Monopolies and the Real Cost of a Rigged Economy

“The system is rigged.” Whatever Americans think this means, David Dayen’s new book, Monopolized: Life in the Age of Corporate Power, is a comprehensive look at why its title is an accurate description of our economic life.

If you’re comparing rental car prices for your next trip and are trying to choose between National, Alamo and Enterprise – forget about it. All three are owned by the same corporate parent: Enterprise Holdings. Going out for a beer with friends (ok, this is before COVID) and you want to support a “mom and pop” shop by ordering a “craft” beer? Don’t fool yourself. Anheuser-Busch InBev, the world’s largest brewer, controls over 40 percent of the beer market in the United States, including a significant number of “independent” breweries. You like Ben & Jerry’s hip and progressive ice cream? They sold their business decades ago to Unilever, a British-Dutch consumer goods corporation.

Look around at any important area of society – the impact of the internet, how we obtain our food, the obscene maldistribution of wealth, and the monopolistic nature of our economy is implicated.

There have been periods in our history where anti-monopoly policies and “trust busting” were primary issues in our political debates – look up the names Louis Brandeis and Thurman Arnold. Just last week, the House Judiciary Committee’s antitrust subcommittee questioned the owners and CEOs of Apple, Google, Amazon and Facebook on what The New York Times described as business practices “shrouded in secrecy and mystery.”

The complex mechanisms of how our economy operates today remain invisible to the general public. Dayen’s book will help change that. Monopolized is a kind of decoder ring that unveils the scandal of corporate control of our lives from birth to death – from the consolidation of hospitals and insurance companies in the health care industry to the monopoly of funeral homes.

This interview has been edited for length and clarity.
 

 
Capital & Main: In your book you write about the CEOs of Google, Apple, Facebook and Amazon. What is your sense of the recent House hearing and what might come out of it?

David Dayen: I think there’s this sense that Congress is inherently dysfunctional, and that whether it’s tribalism or lack of resources, that it just can’t conduct the kind of high-level investigation and oversight that it may have been able to do in the past. And this hearing kind of shows that that’s not true, that if you’re dedicated and you have good staff and you have some evidence and you have a commitment to carry it out over a long time period, that Congress is perfectly able to function in a very positive way.

The members at the hearing extracted some significant concessions and admissions from those big tech CEOs – admissions that they use acquisition strategies to muscle out rivals and buy up competitors and increase their market position. And the important takeaway is that the hearing was an indictment of the Federal Trade Commission and the Justice Department’s Antitrust Division, because those two agencies, which are supposed to be in charge of enforcing the antitrust laws, had all of this information that the House antitrust subcommittee had. And they had all of the wherewithal to conduct the exact same investigation and to act on it by blocking mergers that were anti-competitive, or by putting sanctions on companies for antitrust behavior or for even breaking up these companies. And they didn’t do any of it. That was true in Democratic administrations, and it was true in Republican administrations. And none of those people who were in positions of authority at these agencies should ever be let back into government or ever even listened to about antitrust policy again.

Capital & Main: You said this avoidance of doing anything about monopolization happened in both Republican and Democratic administrations, and that people see Congress as dysfunctional. But it seems to me that many people also see them as bought.

Dayen: Right. If you have the apparatus and government to do these things, and there’s a great deal of evidence to suggest that they should be done to keep these monopolies from exploiting the economy and consumers and other small businesses, why hasn’t this happened? You’re right that it’s a lack of political will. This is certainly true when you’re talking about the FTC and the Antitrust Division of the Justice Department. So many of the top leaders of those agencies have gone on to corporate defense law firms that are representing the very clients that they were supposed to regulate at those agencies. This happens over and over and over again. There’s one law firm, Arnold & Porter, which is the home to just about every [former] member of the top leadership of the FTC and DOJ’s Antitrust Division.
 

“So many top leaders of the FTC and the Antitrust Division of the DOJ have gone on to corporate defense law firms that are representing the very clients they were supposed to regulate.”

 
So this is a huge problem with respect to the regulators and from a standpoint of campaign contributions and lobbying. This type of hearing with the tech CEOs could easily be replicated in other committees where they have jurisdiction over specific sectors of the economy. These don’t happen. In large part, they don’t happen because of the power of industry to essentially capture government. And that’s another function of monopoly is converting this tremendous amount of economic power into political power. And so what is needed is the summoning of more political will to prevent that circumstance. What took place in the antitrust committee was virtuous. And from that spark maybe we will see a reviving of this kind of diligent work from Congress.

Capital & Main: You point out how monopolization is apparent in that people have an intuitive sense that corporations and large economic organizations are gaming the system. But it’s also invisible in that how it actually works is mostly obscured. You made the details of monopoly visible and concrete. 

Dayen: I really wanted to talk to people in the country about how these monopolies are affecting their lives. Maybe they would not say it’s monopoly that is the problem, but they could say that their lives are being affected by something wrong within our economy and our society. And it was up to me to connect the dots of how that connects to monopoly.

I remember waiting for a bus in San Francisco and realizing that I was in front of the Wells Fargo Plaza at Zuckerberg General Hospital. It’s sort of the ultimate monopoly street corner in one of the ultimate monopoly cities. I remember driving through another city and seeing a Dollar General, which is one of the fastest-growing storefronts in America – about three of them a day go up. And it was situated in West Virginia next to a Family Dollar, which is another one of the big dollar stores. And these chains are now outpacing Walmart, outpacing any storefront, in terms of their ubiquity.

I was just confronted by this over and over again, and it reinforced my point that we have this illusion of choice in America. You’ll walk down a supermarket aisle and there’s 100 different items, but that choice is not reality. In fact, these industries are incredibly concentrated, and they have incredible effects through that concentration.

Capital & Main: You went to Iowa and talked to a man named Chris Petersen, who describes himself as a small farmer who now refers to himself as a “grunt worker” because of increasing domination of farming by a small number of agribusiness firms. 

Dayen: Chris is a multigenerational farmer. His family wanted to follow him into that profession, but there’s just no way to make that work anymore. And so you have people who want to bring their talents, their accumulated knowledge of centuries, to bear and continue the tradition of farming within that family, and they can’t do it. And the reason they can’t do it is that the inputs are all going up in terms of seeds and tractors and your need for funding because of the concentration of the industry. The sellers that you sell to have also become concentrated, and they squeeze the family farmer. The pork industry is 70 percent controlled by three packing companies. The beef industry is about 85 percent controlled by three companies. The chicken industry is similar. And they’re also vertically integrated so the same packers that you’re trying to sell your product to you’re also competing against because they have these giant concentrated animal feeding operations. They’re environmentally just horrific. The waste product is kept in these giant lagoons. All of these farm industries are incredibly concentrated, and they create situations where a family farmer simply cannot survive.

Capital & Main: We used to have elected leaders we called “prairie populists.” People like Sen. Frank Church, Sen. George McGovern, Sen. Tom Harkin, Sen. Fred Harris. If it’s corporate monopoly that is killing the small farm and devastating these places, why in all of these states – Idaho, South Dakota, Iowa, Oklahoma – are there only Republican senators now?

Dayen: It’s a very good question. One reason I would say is that this is a bipartisan problem. The Democrats over the last 40 years through the imposition of neo-liberal ideology have sort of given up a lot of these industries and allowed a lot of this monopolization to take place. So you’re not getting a choice in those communities between prairie populists and conservative pro-business interests. You’re getting Democratic pro-business interests versus conservative pro-business interests. And at least those conservatives have some sort of values-based argument that aligns a little better with the concerns of those areas. There are a lot of things that went on: the rise of Fox News, the foregrounding of choice and other social issues.

Capital & Main: Tom Frank’s What’s the Matter With Kansas analysis?

Dayen: Right, that whole thing. But I do think that monopolization and the allowance of it has had something to do with this when these communities are effectively abandoned because new business formation has been cut in half and there’s a sense that no politician is doing anything about it. Look at 2016. Hillary Clinton won the counties that supplied the most GDP to the economy, but Trump won the election because those left-behind areas went for him. And I think that it aligns very well with this whole trend of regional inequality that’s fueled by monopolization.

Capital & Main: One of the things that you do in the book is go through different industries and point out that monopoly exists not just in the tech sector, even though that gets a lot of attention.

Dayen: I totally agree that somehow if I could wave a magic wand, and Amazon, Google, Facebook and Apple were all broken up tomorrow, we would still have a bad monopoly problem in this country. The airlines are a good example. Interestingly, the Civil Aeronautics Board was eliminated, and deregulation was brought to the airline industry – which was something that was pushed by Ted Kennedy and his chief adviser at the time, Stephen Breyer, who is now a Supreme Court justice. It was signed into law by [President] Jimmy Carter at the behest of Ralph Nader. So this was a Democratic initiative although Republicans certainly went along with it. But one of the reasons that deregulation happened was that it was supposed to promote competition, better service and more flights because there would be this multiplicity of airlines that would pop up and everybody would have to compete on quality.
 

“If we could wave a magic wand, and Amazon, Google, Facebook and Apple were all broken up tomorrow, we would still have a bad monopoly problem in this country.”

 
And that happened for about two to three years. And then all of them went bust. And we had this tremendous consolidation which led to four big mergers after 9/11, with four airlines controlling 80 percent of the routes. And they figured out this system of making life inside the plane miserable and much like a rat getting a food pellet to go down a maze. They figured out that if you give people two more inches of leg room, they will pay you to get out of [what is] essentially jail, to have a slightly better experience.

Capital & Main: One aspect of the theology of capitalism is that people who run businesses into the ground do, and should, suffer economically. But you point out that that’s not the case anymore and talk about the absurd logic of private equity firms that run businesses into the ground.

Dayen: About one-quarter of all mergers and acquisitions come from private equity. And the goal of private equity is not necessarily to create strong businesses, it’s to find businesses that have some underlying value attached to them and to extract that value, to load those businesses up with debt. Private equity wants to extract that value and give it to their investors and their managers, who are some of the richest people in the world. And what happens to the business after, whether it goes into bankruptcy or survives, it doesn’t matter to the private equity firm.

Private equity has played a role in a staggering number of retail bankruptcies. One of the craziest ones is the Sears bankruptcy. Eddie Lampert was a hedge fund manager, but he ran it in a private equity style, loading up the Sears parent company with debt using these sale leaseback arrangements to split the company and to put the real estate in one company and put the actual business itself in another, and have the business now pay rent to the real estate company where they used to own their own real estate.

Eddie Lampert, who was the CEO of Sears, created that split and then became the CEO of the real estate company. So he was getting paid for selling off the assets and selling off the value of Sears. He was also the financier for Sears. He lent the company money through his hedge fund. And in the bankruptcy that Sears went through, he was first in line as a creditor.

So Eddie Lampert was sort of this Jack of all trades, where he was the head of the company, also its biggest financier and also the landlord. And he was just making money off of all of these other forms of ownership.

Capital & Main: The health care industry is so critical at this time. You have a chapter in your book about the obscure ways health care has evolved into a monopolistic industry with irrational practices that distort the cost of health care.

Dayen: We have seen a tremendous amount of hospital consolidation over the last 30 years. About 90 percent of all hospital networks are very concentrated within certain metro areas. And there are all sorts of bad outcomes that result from that. The closure of rural hospitals, because they’re not profitable enough and, obviously, there’s price effects. But you would think that if the hospitals are superconsolidated, at least they’d be able to buy in bulk supplies that they need to maintain their hospital and use their bargaining power and leverage to do better on that score. It turns out that’s not the case, and the reason is these middlemen called group purchasing organizations (GPOs). And what these GPOs do is buy on behalf of hospital networks bundled together. There are only about four of them that serve 98 percent of hospitals.

First of all, they’re skimming off the top. They’re taking their profits out of this consolidation, which makes it harder for suppliers of medical supplies to stay in business. The second thing is that GPOs demand sole source contracts. They tell hospitals, “If you buy 100 percent of your syringes from this one supplier, then next year you have to buy 90 percent from that supplier or else you lose these massive discounts that we’re going to give you.” So hospitals are sort of locked into these arrangements, and it creates this relationship where there’s really a monopoly on these various medical supplies, and that creates this hidden risk in the system. So any kind of disruption on the part of a medical supplier cascades through all these hospital networks. This is another function of monopoly. It creates this hidden risk, this catastrophic magnification of problems with supply.

Capital & Main: You describe Facebook and Google not as tech firms but as “junk mail companies” or “ad agencies.” You describe how the shift to video by these companies in the attempt to get “viral victories” has decimated serious journalism. Are we creating a nation of infants with all of this, or were we already a nation of infants that the tech companies understood and just monetized? 

Dayen: I think we’re creating a nation of ignorance because video, as we know, did not work. It was predicated on a series of lies that Facebook was making about its video statistics. They claimed this massive amount of viewing that was untrue. And advertisers finally figured out that it was untrue. They weren’t told for a year when Facebook knew that its statistics were simply false. And what Facebook did after that, it said, “Oh, well, we’re going to move away from video. We’re sorry.” And all of these digital media companies that followed Facebook into video made all these investments in video, and now it was all useless. And many of those digital organizations went out of business. And of course, this is a follow-on to local news having their advertising revenue ripped away from them by Facebook and Google. Facebook and Google can track people all over the web and find someone who’s in their 20s and looking for a restaurant in Cleveland. How can the newspaper in Cleveland compete with that? So this has decimated publishers. There’s a study out of the University of North Carolina that something like 1,300 communities in America have no daily newspaper. I think this has created more ignorance. These news deserts proliferate across the country, and they are correlated with areas of Trump support, by the way.

So we’re just creating these dark corners in our country where there’s no news or information attached to them. If no one’s at the city council meeting, if no one is looking into the school district, it’s just a license to steal. It’s just a license for corruption.
 

“Over 1,300 communities in America have no daily newspaper. If no one’s at the city council meeting, if no one’s looking into the school district, it’s just a license for corruption.”

 
Capital & Main: When I was in college, monopoly was described as “monopoly capitalism.” The critique connected capitalism and monopoly, arguing that the “inner logic” of capitalism tended towards monopoly. It was an entirely predictable dynamic. How do you view this? 

Dayen: I think there’s definitely a connection between monopoly and capitalism as it’s practiced in the United States. You see that most vividly with these brand-new industries that have popped up and suddenly have gone into a monopoly environment, e-cigarettes being maybe the greatest example of that. Juul didn’t exist four years ago and now vaping is synonymous with the word “juuling.”

That wasn’t always the case in the 1930s on through the 1970s. We had an aggressive antitrust regime in this country such that concentrations of power were prevented in many senses from forming, or natural monopolies like the phone networks were heavily regulated. So I don’t know that it’s inherent if you have a regulatory regime that promotes competition, but certainly we haven’t had that in America in the last 40 years. I think the trend towards monopoly is certainly inherent [in capitalism] right now in the way that it’s practiced here.

Capital & Main: You argue that we need a people’s movement to combat monopoly and corporate concentration. But I looked at Joe Biden’s “vision” on his campaign website and I did not see anti-monopoly as a key platform.   

Dayen: The question is, how do we get private law and private government and private regulation back into the hands of the public? I do think it will take a social movement in order to achieve that. I make no bones about the idea that this is not going to be easy. You mentioned about Biden. His top antitrust adviser is a woman named Terrell McSweeny, who was at the Federal Trade Commission. She currently works for Covington & Burling, which is a big corporate defense law firm that defends corporate clients.

Personnel is going to matter a whole lot, but a movement is going to matter a whole lot. Joe Biden, I think, is indicative of a lot of public officials who try to get in front of a parade and then claim that they were leading it all along. So the goal is to start that parade and force the political system to act. We’ve certainly seen in our history politicians that didn’t necessarily want to move in the directions they’ve moved. They were forced by the needs and the demands of the people. That kind of movement is what it’s going to take to break the incredible power of these giant corporate monopolies.

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