Le Show; 2020-03-08

From deep inside your audio device of choice. Ladies and gentlemen, the world of public opinion polling is introduced us to the concept of the low information voter. You're familiar with that? I'm sure people who don't watch the news read the paper or go outside. Now we're encountering a new phenomenon, the low information leader. The day this week, President Trump, reacting to the World Health Organization's estimate that the new higher mortality rate for the coronavirus is 3.4%. Well, I think the 3.4% is really a false number now, and this is just my hunch. But based on a lot of conversations with a lot of people that do this, because a lot of people will have this, and it's very mild, they'll get better very rapidly, they don't even see a doctor, they don't even call a doctor. You never hear about those people, so you can't put them down in the category of the overall population in terms of this coronavirus, so you just can't do that, so if we have thousands

or hundreds of thousands of people that get better just by sitting around and even going to work, some of them go to work, but they get better. So it's based on a hunch, and people have the coronavirus flu, and they go to work. Exhibit two of the low information leader this week, Democratic presidential nomination front runner, former vice president Joe Biden. We all be sure to be self-evident. No matter what we're creating by the goal, you know the thing. Here's the deal. You know the thing. The low information leader, ladies and gentlemen, hello, welcome to Lizhaw. What I do know that I love you, and I know that if you love me too, well I'm the

world this would be, well I'm not too much geography, I'm not much trigonometry, no no much about algebra, no more for the slightest force, but I do know what it was to, and if this one could be with you, well the world this would be. Now I don't claim to be an A-studies, but I'm trying to be for maybe by being an A-studen maybe, I can win your love for me, no no much about history, no no much biology, no no much about a science book, no no much about the French I took, well I do know that I

love you, and I know that if you love me too, well the wonderful world this would be. Ladies and gentlemen, I don't care how much of the coverage of the democratic primary system you've been paying attention to so far, but I will bet you that one word you have not heard amidst all the issues discussed is the word antitrust.

It seems to have disappeared completely from the vocabulary of Democrats as well as other people, and my guest today is an author and researcher who has done major work into why antitrust, which used to be a frontline issue in American politics and economics is now struggling for breath. Matt Stolar is the author of Goliath, a hundred-year war, Matt, what's the hundred-year war? It's a hundred-year war between monopoly power and democracy. There you go, and as a research director at the American Economic Liberties Project, he also has a newsletter that I read called Big, which is about the gigantism in the American economy these days. Welcome to the show, Matt. Hey, thanks for having me. Based on Big, just to start with that column, you have discussed areas where monopolization

has crept in or leapt in, crept or lept that are astonishing to somebody who didn't know. For example, cheerleading. It's amazing. I love that story. We right now in America were facing a crisis of monopoly, and it's not always obvious, although you can see in the big markets, like search engines or social networks or airplanes, cable systems, stuff is expensive, and the products are not always great, not a lot of choice. 75% of our industries have gotten more concentrated in the last 20 years, but it also affects small industries. Weird industries you wouldn't think of, syringes or coffins or missiles and munitions. The one that I wrote about recently was cheerleading. Those of this Netflix series cheer, you know, I noticed that they talked about a company called Varsity. It was sort of this 30 second long thing being like, oh, Varsity controls everything and then they went back to the soap opera about a cheer team, which is what the series was about.

So I looked at this company called Varsity Brands, which is owned by Bain Capital, so it's owned by a private equity group, and what they do is they've monopolized the whole industry of cheerleading, which is really weird. They own all of the competitions, right? So cheerleading is competition based, and they own them all. To compete at these competitions, they use a host of coercive tactics on the teams that go there. So basically they say you have to buy our clothing and apparel and equipment, or they encourage it very strongly. So one of the quotes I heard was from Bodit Toe, and so there are multi-billion dollar corporations that basically controls the sport of cheerleading. They also finance all of the nonprofit governing associations. They use rebates to control independent gyms and long-term coercive contracts. It is, and I look at monopolies, so all monopolists basically have a set of tools that they use, and they're pretty common.

So when I was looking at Varsity and studying, this is like John D. Rockefeller, but with more glitter. It's amazing. And we often hear, when this subject comes up, you know, Omanopolis, it's often these companies like Google, or telephone companies, or whatever, and people are like, oh, there's all these economies of scale. You need big companies to make big stuff, which is, of course, often nonsense. But one of the things I love about the cheerleading story is that I can assure you that there are no economies of scale in cheerleading. This is purely a set of coercive contractual arrangements and mergers that took place over the last 20 years. So it sort of proves that, I mean, I can go through the policy choices that led to this, but it kind of proves that monopolies are not natural or inherent. They come from business arrangements that we decide to make legal or not legal, as the case may be, through our policy regimes. And the last kind of between 20 and 40 years, we've made it much, much easier to concentrate power across the economy. So you see systemic concentrations, all sorts of interesting political effects. And going to your book, what it makes perfectly clear to use an axonism is that this country

which has a tendency to pendular swings on a lot of issues gambling is horrible. Here's gambling everywhere, including embedded into a new football league, same with alcohol, that we have gone through a series of sick, glickled, pendular swings on the subject of antitrust. And there are eras when concentration of economic power is rampant. And then there are usually periods following that where government takes hold and changes the policy environment. We're in one of those, you can't escape a cycle, you're just in one part of it or another. Here it appears a period of the cycle where mergers, acquisitions, monopoly power is rampant, aren't we?

Yeah, I think that's right. I mean, so the book starts, Goliath, it's a story. And basically the frame, I kind of loosely trace this Texas Congressman named Wright Patman, is very famous in the middle of the 20th century who fought against big banks, high interest rates, and monopoly, special privileges of all kind. And then going back to the Thomas Jefferson, Lewis Brandeis, that kind of original strain of anti-monopolism in America. And we've actually been in this situation before, as you noted, in the late 1800s and then through the 1920s, you had a series of robber barons that controlled our political economy and they concentrated power and wealth over different industries, but in similar ways that we do today. And then they also corrupted our politics. And we fought back in the New Deal in the 1930s. So I go through how Patman and FDR and Robert Jackson, a series of others, waged a kind of a battle against the robber barons domestically and then Nazis abroad. And a lot of it had to do with concentration of economic power. That was a fundamental aspect to the way that we organized our culture.

And then into the 1950s and 60s and 70s. And then I trace why we chose, after winning those battles and establishing a kind of middle class society and a democracy in which we had both, and this is what FDR said, access to the ballot box and freedom in the marketplace. And I don't mean this kind of like weird neoliberal form of freedom where it's like freedom to control others, but like actual freedom to start a business or choose to buy or sell from multiple parties or the ability to unionize, the ability to basically the people that do the work, get the benefits from the work, that's the essential populist frame. Why we chose to give that up? And that story is very weird and complicated. And fun, it's not just a right-wing story. I actually traced it. There was a school of thinking on the right, which was the University of Chicago conservative thinking around antitrust and regulatory policies, like deregulation and stuff like that. The central Chicago school? Yeah, yeah. And then on the left, it actually came from Marxist types, who was, you know, John Kenneth Galbrett was a very important economist, who was very pro monopolist.

And then you had Richard Hofstetter, who was an important historian, established what was called the consensus view of history. And what these guys did is they convinced the left that corporate power, that banking power was, might be a problem, but it wasn't a political problem. It wasn't part of politics. The monopolies were natural. And that the only real kind of question in our economy were maybe some labor rights or maybe some consumer rights. But they convinced us that we are not citizens, but that we are consumers. And that transition happened in the 1970s. And so when the Chicago school put consumer-oriented thinking at the core of all of our kind of political economy rules and regulations, one of which is antitrust, but there are a bunch of them, and said it actually competition and corporate power doesn't matter. The only thing that matters is how we're treated as consumers. The left was totally defenseless. And so since the 1980s, we've seen a rollup of power in everything from media systems to banking to technology to defense.

And you wake up 40 years later and all of a sudden we're confronting autocracy. We're confronting a political system of monopolies. We see Mark Zuckerberg structuring our elections, Michael Bloomberg trying to buy our elections and the Chinese who have rolled up power over our industrial commons, controlling access to medicines and electronics and a whole bunch of other important resources. And fundamentally, the question in a culture like ours is whether we, the people, set the terms and conditions by which we trade with one another, exchange ideas, interact, or whether a small group of people sets those terms and conditions. And one of those systems is a democratic one, and the other one is more of a corporatist or autocratic one. There are three people who stand out in your history of all of this, three characters that had to put it in story terms. You mentioned Wright Patman, who is a democratic congressman from Texas, eventually after a long slog through Congress became chairman of the banking committee, Robert Bork, whom most

of us remember chiefly as a failed candidate, failed nominee for the Supreme Court in a contentious set of hearings in the late 1980s, which gave rise temporarily to a new verb, borking, describing the process he went through in his nomination. And Andrew Mellon. Now there was a time when Andrew Mellon was as well known to the American public at large, as I guess Mark Zuckerberg is now. Tell us a little bit about Andrew Mellon. Yeah. So Andrew Mellon was the treasury secretary from 1921 to 1932. That's a long ride for one thing. Absolutely. He was the longest and they said that the greatest secretary of the treasury since Alexander Hamilton, and he actually put Alexander Hamilton on the $10 bill. He owned three fortune 500 companies. He was the third richest man in the country at the time. Hey, I think he had to resign from the board of 99 different banks when he took the job

in 1921. He also was engaged in routine self-dealing for his own business as well. He was at treasury. And he really, the joke in the 20s was that three presidents served under Andrew Mellon. He really structured the political economy of that decade. And he learned from JP Morgan how to do that. But also at the time, the secretary of the treasury was also the chair of the Federal Reserve. That changed in 1935. So this guy was enormously powerful. And he would use the IRS, or it was called the Bureau of Revenue at the time. He would use the IRS to take revenge on his political opponents and to give tax breaks to his friends and to himself. It was like kind of this really scary decade. In the 1920s, KKK was really powerful, and the Democrats were fighting each other. And it was this, there was a lot of prosperity, but it was marbled with rancid inequality, with machine gunning of miners in coal mines. And he really presided over it.

And then as the economy started crashing, he didn't want the government to do anything for what right patman called the plain people. And right patman was elected in 2009 from this poor district in Texarkana. And so there was a giant protest of frustrated World War I veterans who had fought for democracy just a little over 10 years earlier. And then we're suffering and they felt they had not been. The government hadn't honored the promises that they had made. Somewhat similar to what you see with student debt today, they called themselves the bonus army. And patman was advocating for them, for the government to do something for them, and basically accelerate their pension so that they could get homes and stuff like that and get food in a depression. And Andrew Mellon was arguing for tax cuts for the wealthy. And it became this massive fight and the bonus army camped out in Washington, D.C., it was like the Occupy Wall Street. And then eventually right patman impeached Andrew Mellon or he filed articles of impeachment against him and he and LaGuardia cooperated to start exposing some of the things that Mellon

had done. And then Hoover realized he was unpopular fired Mellon. And then this is Herbert. This is Herbert Hoover. Yeah. Herbert Hoover. Yeah. And then Herbert Hoover sent the army led by Douglas MacArthur and Dwight D. Eisenhower and George Patton to burn down the camps of the veterans. It's just like crazy. They said the army and they burned him down and through tear gas and they had to become a tourist attraction. So they threw tear gas and there was a senator there. They just tear gas to senator. It was just like crazy. And at that moment in 32 when the country was really, I think on the verge of revolt. I mean there were, like I read a bunch of the hearings and conversations, it was a scary time. I mean Hitler was rising in Germany and that defeat of Mellon and then Hoover's bad reaction to the bonus army really set the stage for the New Deal. Because what Patton was saying is, you know what, it's our democracy and our government should actually intervene to help structure our democracy, not the old order, the old

order of Robert Barons and monopolists. And then over the next, you know the way I framed the New Deal and I don't think, I think this is kind of an old interpretation that I'm bringing back is that it was basically a gang fight between the forces of democracy and the forces of plutocracy. And a lot of the things that happened in the New Deal like regulating and shrinking Wall Street and breaking up our banks and breaking up our utilities and breaking up our aerospace companies, all of which happened were done as a way of controlling the excessive political and economic power of these Robert Barons. And it wasn't done in Germany and it wasn't done in Italy. And they knew that and they were, they were, there was a big ideological conflict over what to do with this industrial power. And so I go into that and Andrew Mellon kind of casts a shadow over the 20th century because, you know, they put him on trial for tax fraud after they impeached him and fired him the FDR. You know, so this was not a look forward, a kind of administration, very different from how the Obama administration operated.

They unionized his companies, they broke up his banking empire, they broke up his companies. It was this fascinating kind of like nonviolent war almost within the American political economy. And then out of that came a middle class society governed by public institutions, small businesses, unions, co-ops, things like that. But Mellon's influence over the 20th century was profound and his ideas how to run a society came back in the form of the university, the Chicago school people and in particular Robert Bork, who though he never got on the Supreme Court was far more influential than anyone on the Supreme Court today because his ideas about concentrating power, the kind of melanism is what they called it. Really dominate our antitrust thinking and our regulatory thinking today. Your description of Mellon's behavior, there would have been a time, maybe a decade or two ago, when it sounded peculiar, it now sounds very familiar. It's almost comforting.

It's in a sense that I think there's a wave of thinking that this has never happened before. These are unprecedented times in terms of behavior at certain high levels of our society. And it is comforting to know that we've seen it before and that it has been beaten back before. It's not an inevitable slide into doom. That's the comfort I take from it. But Robert Bork's position regarding antitrust, as I understand it, is that monopoly, concentration, all of these things which were originally taken into account by antitrust regulators are irrelevant that the only thing that matters is our consumers ending up paying higher or lower prices as a result. Is that sort of it? Yeah, that's exactly right. So it's the consumer framework. Now, we used to think about competition and market power and economic power as power. I mean, you would say you're too powerful and you use that power in dangerous and coercive

ways. And the antitrust laws and regulators are there to stop you from doing that and to make sure that there's a level playing field that people are not living in a dictatorship in the little market. And what Bork said is that's crazy to do it that way. That's unreliable. That requires like human judgment. What we really need to do is make the law more of a science. And the only way to do that, and he said this, he says economics as a science. And we need to have the law conform to whatever the economists think. And economists are this very narrow technocratic group that speaks in a mathematized form of language. But they have political assumptions in there. And Bork's idea was, let's get rid of traditional notions of justice and equity and common sense. And let's put all political economy power in the hands of these opaque kind of mystical oracles that we call economists. And so under the guise of doing things for consumers and under the guise of saying,

well, we need somebody to predict what the prices are. And that's going to require all these very complicated models. It's too complicated for you to understand. And he took out of our political, the core of our economic management, the idea of justice and equity for all of us and decentralized power, which is what the laws were intended to foment and replaced it with people on the payroll of kind of plutocrats. And that's what the economics elite really is. What's the law and economics movement? It came out of the University of Chicago, so it was a guy named Aaron director who trained Robert Bork. And Aaron director is kind of like the mysterious kind of guy in the shadows behind all of it. He was also the brother-in-law of Milton Friedman. And his idea was, we should really substitute economic thinking, econometrics, the sort of neoclassical thinking about rational choices and these technocratic models whose assumptions

may or may not conform to reality, we don't really care. We should substitute that for the law. So they did a whole bunch of things like antitrust used to, you know, the courts interpreted it as saying, okay, if you are a big, you know, and you're doing certain things like you're saying, okay, in order to buy one product, you have to buy another product or we're not going to sell you the first one and where I'm in operation, you have to buy the second product. That's called tying. It used to be just illegal, right? You just said, you can't do that if you're powerful. And what these guys did is they said, we're not going to make it automatically illegal. We're going to say, go to the court, bring an economist, prove that there's a harm and the other guy can go to the court and bring an economist and actually prove that that's actually a good arrangement. And then you're going to fight for a few years and then the judge is going to decide whether that's good or not. And that's how we're going to change the law. That's called the rule of reason, which it doesn't really make any sense. It's like saying, we're going to put a stop sign somewhere, but you're not going to have to stop in order to figure out whether you should stop at that particular time.

It's going to take you five years arguing a court about whether stopping at that point was a good idea or not. So that's how they kind of transformed antitrust law. And it was under the guise of the something called the law and economics movement, which said, let's substitute these sort of technocratic economic models for the judgment of human beings or actually not human beings, but people with common sense who are in these regulatory and antitrust positions. It was also a different kind of economics because there used to be this kind of economics called the structure conduct performance paradigm, which essentially said, if there's a few competitors in a market just a few and they're big, that's probably dangerous. And then they analyzed markets from that perspective. And the law and economics people came in and said, that's all very silly. Big is not bad. Big can be good as long as they deliver low prices. And so what you saw, the first manifestation of this in the 1970s was they removed laws that restricted chain stores. And so what's the slogan of Walmart?

Every day low prices. And so it didn't matter these guys if you replaced 10,000 stores owned by people in local communities with a bunch of Walmarts because Walmarts had every day low prices. And that's the actual physical and marketing manifestation of Robert Bork's thinking and the law and economic thinking. We just don't care who is controlling our retail, whether it's local communities or whether it's a few oligarchs in Bentonville, as long as you can make the case that there are lower consumer prices. One thing when comes away from your book with a new found appreciation of is the relationship between commerce business as we understand it, that trading between customers and producers, and finance, which is often hiding behind a wall of a few scotorial language. But basically, as banks, and to go back to Melan for a moment, Melan's power came from,

as you mentioned, control of a lot of banks, rolling them into fewer banks, fewer larger banks. In a way, the part of the cycle that we're in now has been described by many people as the financialization of more and more aspects of our economy. Yeah, that's 100% right. If you look at a company like Amazon, Amazon has done a bunch of innovative things, but what they've also done is they have used their ability to get capital at a lower cost to kill their competitors. So there was this one particular moment where a company challenged them called diapers.com or quidsy, but they ran a cycle of diapers.com and said, we're going to try to sell stuff for parents because we think we can do a better job than Amazon. And they were doing really well because they had figured out a specific niche for how to do it.

And then Jeff Bezos said, okay, that's a competitor. So what we're going to do is we're just going to lose money underpricing them until we win. So they started spending $100 million a month, just underpricing diapers.com. And then he went to the head of diapers.com and he said, you guys should sell out to me because I'm willing to spend as much as it takes to kill your business. Now, that's not fair competition because that means that the person who's closest to Wall Street who can borrow the most money at the cheapest cost is the one who's going to win, not the person or entity that has the best products or services or services customers as well as they can. In other words, it's a form of what's called predatory pricing. And if you take a step back, the only way a market system actually produces wealth is if when you take a bunch of inputs and you create a new product with them, if that product is worth more than the initial inputs, that's actually adding wealth, like taking a bunch of metal and rubber and turning it into a car. And that car is worth more than the initial inputs. But if you take a bunch of inputs and you add them together and then you sell them for

less than those initial inputs, which is what Amazon was doing, what you're doing when you're doing predatory pricing, purely to acquire market power. That is actually net destructive of wealth, right? And so what is happening in our economy, and you can see this with chain stores across the board, but also in a lot of different areas, is the closer you are to sources of capital, the better chance you have of succeeding, not if you're doing a better job, but just if you have like relationships with capital. And that's really, that's a dangerous thing for an economy. It's a dangerous thing for a society. And we didn't use to do things that way prior to the 1970s. It is, we did it when Andrew Mellon was in charge, and that's why he rolled up so much power. But it does lead to corporatism and ultimately to sort of more autocratic ways of structuring a society. You know, I'm speaking to you with you from New Orleans, which is fairly notable at this point in American life because of the relative lack of chain stores here, there's a Walmart, it was hard fought, but came in, there's a Costco, a few others, notably the

last stores to come back after the 2005 flood were the non-local stores. And I think that got people's attention here. So there's always been a, here a, not so much a resistance to chain stores as a continued loyalty to local retail. And it's interesting then to read in your book about a nationwide sort of resistance to chain stores that had to be overcome, both in terms of attitude and in terms of policy for them to become the dominant form of retail prior to e-commerce in modern America. Yeah, so I, Patman was involved, I mean this Patman's amazing, I, I didn't know anything about him and I started working in Congress during the financial crisis and then I eventually ran into some of Patman's old staffers and they told me about him. That's how I learned about him. But he, he, he was fighting with the big banks in the 60s and 70s, he impeached Andrew Mellon in 1932.

He was also the first Democrat to investigate Watergate. But then in, in 1936, he was the leader, I was called the anti chain store movement because there were these chain stores that were very similar to Amazon or Walmart and the leading one is called ANP, today it's, you know, ANP supermarket is not, I think it went out of business. People know of it as kind of this mild, unimportant chain, but it was the Walmart of the 1920s and 30s and they use the same tactics that these guys did, they would, they would set up stores next to independent retailers and underpriced them with killing prices and then they would go on the supply side, you know, the way that Walmart exerts its power is largely by bludgeoning suppliers, bludgeoning workers, farmers, you know, then that's, that's what, that's what ANP did. It sometimes have low consumer prices, although they would, you know, not, not always. And then they would, they would, they would bludge in the farmer, they would, they would beat up people trying to unionize their stores, they would, they would hurt suppliers. And they would undermine local communities, as you noted, like the stores that came

back first to New Orleans were the local stores, right, because the people live there. And that's true. That's always been true, like local people that run local institutions care more about their local community. It's just, it's just part of human nature. And so the goal of the anti-chain store movement was to protect local stores and also protect, to protect diversity in the production of goods and services, because a chain store becomes a, like a power buyer was called. And then they start like dictating terms to anyone making anything that's trying to sell things through, through that, that chain store. So Walmart in the 90s, for instance, had so much power that they could and did force a lot of their suppliers to move their supply chains to China. That was just a social choice that the Walmart made because they had the power to do it. When you have a more fragmented set of retailers, no one then has that power. That becomes a social choice that we, the people, make through our democratic institutions. But at any rate, the chain store movement in the 1920s and 30s was really about predatory pricing and the ability of chain stores to come in and use their bargaining power to

destroy local stores and use their bargaining power to destroy small manufacturers and cartilize the retailing and food industry. And Pat Min led a group of, it was independent pharmacists and farmers and just kind of a whole series of people that cared about local stores. And this was predominantly in the South, but not entirely in the South, to impose some rules saying you can't engage in predatory pricing, right? And that's, that's basically what it is. You can't do loss leading to kill your competitors. You can't under price goods based on just your pure bargaining power and size. If you are more efficient, like if you handle things better, you can compete on that, but you can't compete based just purely based on how cheaply you can borrow in the capital markets. And then A&P hired a lobbyist who had actually lobbied for the Nazi tourism bureau. And it's just so funny, this stuff is like never, it's never really that new, like the sleaziness of all these guys.

And this guy, Carl Bueller, offered, I gotta, I think the offered jobs to like FDR administration people. And then John Hartford, who owned A&P, I think gave a $200,000 loan to one of FDR's kids to start a radio venture, like it was, it was dirty. Anyway, the, the A&P eventually cut a deal with labor. They said, okay, we'll unionize as long as you protect us from those, the anti-chain store movement. And so labor unionized their stores and then started saying, we don't like small stores. And then they kind of cut a deal with the farmers. But I ended up happening, there's a series of antitrust suits into the 1940s and 50s. And they passed the law called the Robinson Patman Act. And A&P didn't go away, it still was big. But ultimately, small stores did come back and, you know, A&P was unionized, so workers got paid better, farmers were treated better. And there was a kind of mosaic of chains and small stores throughout the American political economy. So you could compete.

But also if you worked for the A&P, you got, you know, treated better, farmers got treated better. And it really worked into the 1970s. You saw chains didn't disappear and if chains had superior methods of distribution, oftentimes the smaller stores would copy them or they would go out of business. But it made sense. It worked. And then we stripped a bunch of those laws in the 1970s. And it's not a surprise that you've seen the return of corporations like the A&P, which is, you know, Walmart and Amazon and Staples and so on and so forth. And actually, Amazon lobbyists, like recently, you know, a Republican and a Democrat, recently have been writing papers on how the case against A&P was so silly because it didn't consider the importance of consumer prices. So it's like, the past has never passed, right? We're still fighting these, these, these interpretive battles. And of course, in this day and age, an antitrust standard, basely on consumer prices, ignores behemoths like Google and Facebook, which charge nothing except your data. And your attention.

Yes. But your attention is worth nothing to them except if it can be informed by data for targeting purposes. One could argue. But they give their services away to the consumer. I would ask this question. It became obvious to me some time ago that the focus in the United States had shifted at least in public relations terms totally to the consumer. You're getting lower prices no matter what. So for example, the idea that somebody has to make this stuff sort of disappeared from view, the idea that in a sort of healthy economy, consumers are also producers. And their ability to buy is based at least in large part on what they're paid to produce. And that's the way money cycles through the economy. And that's the way a healthy economy works. And it seemed to me like starting in the post-war era and certainly accelerating by the early 70s when the United States stopped making televisions because look, look at these sonies.

The focus shifted entirely to look what you can buy and you figure out how to make the money. Right. And this was the ideological just like the choice that we made. And it was heavily influenced by John Kenneth Galbreath and C. Wright Mills, Ralph Nader, the consumer rights movement that took the kind of energy from the counterculture, which had, you know, the counterculture was very much like libertarian infused, although there was resistance to the Vietnam War. There was promotion of civil rights. There were a whole bunch of things that were important there. But the generation that kind of took that and turned it into a philosophy of political economy ended up going with the Chicago School because they didn't understand the traditional distrust of concentrated power, the traditional role of the American citizen as a producer, as a thinker. And they just disappeared that. And so it's to the point there was this great frontline episode on Amazon.

And one of the things that they noted in that episode was that Amazon's commercials, they show commercials now, of all of these friendly boxes moving, they focus entirely on the boxes moving by themselves. And there's just there's no people in it, right? It's the ultimate kind of erasing of the producer of the worker from our vision of how the political economy works. It's just people happy receiving boxes. That's that smile, literally the boxes are smiling. That is that singing that is the vision like that is Galbreath's vision right there. And it's amazing and it's so dystopian. Also, if we're learning now with the coronavirus that the longer your supply lines, the more vulnerable economic activity becomes, it's interesting that in the political discussion, almost nobody mentions Walmart as a motive force in the offshoring of American jobs. But another force that made it possible was low energy prices because if you couldn't

ship from China to here at a cost that if you added it to the lower labor cost over there was still lower than the cost of American labor, that system wouldn't work. So in a way, it's been bad for the planet. Well, yeah, so in the 1970s we changed this philosophy domestically. And then there was this moment in 1992 when you had had Reagan and then the first bush for 12 years and there had been all of this consolidation and explosion of shopping malls and chain stores and Wall Street had gone crazy. Michael Milkin, who Trump just pardoned, is a big character in the book too, which is like hilarious because Michael Milkin's Drexel bank, they were explicit, we want to bring back the Andrew Mellons of the world. So there's this question in 92, okay, so this guy Bill Clinton wins and he says putting people first, are they going to roll back the Reagan administration or what? And the, because they're Democrats, right, and traditionally Democrats have been populists.

But what Clinton does instead of rolling it back is he doubles down on the Reagan standard and he takes it global. And his wife is on the board of Walmart and they do NAFTA, they do China PNTR, they move the supply chains or help move the supply chains to China or start moving it to China and Bush then continues that. And yes, it is because of low energy prices. And it's also, it's also because they saw the world as financiers do, right? They financiers, bankers, all they think about is how money moves. They think that, and you saw this with Bloomberg, they think that food just grows in supermarkets. Right? They don't understand that stuff doesn't just show up on the shelf by magic. So when they move things to China, you know, and like they're like, oh, the free market will provide. It's like, no, China is providing, right? We just decided to train for all that stuff to China. And they did it for their own geopolitical interests. And all of a sudden we're waking up to power, right? These guys just assume that there was no power underpinning economic relationships.

It's all the market. It's all voluntary exchange. And it's like, no, actually, economic power is a thing, economic power matters. And all of a sudden, we are heavily dependent on China for, you know, pharmaceutical inputs and potentially in a pandemic. So like already, hospitals in the US are practicing how to recycle specific types of masks that are necessary in a pandemic because they know there are going to be mass shortages. And we can't make that stuff anymore or we can't make enough of it. The irony is that in the name of the free market, we've outsourced the manufacturer so much to a government controlled market. The thing is what we did before 95 is we did that to, but only with the basically democracies or military allies. And China is, they're not an enemy, but the government is quite hostile to the United States. And they could be an enemy. I don't, I think it would be really catastrophic if they were. You know, one of the things that we gave up in the 90s was national security because national

security is about managing risk. So in some ways, if we ever got into a conflict with China, our ability to sustain that conflict would kind of hinge on whether China decided to keep selling us ammunition. You make the point in reference to Melon about his key role because he dominated. He had 100% of the aluminum business, which was key to the aircraft that the United States was going to need in World War II and the choke point that he therefore enjoyed over American national security. And they had, Alcoa had a cartel arrangement with Nazi Germany. He noted a lot of standard oil of New Jersey did that too. And Hitler was using the American corporate law and patent law to try to, and doing this all over the world, particularly in the countries that he was trying to take over. He was trying to restrain production. So there was an anti-trust attorney in 1941 who said he was speaking, and I think in Michigan or somewhere, but he in the US, he said, you know, the difference between an aluminum plant being bombed out of existence and never being built in the first place

because of cartel arrangements is largely a difference in the amount of noise involved. And so there's a chapter in the book called Trust Busters Against Hitler, which is about how we were a couple of lawyers backed by Bill and Congress, including people like Harry Truman, how they untangled American supply chains from these foreign cartels in particular, what the Nazis were doing, and how they had to break domestic robber barons who wanted to control supply of key inputs, including Andrew Mellon, to do that. It took a while, but it was really important to break domestic control of supply because if you buy monopolist, because those monopolists were perfectly happy to work with foreign autocrats. They didn't have domestic US interests at heart, right? And that's just, they just didn't. And that's just true. What you see is like our companies, our big companies don't have American interests at heart.

And they're really powerful. And that's a big problem. And in World War II, the reason we were able to build up sort of the arsenal of democracy is because there was a lot of competition. So every major weapon system in World War II, there were at least a dozen prime contractors who could build it. And that gave power to the procurement officers in the Army and Navy to force them to build good equipment at a reasonable price. And we don't have that today. Today, you know, it's like we have the F-35 and it's Lockheed Martin, right? You point out in the book that at the end of the Cold War, the government, I guess this was under Clinton by that point, the Defense Department was actually telling defense contractors, you guys have to merge to survive. Yep, about 100 major defense contractors merged to about five. That's when Lockheed became Lockheed Martin, right? That's when Boeing bought McDonald Douglas. And now what you see, I mean, it's catastrophic, right? And I mean, the left kind of didn't pay attention to it, although Bernie Sanders did fight

against it because they just didn't see the difference between have a military industrial complex with a bunch of contractors versus a military industrial complex with just like a few and the one that was controlled by private equity. There is a difference and it's a significant one. But now we have a problem where the whole civilian aerospace industry is rolled up into one company, Boeing. And Boeing, as it turns out, is having problems. And what that means is there's no alternative. So we see that monopoly is causing this problem of hidden risk, which then all of a sudden, you know, in 2018, Boeing was on top of the world, $100 billion in revenue, like super innovative, taking market share. And it would have been, people would have said, oh, that's kind of crazy to say that that company is doing a bad job. But the market power, which is what was sustaining that revenue and the political connections, like Nikki Haley's on now on the board of Boeing, their very politically connected company, was masking the deterioration in the underlying business of building safe civilian aircraft

and spacecraft. And that's what we see across our political economy. There's all of this hidden risk kind of everywhere that we haven't been managing and haven't been looking at. And traditionally, we've managed that with competition policy to enforce multiple competitors so you have resiliency, so you have multiple supply chains. And we kind of got away from that. And now what we're starting to see is a kind of return to a more traditional management of our political economy, because people are like, oh my gosh, Boeing is a disaster. And oh my gosh, we are so dependent on China for all of these key inputs. And you know, there's a lot of other reasons, but like, oh my gosh, too big to fill banks, crash the economy. So there's an ideological turnover that's happening right now. And you know, it's sometimes it's hard to see because there's so much noise with Trump. But it really is happening. I know that some people are saying and have been saying to the radio or the, or their audio device of choice for the last little while. But there is such a thing as a natural monopoly. There are certain things that have always been regarded as natural monopolies, at least

a telephone service was always regarded as a natural monopoly. You didn't want to have eight or nine competing systems. I mean, you, you had local telephone companies, which, but they connected to one national network. You didn't have, as we do now with cellular service, competing national networks. But water supply, I guess, would, was always regarded as a natural monopoly, electric utilities. So where's the line? Well, so it's an important question and it's, it's debate that's pretty, that's ongoing. I, I think the problem when you're looking at, when you're coming from a pop of this perspective, it's concentrations of private power. It's really easy to say, oh, there are economies of scale. There are natural monopolies and, and there are technical economies of scale and lots of different businesses. But there's a difference between having like a factory that, that makes products and it's big so it can be efficient or an electric utility that, you know, you only want to attach

one wire at every house because it doesn't make sense to attach to and have competition there. So you're actually having that kind of economy, technical economy of scale and having, you know, 10 factories under one legal holding company. That's legal scale. That's not technical scale or like having a whole bunch of electric utilities and lots of different states under one holding company, which also may own a whole bunch of other stuff, right? That's just legal, that's a legal arrangement. That's not a technical economy of scale and people often intentionally confuse those too. So with Google, even if you accept that search might have technical economies of scale, which it does, but, you know, probably not as much as it as it should have right now. It's probably shouldn't have to be 95% of the market. But there's no reason that search and YouTube have to be under the same kind of holding company. There's no reason that like Facebook and Instagram have to be under the same holding company. Well, the reason that they won't argue this in public, but the reason is the more data, the better.

There's a lot of reasons, but they're basically, they're, they're, they're many Napoleon's, right? They want, they want it all. As an example, general motors, they were the biggest company by revenue in the world in the early 90s. Their factories made on average 200,000 cars a year. Honda was about a third the size of GM. Their factories made about 600,000 cars a year. Honda was much more efficient than GM. GM said, oh, economies of scale, but in fact, their economies of scale were lower than Honda's, but they, they had a kind of legal scale that was much bigger. And you know, everybody knows that when something's really big, it becomes bulky and bureaucratic and badly run. And there was just like endless quotes. You can go back to the 1920s with Alfred Sloan. It's ahead of GM being like, man, we're really just too big. We can't get anything out anymore. All the way to Ross Perot in the 1980s on the board of GM saying, man, this place is, you know, terribly run. You can't get anything done. And that's what you see in big institutions. And so it's really important to separate out, you know, the technical economies of scale from the actual kind of legal economies of scale. So what we did with like electric utilities, right, which is a, I think that's a fair

to say that that's, and has more natural monopolistic elements, although, you know, solar panels can challenge it. As we said, as we're just going to keep them really small. So if they're going to be monopolies, we'll make them local monopolies and we'll make them regulated. And I would also note that economies of scale are not necessarily tied to the corporate form itself. So for example, I talked to the creator of the internet, or one of the creators of the internet is guy named Bob Conn, who created the TCP IP protocol at DARPA net in the 1970s. And he pointed out that linking all of like a bunch of networks together through this underlying protocol has scaled by a factor of something like 10 million. And that happened not because it was a corporation, but because it wasn't a corporation. So he told me that at the time, you know, General Electric and DEC and Wang and IBM and all these companies, they didn't want to interoperate and they wanted people to only use their network. They're Waldgarden. And it was the fact that there was this public protocol, similar to like the public protocol of email that actually made the network.

I mean, you could see it with podcasting too. There's a public protocol called RSS. You don't have to have legal control over a technology to scale it. In fact, sometimes that works against the scale, but when you do need to have that like legal control of some technical capacity, we can do that. But just like it's almost always enormously overstated. You know, as we're talking, I'm thinking of the natural monopoly of electric utilities and the spectacle right now of PG&E out in Northern California, which just didn't think it was appropriate to spend money on maintaining their outdoor transmission lines and is paying billions of dollars now in damages for fires. Some of the huge brush fires in Northern California caused by those deteriorating power lines and stimulating a whole conversation in Northern California, obviously starting in San Francisco about whether it should be publicly owned, since it's a monopoly. Conned.

Conned did not think it was a good idea to have enough ladders on hand before Sandy hit New York. I mean, these are not, these aren't geniuses, right? You can have like really well-run utilities that are publicly regulated and privately owned, and you can have really well-run public utilities that are publicly owned. Los Angeles has one that's well-run, I think. I think Austin has an electric utility that's really badly run, and San Antonio has one that's really well-run. So it's like one of the things about populism is that in the traditional pragmatic approach to governance, like the post office was a monopoly, right, but it's well-run, right? At least traditionally has been well-run, so it's like it all comes every day. It works, right? And it has since the 1790s, I mean, in the 1790s, it was extraordinary technology. But we have to get back to a detailed institutionalist perspective on how our economy works. Like it doesn't necessarily matter if things are publicly owned or privately owned. What matters is that the people, and this gets back to the definition of property, but that the people who have control over a piece of land or an item or something else

also have responsibility for that. And we've separated out control and responsibility. And that's ultimately the problem of monopolization. It's the problem of financialization. So Mark Zuckerberg is in control of Facebook, but he doesn't actually have responsibility for what happens on Facebook. Well, we gave him that lack of responsibility with Section 203 of the communications decency. Absolutely. And we put it in our laws. And that's true, like across the board, what you're seeing is people who have control, but not responsibility. And that's a traditional problem in American political economy. It's called absentee ownership. And that's what a lot of our traditional, like political economy tools have been designed to address. Okay. Final question. On the consumer side, it's called credit. On the bank side, it's called debt. And it's the primary, if not sole product of the banking industry. When I was a kid, there were state laws that dictated a maximum legal interest rate. What happened to those laws?

So it's interesting because Goliath is about monopolies, but it's also about finance, right? So the middle part is about a whole series of battles that people don't know about in the 1950s and 60s over banking and what would eventually become the personal finance industry. That didn't really exist until kind of the 1960s and 70s with the mention of the credit card. So the user ecaps, which were this traditional model for regulating power, right? Because making sure that poor people didn't get gouged or normal people didn't get gouged by people. Goes back a long way to that tradition. Goes to colonial times. It goes to biblical times, yeah. Yeah. I mean, in a lot of states in the US, when they became a state, the first law they passed was a user ecap. And it's so funny to read, like, you know, George Stigler was one of Robert Bork's kind of buddies, you know, talking about how irrational user ecaps are and all these, you know, there's such a lack of respect for tradition and for humanity in their writing, such arrogance. And they stripped out these laws by making the argument that these laws were inefficient and then they were preventing capital from going to kind of communities that were underbanked.

They made arguments that these laws led to loan-sharking. And what happened is that people, whenever they were, and there's this kind of episode in Arkansas, which was right next to Texas in the 80s, all the elites in Arkansas and the bankers wanted to get rid of user ecaps. And they kept being like, let's get rid of user ecaps. But it was in the Constitution, the Arkansas Constitution because of, it had been there since reconstruction in the 1870s when there was a lot of really high interest rates. And so they had to actually try to pass a constitutional amendment and it was a popular referendum. And they kept putting it out there and people in Arkansas kept voting it down. And so finally, they actually just did it federally. And that was just like a big part of the Chicago School was releasing concentrated capital to rule our society and in lots of different ways through user, getting rid of user ecaps, but also through allowing them to just manipulate the corporate structure. And they always talk in terms of liberty, right? But their form of liberty is the liberty for capital, liberty to control, liberty to force

servitude, right? And that's a form of liberty that is a very aristocratic and autocratic form of liberty. But it's confusing because Democrats tend not to talk in terms of liberty, but our frame for liberty, and I'm a Democrat populist, is liberty from capital, liberty from control, liberty from servitude, right? The liberty to be a free person. And that is a very brandy scene way to understand political economy. It's kind of coming back. You see it with like Bernie, you see it with Warren, you see you know, some of these candidates they have antitrust planks, there is an understanding of concentrations of power, a private power, not just public power, but private power. So I think, you know, we're on our way back. I wrote Goliath that came out of the financial crisis because I saw the misapplication of private power in all sorts of really destructive ways. And I saw that we were, this is a whole history I didn't know. I had to learn it all and I was a history major, right? But I didn't know any of it. So it's really, the book is, it's a fun book, but it's designed to equip us as citizens

with a set of stories about our culture that we didn't know. And it is, you know, you said it is comforting. That is what, that is kind of the message is we've been here before and we can take our democracy back. And I guess I'll finish with like the message of the book and the message is sort of what I try to kind of articulate is look, the good news is that it's up to us because we do live in a somewhat free society and we can take it back. The scary news is that it's up to us, right? It's our responsibility to take this back to educate ourselves. I enjoyed the book, I enjoyed reading your newsletter, I enjoyed being reacquainted with Ivor Kruger, the match king who monopolized the world of matches at one point in our history. Matt Stuller, thank you very much for joining us. It's truly a pleasure, thank you. The Tepele Show Shoppo, to Robert Frazier at Monitor Studios in Washington DC and Billy

Therio at Southern Sound Services in New Orleans for help with the day's broadcast as well as Pam Hallstead as always. And Thomas Walsh at WWI Know New Orleans. The email address for this program, the chance to get cars I talk to shirts, the music playlist, all available at harryshare.com and I'm on Twitter at the harryshare. The show returns next week, I hope you do too. The show comes to you from Century of Progress Productions and originates through the facilities of WWI Know Orleans flagship station of the Chained Disease Radio Network. So long, from down under.