The failure to enforce antitrust laws during forty years of plutocratic economics has produced dominant businesses in numerous sectors. The resultant concentration of economic power, and, along with it, political power, has undermined our democracy both economically and politically. It has also led to rapidly growing income and wealth inequality. (See my previous post for details.)

The monopolistic, unregulated markets created by plutocratic economics since the late 1970s have made it clear that well-managed markets, where real competition thrives, are more efficient and equitable. There is a stark contrast between the economy of well-managed competition from the 1950s through mid-1970s and today’s plutocratic economy. In the post-World War II period, income and wealth were much more evenly distributed and workers’ compensation rose with their increases in productivity. In the latter period, economic inequality has grown tremendously and workers’ compensation has been stagnant, despite increasing productivity.

The economic security of the middle class has disappeared, in part because of increased economic and financial instability. After a period of over 30 years without an economic crash or major economic scandal, from 1980 on there have been three major economic crashes or scandals: the Savings and Loan crisis, the bursting of the dot com bubble, and the 2008 financial collapse and Great Recession.

There are a variety of solutions that would reverse the trend toward greater industry concentration, [1] [2] [3] as well as steps that can be taken to reduce the power of monopolistic firms. [4] There is much the U.S. can learn from Europe where more vigorous antitrust enforcement has produced more competitive markets, lower economic inequality, and more equitable sharing of corporate earnings. [5]

  • Reviving vigorous use of antitrust laws to block mergers and acquisitions, including:
    • Declaring a moratorium on approvals of large mergers and acquisitions (e.g., those above $6 billion in value or ones creating firms with over 10% of local market share)
    • Banning mergers or acquisitions that would reduce the number of major firms in a local market to less than four
    • Expanding the antitrust judgment criteria from the simplistic focus on lower prices for consumers and “productive efficiency” to include a broader interpretation of the public’s interests
    • Reinvigorating enforcement of laws limiting predatory pricing, and
    • Considering monopsony power (i.e., a dominant buyer) as well as monopoly power (i.e., a dominant seller)
  • Using antitrust laws to break up companies with monopolistic power
  • Imposing much bigger fines for violations of antitrust laws
  • Making the merger and acquisition review process more public and transparent
  • Banning “exclusive dealing” where dominant firms require customers, wholesalers, and suppliers to sign contracts banning them from doing business with rivals or rewarding them for not doing so
  • Banning pharmaceutical companies from paying potential competitors not to introduce generic versions of drugs
  • Stopping pharmaceutical companies from extending their patents on drugs through trivial changes in a drug, erroneous patent filings, and outright patent fraud
  • Restoring consumers’ ability to repair durable products (e.g., smartphones, computers, cars, and tractors and other farm machinery) themselves or at independent repair servicers by banning product designs intended to prevent servicing and prohibiting restrictions on the availability of spare parts, repair tools, and detailed owners’ manuals

There are also a variety of solutions that would ameliorate some of the negative effects of industry concentration:

  • Making the formation of a union easier and less susceptible to employers’ efforts to block and delay unionization
  • Allowing workers of franchisees or ones in the gig economy to unionize
  • Banning non-compete agreements for low-paid, low-skill workers and ban non-poaching agreements for franchisees
  • Increasing the minimum wage

Recognition of the importance of antitrust enforcement is growing. It is being discussed in the presidential campaign for the first time in many years. Congress is holding hearings on monopolistic practices by businesses for the first time in decades. This included a hearing in May where a military spare parts supplier was called to task for charging over 40 times its costs for some parts and where a bipartisan group of legislators called for the company to return over $16 million in excess profits. [6]

Democratic society is threatened by dominant, market-controlling businesses. Huge monopolistic corporations can transcend the power of elected government to effectively control them. Every entrepreneur and businessperson should have the opportunity to compete without unfair competition and domination by monopolistic firms. Regional-level businesses should be able to thrive without being throttled by giant, national, monopolistic companies.

A functioning democracy relies on citizens who are free from domination by employers and sellers of goods and services. I encourage you to listen to what candidates for public office have to say about reducing the presence and power of monopolistic businesses and to ask them questions about what they would do to restore a vibrant, competitive economy in the U.S. – an economy that is fair for consumers, workers, small businesses, and entrepreneurs.

[1]      MacGillis, A., Jan./Feb./March 2019, “Taking the monopoly threat seriously,” Washington Monthly (

[2]      Cortellessa, E., April/May/June 2019, “Meet the new trustbusters,” Washington Monthly (

[3]      Sussman, S., July/Aug. 2019, “Superpredators: How Amazon and other cash-burning giants may be illegally cornering the market,” Washington Monthly (

[4]      Vaheesan, S., 9/24/19, “Unleash the existing anti-monopoly arsenal,” The American Prospect (

[5]      Horowitz, E., 7/30/16, “Europe may do capitalism better than US,” The Boston Globe

[6]      Dayen, D., 6/24/19, “In the land of the giants,” The American Prospect (


Forty years of plutocratic economics has resulted in monopolies and near monopolies in many business sectors due to the failure to enforce antitrust laws. This concentration of economic power, and, along with it, political power, has undermined our democracy both economically and politically. It has also contributed to rapidly growing income and wealth inequality. (For information on plutocratic economics in general, see this previous post. For more on the effects of its deregulation of business, see this post.)

The Sherman Antitrust Act of 1890 laid the groundwork for antitrust regulation. Its purpose was to reduce the size and economic power of large, monopolistic companies. It was based on the federal government’s responsibility to regulate interstate commerce. At the time, the conglomeration of companies under trusts had come to dominate several major business sectors, such as the oil industry under the Standard Oil Trust. These trusts were monopolistic and destroyed competition.

The Sherman Act banned business activity that was “in restraint of trade or commerce among the several states, or with foreign nations”. The Sherman Act sought to balance the power of commercial, for-profit enterprises and the public interest. [1] The Clayton Antitrust Act of 1914 built on the Sherman Act and states that any merger is illegal if “in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly”. The reference to “any section of the country” is significant because when a few companies dominate an industry, they often have effectively divided the country up geographically so each one has a monopolistic position in some areas. Therefore, to effectively enforce antitrust laws, industry concentration should be analyzed in markets properly defined by product or service AND geography. Such an analysis often finds that market concentration is much higher than a nationwide analysis would suggest. [2]

In the 1960s, a concerted effort to undermine the historically broad economic and public interest goals of antitrust enforcement began. It was spearheaded by a group from the Chicago Law School with Robert Bork playing a leading role. (He was nominated for the Supreme Court by President Reagan in 1987 but was rejected by the Senate.) Bork and others argued that the only legitimate use of antitrust laws was to maximize consumer welfare, narrowly defined as low prices (often presumed to be the inevitable result of the economies of scale possible for large companies). This theory was adopted by pro-business economists, judges, and policy makers, including President Reagan.

Under President Reagan, antitrust enforcement was significantly scaled back and the Federal Trade Commission actually stopped collecting data on industry concentration. In eight years, President George W. Bush’s administration did not initiate a single antitrust case. [3] [4] The number of mergers grew from 2,308 in 1985 to 15,361 in 2017. [5]

Since 2000, three-quarters of U.S. industries have become more concentrated, including the technology, health care, communications, defense, and agriculture industries. This is perhaps most noticeable in the high-tech industry where Google and Facebook now control over 60% of all digital advertising and Amazon controls over half of all e-commerce. [6] From 1997 to 2012, the top four firms in any given industry saw their share of industry-wide revenue grow from 24% to 33%. [7]

There’s clear evidence that entrepreneurship and the number of start-up companies is down in the U.S. This is mostly due to dominant companies suppressing competition in multiple ways. They can block the entry of new firms simply by dominating the consumer and supplier markets. They can simply acquire competitors, especially given the lack of antitrust enforcement. Or these large companies can overwhelm start-ups in the market through fair and unfair competition using their vast resources. Among the evidence of reduced entrepreneurship and start-ups is that from 1987 to 2015 employment by companies under 10 years old has declined from 33% of the workforce to just 19%. [8]

Fewer, bigger employers have negative effects on workers and their compensation. Industry concentration means employees have fewer options, reducing their bargaining power. One reflection of this is the reduction in employment by newer companies. Furthermore, increasing numbers of companies, including low-wage, franchise businesses like McDonald’s, are forcing workers to sign non-compete agreements and franchisees to sign non-poaching agreements (banning solicitation or hiring of employees from other franchisees), further limiting workers’ options for employment, advancement, and wage growth. [9]

The growing size and reduced number of companies have exacerbated the economic divide between urban and rural areas. The large, highly profitable companies tend to be in urban areas, and people and economic vitality are drained from rural areas. Furthermore, the relatively small number of highly profitable, very large companies has made a handful of big cities the big economic winners, leaving many other cities behind.

The growing number of large, dominant companies also gives them power over suppliers. The condition of having a dominant buyer in a marketplace is called monopsony. It allows buyers like Wal Mart or Amazon to drive down suppliers’ prices, often forcing them to reduce the compensation of their workers, or in some cases, to drive the supplier out of business and take over the business for themselves. [10]

The result of industry concentration in the U.S. economy has been soaring profits, stagnant wages, and falling investment in companies’ equipment, research, and product development. In addition, service quality has fallen, along with entrepreneurship and innovation. This combination of rising profits with falling investment and stagnant worker pay violates the basic economic theory of competitive markets.

There is only one explanation: monopoly or near-monopoly conditions that allow companies to give their increased profits to owners while under-investing in human and physical capital, as well as service quality and innovation, because they can squelch competition, for example by buying up or crushing competitors and innovators. [11]

My next post will present solutions to the problem of large, monopolistic companies dominating our economy and democracy.

[1]      Paul, S., 6/24/19, “The double standard of antitrust law,” The American Prospect (

[2]      Abdela, A., & Steinbaum, M., Sept. 2018, “The United States has a market concentration problem,” The Roosevelt Institute (

[3]      MacGillis, A., Jan./Feb./March 2019, “Taking the monopoly threat seriously,” Washington Monthly (

[4]      Dayen, D., 6/24/19, “In the land of the giants,” The American Prospect (

[5]      Abdela, A., & Steinbaum, M., Sept. 2018, see above

[6]      MacGillis, A., Jan./Feb./March 2019, see above

[7]      Shambaugh, J., Nunn, R., Breitwieser, A., & Liu, P., 6/16/18, “The state of competition and dynamism: Facts about concentration , start-ups, and related policies,” Brookings (

[8]      Shambaugh, J., Nunn, R., Breitwieser, A., & Liu, P., 6/16/18, see above

[9]      Covert, B., 2/15/18, “Does monopoly power explain workers’ stagnant wages?” The Nation (

[10]     Abdela, A., & Steinbaum, M., Sept. 2018, see above

[11]     Covert, B., 2/15/18, see above


Forty years of plutocratic economics has produced a high level of economic inequality and numerous business sectors dominated by a monopoly or near monopolies. This has undermined democracy in our economy and in our political institutions.

A high level of economic inequality is bad for the economy. The Organisation for Economic Cooperation and Development (OECD), an international organization of 36 economically developed countries, estimates the U.S. lost almost 5% in economic growth over the period from 2000 to 2015 ($1 trillion a year in a $20 trillion economy) due to its high level of inequality. Part of this loss is due to limited access to education for people with lower incomes, which wastes human capital and reduces the productivity of the workforce. [1] In addition, our high level of inequality has undermined the consumer spending that is close to 70% of our economy because workers and the middle class simply have less money to spend.

There are multiple policy changes that are needed to reverse the failed plutocratic economic policies (see more information in previous posts here and here) that have been put in place over the last four decades and their effects. Some of them directly address the high levels of economic inequality in incomes and wealth that have been created. Others address the underlying issues that have allowed the plutocrats to amass wealth and power. Both are needed to reinvigorate our democracy and its commitment to equal opportunity, fairness, and the ability of all to pursue life, liberty, and happiness.

Policy changes that would directly address the dramatically increased and increasing economic inequality include: [2]

  • Increasing incomes of workers and the middle class by raising the minimum wage and strengthening unionization
  • Increasing spending on public education and making it equitable so all students are prepared to be productive members of society and the workforce
  • Raising taxes, partly by eliminating loopholes, on wealthy individuals and businesses
  • Raising the estate tax (which was meant to prevent wealth from accumulating and being passed down from generation to generation thereby creating a plutocracy [3])
  • Requiring the payment of a tax on the gain in value of appreciated property when it is passed on to heirs
  • Implementing a wealth tax

Policy changes that would address underlying issues that have enriched and empowered plutocrats include: [4] [5] [6]

  • Building progressive, grassroots, inclusive, and broad-based participation in our democratic policy making and elections, including through reforming campaign financing
  • Strengthening business and financial industry regulation, including strong anti-trust enforcement that limits the size and power, both economically and politically, of businesses (my next post will provide more detail on this important policy)
  • Reforming trade policies to protect workers and the environment and reduce the power of multi-national corporations over nations’ sovereignty
  • Updating labor laws for the gig economy, including clarifying standards for who is deemed an employee vs. an individual contractor
  • Strengthening regulation of public utilities from electric power to phones to airlines and of services that are essential to everyday life such as the Internet and financial services (which is what the Consumer Financial Protection Bureau was created to do but has been undermined in carrying out)
  • Stopping privatization of assets and functions best managed by democratic public entities, such as roads, bridges, basic education, prisons, health insurance, and public assistance programs
  • Building a robust system of public banking and mortgage finance perhaps through the U.S. Postal Service (which used to provide basic banking services)
  • Creating publicly owned, mixed-income, highly desirable social housing (as is widely done in Europe especially Austria) as opposed to the poorly performing privatized or public-private partnership subsidized housing we now have
  • Regulating the flow of capital and valuation of currency to reduce financial manipulation, speculation, and tax avoidance
  • Adding employees to corporate boards of directors

These are some of the key policy changes needed to reverse plutocratic economics and support workers and the middle class. I urge you to listen to and ask candidates running for public office which of these policies they support.

[1]      Ingraham, C., 7/25/19, “The richest 1 percent now owns more of the country’s wealth than at any time in the past 50 years,” The Washington Post

[2]      Reich, R., 7/9/19, “The four biggest conservative lies about inequality,” The American Prospect (

[3]      Collins, C., & Hoxie, J., October 2018, “Billionaire Bonanza 2018: Inherited Wealth Dynasties of the United States,” Institute for Policy Studies (

[4]      Sabeel Rahman, K., Summer 2019, “The moral vision after neoliberalism,” Democracy Journal (

[5]      Kuttner, R., 6/25/19, “Neoliberalism: Political success, economic failure,” The American Prospect (

[6]      Warren, E., 6/4/19, “A plan for economic patriotism,” Office of Senator Elizabeth Warren (