Huge corporations with monopolistic economic power not only affect economic outcomes, but also political and policy outcomes. As my previous post described, economically, corporate power results in higher prices, lower quality service, depressed wages, fewer jobs, increased profits, higher CEO pay, and a redistribution of income upward to big corporations, their executives, and big shareholders.
Politically, the concentration of power in huge corporations distorts public policies. Examples of policies that benefit large corporations and their wealthy CEOs and investors – to the detriment of the rest of us – include:
- Special tax breaks and loopholes for both big corporations and wealthy individuals;
- Bankruptcy laws that provide relief for corporations but not for distressed homeowners, student loan recipients, or credit card debtors;
- Lack of restraints on corporations amassing power but many hurdles for workers trying to assert bargaining power through unions; and
- Trade deals that protect the profits, intellectual property, and assets of big corporations but not the jobs and incomes of American workers, nor the environment and the safety of our food.
In addition, intellectual property laws here in the U.S. mean that we pay more for drugs than the citizens of any other developed nation. That’s partly because it’s perfectly legal in the U.S. (but not in most other nations) for the maker of a brand-name drug to pay generic drug makers to delay introducing their cheaper equivalents when the patent on the brand-name drug expires. This costs American consumers an estimated $3.5 billion a year – a hidden upward redistribution of our incomes to Pfizer, Merck, and other big pharmaceutical corporations, their executives, and major shareholders. [1]
Wealthy corporations and individuals distort public policies to their benefit through lobbying, the revolving door of personnel, and corruption of our elections through hundreds of millions of dollars of campaign spending. They obtain public policies that support their interests by using state governments to preempt or nullify local laws or initiatives, such as local public internet access or local minimum wage laws. [2] They also use the federal government to preempt state laws as they are trying to do with GMO food labeling. They have passed federal laws that ban federal regulation of fracking, for example, or that ban Medicare from negotiating drug prices with manufacturers (despite the fact that private insurers, the Veterans Administration, and most countries’ health care systems do this). And they use the courts to create corporate “rights” that are used to overturn local, state, and federal laws and regulations, such as limitations on corporate spending on elections.
In terms of campaign spending, the super wealthy account for a growing share of both Republicans’ and Democrats’ campaign funds. In the 1980 presidential election, the richest 0.01% (1 out of every 10,000 Americans or roughly 23,000 people) gave 10% ($10 out of every $100) of total campaign contributions. In 2012, the richest 0.01% of Americans (now 32,000 people due to population growth) accounted for 40% ($40 out of every $100) of all campaign contributions. So, whose voices do you think our elected officials are listening to when they make policy decisions?
If this weren’t bad enough, the exploding outside spending on our elections (i.e., outside of candidates’ campaigns as described in the previous paragraph), which is supposedly independent of candidates’ campaigns, is almost entirely funded by wealthy individuals and big corporations. Furthermore, they can make unlimited “independent expenditures” while their direct contributions to candidates are quite limited. But the candidates know who is paying for the “independent” spending, so these voices are further amplified.
This campaign spending by wealthy individuals and corporations affects who runs for office, shifts the results of elections, and affects the decisions of elected officials. This corrupts the election process and the policy making of our elected officials. The result is not government of, by, and for all the people, but policies favoring the wealthy and their corporations.
Further adding to the influence of big corporations is the revolving door of personnel. Many government regulators, and some members of Congress, come from the industries they oversee in their official, governmental duties. Some Wall Street firms actually pay big bonuses to employees who take jobs in the agencies, such as the Treasury Department and the Securities and Exchange Commission (SEC), that regulate and oversee the banking and financial services industries.
On the other end, when members of Congress or other government employees leave, they often go to work in the industries they oversaw or had contact with when they were in government. A significant number go back to work for the employer they left when they took their government job. Knowing that a well-paying job in the private sector is waiting for you when you leave your government job certainly would seem to present a conflict of interest and might influence decisions made while working in government.
Some members of Congress and other government employees leave, not for jobs in industries they oversaw, but to lobby their previous colleagues on behalf of industries they oversaw or with which they had contact. In the 1970s, only about 3% of departing members of Congress went on to become lobbyists. In recent years, half (50%) of all departing senators and 42% of retiring representatives have done so. This isn’t because recent retirees have fewer qualms about making money off their government contacts. It’s because the financial rewards of lobbying have become much greater as our giant corporations spend more and more money on lobbyists in their efforts to influence public policies. [3]
This is crony capitalism and it has led to huge corporations with significant market and political power. As my previous post described, America only has four big airlines, three big health insurance companies, four big cable and internet conglomerates, and six too-big-to-fail banks that are getting bigger not smaller. Other examples of huge corporations and limited competition are that just two companies sell 70% of the countless toothpaste brands, there are only five big book publishers, and firms like Walmart, Google, and Amazon use their market power to squeeze out competitors and exercise significant power over suppliers. Big technology companies are driving small competitors out of business and massive conglomerates control our food, cosmetics, and drug industries.
Huge corporations with monopolistic power are not healthy for our economy or our democracy. We need to reassert that government policies and the rules of our economy should be of, by, and for the people, not of, by, and for the economic elite. Otherwise, we become a plutocracy, oligarchy, or corporatocracy – they’re pretty interchangeable, take your pick.
[1] Reich, R., 11/1/15, “The Rigging of the American Market” (http://robertreich.org/post/132363519655)
[2] Linzey, T., 1/21/16, “Slaves in all but name: Abolishing the corporate state in rural communities,” In These Times (http://inthesetimes.com/rural-america/entry/18792/community-rights-and-corporate-slavery)
[3] Reich, R., 6/19/16, “A big idea for Hillary,” (http://robertreich.org/post/146169929945)
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