The Monopolization of America | Robert Reich

Summary

The video script addresses the alarming trend of market consolidation in the United States, where a few giant corporations like Monsanto, Luxottica, and Mainetti dominate various industries, leading to higher prices for consumers and lower wages for workers. It criticizes the lax enforcement of antitrust laws, which once protected against monopolies, and calls for a revival to prevent the concentration of economic and political power in the hands of a few, ensuring a fair market for all.

Takeaways

• 🌱 Monsanto's dominance in genetic traits for soybeans and corn gives them significant market power to charge farmers higher prices.
• 📉 Farmers are squeezed by both Monsanto's high prices and food processors' low purchase prices due to industry consolidation.
• 💵 Market consolidation doesn't lead to lower food prices for consumers but increases profits for monopolists.
• 🛒 Four largest food companies control a large portion of meat and soybean processing, indicating a lack of competition.
• 🪥 Even everyday products like toothpaste and sunglasses are dominated by just a few companies, reducing consumer choice.
• 👓 Luxottica's control over sunglasses and eyeglass retail outlets exemplifies the trend of market consolidation.
• 🐱 The pet food market is also consolidated, with just two companies controlling the majority of the market.
• 💊 'Pay for delay' agreements in the pharmaceutical industry cost consumers an estimated $3.5 billion annually in the US.
• 🏥 Health insurance premiums are rising partly due to consolidation in the health insurance industry.
• ✈️ Consolidation in the travel booking industry limits consumer options to primarily two companies: Expedia and Priceline.
• 📺 Cable and Internet services are dominated by four major companies, which can negatively impact consumer pricing and service.
• 💼 Massive corporate consolidation leads to lower wages as workers have fewer options for employment and less bargaining power.
• 🏛️ Antitrust laws were historically used to prevent market monopolization, but their enforcement has weakened, allowing for the current consolidation.
• 📈 The rate of new business formation has slowed since the late 1970s due to barriers created by dominant corporations.
• 🌐 Big Tech, including Google and Facebook, has become so dominant that it poses a threat to competition and potentially to democracy.
• 🛑 There's a call to revive antitrust enforcement to break up monopolies and promote a more competitive and fair market.

Q & A

Why are farmers' profits disappearing in the United States?

Farmers' profits are disappearing due to Monsanto's ownership of key genetic traits in over 90% of soybeans and 80% of corn, allowing them to charge higher prices, and the consolidation of food processors into mega-companies that can reduce the prices they pay to farmers.

What is the impact of market consolidation on consumers and farmers?

Market consolidation leads to higher prices for consumers and lower prices for farmers' produce, resulting in increased profits for monopolists and a redistribution of wealth and power from the majority of Americans to corporate executives and wealthy shareholders.

How does the consolidation of food companies affect the variety of products available to consumers?

Despite the appearance of choice in the supermarket, the consolidation of food companies means that a significant portion of products and brands come from just a few corporations, reducing actual variety and potentially leading to less innovation and higher prices.

Why are 'pay for delay' agreements between drug companies and generic drug makers a concern?

'Pay for delay' agreements, where drug companies pay generic drug makers to delay cheaper versions, are a concern because they cost consumers an estimated $3.5 billion a year and are illegal in other advanced economies but not addressed by antitrust enforcement in America.

How does the consolidation of health insurers affect health insurance premiums and deductibles?

The consolidation of health insurers leads to fewer options and less competition, which in turn causes health insurance premiums, copayments, and deductibles to soar for consumers.

What is the connection between industry consolidation and wages?

Industry consolidation can keep wages down, as workers have fewer choices of employers and are less able to negotiate for raises, especially when local labor markets are dominated by a single large company.

Why were antitrust laws created, and how have they changed over time?

Antitrust laws were created in response to public anger over the economic and political power of large corporations, known as 'trusts,' that were running America. Over time, the enforcement of these laws has weakened, with a shift in focus from preventing monopolies to promoting consumer welfare, leading to less competition and more market power for a few large corporations.

How did Teddy Roosevelt's presidency influence antitrust enforcement?

Teddy Roosevelt used the Sherman Antitrust Act to break up monopolies like the Northern Securities Company and Standard Oil Trust, setting a precedent for strong antitrust enforcement and demonstrating the government's commitment to curbing the power of large corporations.

What is the significance of Robert Bork's 'The Antitrust Paradox' on modern antitrust policy?

Robert Bork's 'The Antitrust Paradox' argued that the Sherman Act should focus solely on consumer welfare, suggesting that mergers and large sizes create efficiencies that lower prices. This view influenced policy, leading to a decline in antitrust enforcement and an increase in market consolidation.

How does the dominance of Big Tech companies like Google and Facebook affect the economy and politics?

The dominance of Big Tech companies in the economy and politics allows them to gain significant political influence, which can further enlarge their economic power. This concentration of power can stifle innovation, limit consumer choice, and affect how markets are organized and enforced.

Why is it important to revive antitrust laws in the current economic climate?

Reviving antitrust laws is important to promote competition, prevent the concentration of economic and political power in the hands of a few corporations, and ensure a fair marketplace that benefits consumers and workers alike.

Outlines

00:00

🌽 Market Consolidation and Its Impact

The first paragraph discusses the economic challenges faced by farmers in Missouri due to market consolidation. Monsanto's dominance over soybean and corn genetics allows them to charge high prices, while farmers also face pressure from food processors that have become mega-companies with significant market power. This consolidation does not lead to lower food prices for consumers but rather increased profits for monopolists. The script highlights the lack of current antitrust enforcement, which historically prevented such monopolies. It also points out the high market control by a few companies over various products, such as beef, soybean processing, pork, and chicken, as well as non-food items like toothpaste and sunglasses. The lack of competition due to consolidation leads to higher prices for consumers and suppressed wages for workers, with big corporations also wielding significant political influence.

05:00

📚 The History of Antitrust Laws

The second paragraph delves into the historical context of antitrust laws in the United States. It starts with the public's anger in the late 1800s against the economic and political power of large corporations, known as 'trusts', which led to the first antitrust law in 1890. Teddy Roosevelt's presidency marked a significant period of antitrust enforcement, with the breakup of major trusts like Northern Securities and Standard Oil. The paragraph contrasts Roosevelt's view allowing some industry concentration with Woodrow Wilson's belief in breaking up all monopolies. It discusses the shift in antitrust enforcement over the years, culminating in the 1980s with Robert Bork's influential views that prioritized consumer welfare over preventing monopolies. This shift led to a lax antitrust environment, even under Democratic administrations, and has resulted in decreased competition, especially in high-tech industries where information and ideas are the most valuable assets.

10:01

💼 The Consequences of Antitrust Neglect

The third paragraph emphasizes the consequences of neglecting antitrust laws, particularly the intertwining of economic and political power. It points out that dominant corporations not only control the economy but also gain significant political influence, which further expands their economic power. The paragraph calls for a revival of antitrust enforcement to counter the dominance of big tech, pharmaceutical, insurance, agriculture, and financial giants over both the economy and politics. It highlights the original goal of antitrust laws to prevent such concentration of power and suggests that it's time to address the current state of market concentration.

Keywords

💡Monopolies

A monopoly refers to a situation where a single company dominates the market for a product or service, thereby having the power to set prices and control supply. In the video, Monsanto is highlighted as owning key genetic traits to a large percentage of soybeans and corn, which allows them to charge farmers higher prices. This example illustrates how monopolies can lead to increased costs for consumers and reduced competition.

💡Consolidation

Consolidation in the context of the video refers to the process by which companies merge or acquire other businesses, leading to fewer but larger entities controlling a market. This is exemplified by the mention of four largest food companies controlling a significant share of meat processing and the consolidation of health insurers, which can result in higher prices and reduced choice for consumers.

💡Antitrust Laws

Antitrust laws are regulations that aim to prevent the formation of monopolies and promote fair competition in the marketplace. The video discusses how these laws were once used to break up large corporations but have become less effective, leading to increased corporate power and a lack of competition.

💡Market Power

Market power is the ability of a company to influence market conditions, such as pricing and supply, due to its size and dominance. The video script describes how food processors with significant market power can reduce the prices they pay to farmers, which is a direct consequence of consolidation and lack of competition.

💡Generic Drugs

Generic drugs are copies of brand-name drugs that have the same active ingredients but are typically sold at lower prices. The video mentions 'pay for delay' agreements where drug companies pay generic drug makers to delay the release of cheaper versions, which is a practice that increases costs for consumers.

💡Conglomerates

A conglomerate is a large company that consists of multiple, often unrelated, businesses. The video script points out that a few conglomerates control a vast array of brands and products, such as toothpaste and sunglasses, which can limit consumer choice and increase prices due to reduced competition.

💡Political Clout

Political clout refers to the influence that powerful entities, such as large corporations, have over political decisions and policies. The video suggests that massive corporations use their political influence to maintain their market dominance and consolidate power, which can undermine the effectiveness of antitrust laws.

💡Robber Barons

The term 'robber barons' historically refers to wealthy and powerful individuals in the late 19th and early 20th centuries who amassed fortunes through monopolistic practices. The video uses this term to draw a parallel between past and present concentrations of economic power.

💡Economic Power

Economic power is the ability to control economic resources and influence economic conditions. The video discusses how economic power is increasingly concentrated in the hands of a few corporations, which can lead to higher prices, reduced wages, and less innovation.

💡Big Tech

Big Tech refers to the largest technology companies, such as Google and Facebook, that have significant influence over the digital economy and consumer behavior. The video highlights how these companies have become dominant in their respective fields, raising concerns about the concentration of power and its impact on competition and innovation.

💡Reviving Antitrust

The call to revive antitrust in the video refers to the need to strengthen and enforce antitrust laws to counter the growing dominance of large corporations. The speaker argues that current antitrust policies are insufficient to address the level of market concentration and the associated economic and political power of these corporations.

Highlights

Monsanto controls over 90% of soybean and 80% of corn genetic traits, leading to higher prices for farmers.

Farmers face price cuts from food processors due to industry consolidation.

Consolidation doesn't lower food prices but increases monopolists' profits.

Historically, antitrust laws were used to prevent market monopolization.

Current antitrust enforcement is weak, leading to a redistribution of wealth to corporate elites.

Four largest food companies control a significant portion of meat and soy processing.

Many familiar brands are owned by just a few corporations, reducing market diversity.

Luxottica owns most sunglasses and eyeglass retail outlets, illustrating market dominance.

Mainetti is the sole manufacturer of plastic hangers in America, an example of industry consolidation.

Cat food market is dominated by two companies, indicating a lack of competition.

Consolidation allows companies to increase prices without fear of competition.

Drug companies use 'pay for delay' tactics to keep generic drugs off the market, costing consumers billions.

Health insurance industry consolidation leads to higher premiums and deductibles.

Online booking services are dominated by two companies post-merger, reducing consumer choice.

Cable and internet services are controlled by just four major companies.

Consolidation suppresses wages as workers have fewer employment options.

Big corporations wield significant political influence, affecting market organization.

Antitrust laws were initially designed to prevent the concentration of economic and political power.

The first antitrust law was a response to the public's anger against powerful cartels.

Teddy Roosevelt used antitrust laws to break up monopolies like Northern Securities Company.

The Sherman Act's interpretation evolved to focus on 'unreasonable' restraints of trade.

Antitrust enforcement and regulations were strong until the 1980s, preventing corporate concentration.

Robert Bork's 'The Antitrust Paradox' shifted the focus of antitrust law towards consumer welfare.

Since the 1980s, antitrust enforcement has weakened, allowing for industry consolidation.

High-tech industries are also experiencing increased concentration, with Google and Facebook dominating information access.

The formation of new businesses has slowed due to barriers created by dominant corporations.

The European Union has taken antitrust action against Google, unlike the U.S.

Reviving antitrust laws is necessary to counter the dominance of Big Tech and other industries.

Transcripts

Not long ago I visited some farmers in Missouri whose profits are disappearing. Why? Monsanto

alone owns the key genetic traits to more than 90 percent of the soybeans planted by

farmers in the United States, and 80 percent of the corn. Which means Monsanto can charge

farmers much higher prices. And farmers are getting squeezed from the other side, too,

because the food processors they sell their produce to are also consolidating into mega

companies that have so much market power they can cut the prices they pay to farmers. This

doesn’t mean lower food prices to you. It means more profits to the monopolists.

America used to have antitrust laws that stopped corporations from monopolizing markets, and

often broke up the biggest culprits. No longer. It’s a hidden upward redistribution of money

and power from the majority of Americans to corporate executives and wealthy shareholders.

I’m in a supermarket. Looks like lots of choice, doesn’t it? But, let’s take a

closer look. The four largest food companies control 82 percent of beef packing, 85 percent

of soybean processing, 63 percent of pork packing, and 53 percent of chicken processing.

All these products and brands? From just ten huge corporations.

Look at all these brands of toothpaste. 70 percent of toothpaste sales go to just two

companies.

Lots of sunglasses. Actually, one company: Luxottica. They also own nearly all the eyeglass

retail outlets.

Practically every plastic hanger in America is now made by one company, Mainetti.

What brand of cat food shall I buy? Hmmm. There are basically just two companies.

The problem with all this consolidation into a handful of giant firms is that they don’t

have to compete. Which means they can jack up your prices.

Drug companies, in effect, pay the makers of generic drugs to delay cheaper versions.

Such “pay for delay” agreements are illegal in other advanced economies, but antitrust

enforcement hasn’t laid a finger on them in America. They cost you and me an estimated

$3.5 billion a year.

You think your health insurance will cover this? Well, health insurers are consolidating,

too. Which is one reason your health insurance premiums, copayments, and deductibles are soaring.

Massive consolidation into a handful of giant businesses is going on all over.

You think you have a lot of options for booking discount airline tickets and hotels online?

Actually, you have only two. Expedia merged with Orbitz, so that’s one company. And

then there’s Priceline.

How about your cable and Internet service? Basically four companies. This is unfortunate

to say the least, and not just because industries and services with little competition charge

you more. It’s also troubling because such consolidation keeps down wages. Workers with

less choice of who to work for have a harder time getting a raise. When local labor markets

are dominated by one major big box retailer, or one grocery chain, for example, those firms

essentially set wage rates for the area.

These massive corporations also have a lot of political clout. That’s one reason they’re

consolidating. Power. Antitrust laws were supposed to stop what’s been going on. But

today, they’re almost a dead letter. That hurts you.

The first antitrust law came in 1890 when Senator John Sherman responded to public anger

about the economic and political power of the huge railroad, steel, telegraph, and oil

cartels – then called “trusts” -- that were essentially running America.

A handful of corporate chieftains known as “robber barons” presided over all this

– collecting great riches at the expense of workers who toiled long hours often in

dangerous conditions for little pay. Corporations gouged consumers and corrupted politics. They

had so much political power they made it impossible to enforce the Sherman Antitrust Act.

Then in 1901, progressive reformer Teddy Roosevelt became president. By this time, the American

public was demanding action. In his first message to Congress in December 1901, only

two months after assuming the presidency, Roosevelt warned, “There is a widespread

conviction in the minds of the American people that the great corporations known as the trusts

are in certain of their features and tendencies hurtful to the general welfare.”

Roosevelt used the Sherman Antitrust Act to go after the Northern Securities Company,

a giant railroad trust run by J. P. Morgan, the nation’s most powerful businessman.

The U.S. Supreme Court backed him up and ordered the company dismantled.

In 1911, John D. Rockefeller’s Standard Oil Trust was broken up, too. But in its decision,

the Supreme Court effectively altered the Sherman Act, saying that monopolistic restraint

of trade was only objectionable if it was “unreasonable,” and that determination

was to be made by the courts. So what was an unreasonable restraint of trade?

In the presidential election of 1912, Roosevelt, running again for president but this time

as a third party candidate, said he would allow some concentration of industries where

there were efficiencies due to large scale. And then he’d have experts regulate these

large corporations for the public benefit. Woodrow Wilson, who ended up winning the election,

and his adviser Louis Brandeis took a different view. They didn’t think regulation would

work, and thought all monopolies should be broken up.

For the next 65 years, both views dominated. We had strong antitrust enforcement along

with regulations that held big corporations in check. Most big mergers were prohibited.

Even large size was thought to be a problem. In 1945, in the case of United States v. Alcoa

(1945), the Supreme Court ruled that even though Alcoa hadn’t pursued a monopoly,

it had become one by becoming so large that it was guilty of violating the Sherman Act.

All this changed in the 1980s, after Robert Bork -- who, incidentally, I studied antitrust

law with at Yale Law School, and then worked for when he became Solicitor General under

President Ford – wrote an influential book called The Antitrust Paradox, which argued

that the sole purpose of the Sherman Act is consumer welfare.

Which means that mergers and large size almost always create efficiencies that bring down

prices, and therefore should be legal. Bork’s ideas were consistent with the conservative

Chicago School of Economics, and found a ready audience in the Reagan White House.

Since then, even under Democratic administrations, antitrust has all but disappeared.

We’re seeing declining competition even in cutting-edge, high-tech industries. In

the new economy, information and ideas are the most valuable forms of property. This

is where the money is. We haven’t seen concentration on this scale ever before.

Google and Facebook are now the first stops for many Americans seeking news. Meanwhile,

Amazon is now the first stop for more than a half of American consumers seeking to buy

anything. Talk about power.

Contrary to the conventional view of an American economy bubbling with innovative small companies,

the reality is quite different. The rate at which new businesses have formed in the United

States has slowed markedly since the late 1970s. Big Tech’s sweeping patents, standard

platforms, fleets of lawyers to litigate against potential rivals, and armies of lobbyists

have created formidable barriers to new entrants.

Google’s search engine is so dominant, “Google” has become a verb.

The European Union filed formal antitrust charges against Google, accusing it of forcing

search engine users into its own shopping platforms. And last June, it fined Google

a record $2.7 billion. But not in America.

Remember, economic and political power cannot be separated because dominant corporations

gain political influence over how markets are organized, maintained, and enforced, which

enlarges their economic power further. One of the original goals of the antitrust laws

was to prevent this.

Big Tech — along with the drug, insurance, agriculture, and financial giants — dominates

both our economy and our politics.

It is time to revive antitrust.