start.
Needless to say, it won’t be easy or quick. The sheer bigness of business and their stranglehold on our politics (corporate spending on lobbying has doubled over the past decade, but only represents a tiny fraction of their profits) complicates but doesn’t negate the task. Remember it took a century after the Civil War for African Americans, who helped win it, to gain legal equality. Hopefully it won’t take as long for a just, sane, equitable, human economy to emerge from the ashes of late 20th and 21st century plutocratic capitalism. With faith, determination, solidarity and persistence, perhaps we too shall overcome our current predicament.