government's obliteration of the Bill of Rights via the Patriot Act, the
recent defense bill that allows the military to detain citizens indefinitely
without trial, the health care law that forces citizens to buy insurance, and
the attempted takeover of the Internet through SOPA
and PIPA has gotten a lot of attention lately, and in a few rare
cases has generated some effective push-back.
to an article in this month's Harper's Magazine (Killing the competition: How the
new monopolies are destroying open markets, by Barry C. Lynn), US
corporations are evolving into forms that are more threatening to their
victims than anything emanating from Washington. As the author characterizes
it, a new generation of monopolists are imposing
their own private governments on their industries -- and not always the
industries one would expect. This long, detailed article should be read by
anyone with a desire to understand how the US is evolving. Here I'll
highlight a few excerpts to summarize the major plot points:
Just a few
years ago a software engineer's talents were almost completely portable,
allowing a programmer to move effortlessly between tech companies. In other
words, there was a functioning market for talent in which the individual had
power and choice vis-à-vis local employers. Then a handful of
companies began to accumulate near-monopoly control over their product lines
-- and their workers. From the article:
the Valley is once again abuzz. Headlines report bulging wallets and a
smorgasbord of new perks. Venture capitalists hum down Route 101, and angel
investors lurk and listen in the bars. But instead of a disruptive melee like
that of the late 1990s, with its diversity of players and voices, the
overwhelming tendency today is a further consolidation of power by the
already powerful. During the past decade, a few giants have managed to fence
in market after market for hardware, software, and content. Some did so
simply by buying up their competitors....
Yet this de
facto license to govern a trillion-dollar industry--and with it, entire
swaths of the American economy--appears to have left these high-tech headmen
unfulfilled. Or so we learned when the Justice Department complained in 2010
that senior executives at Apple, Google, Intel, Pixar, and two other
corporations had "formed and actively managed" an agreement that
"deprived" the engineers and scientists who work for them of
"access to better job opportunities." Even in those reaches of
society long accustomed to the rule of the few, the fact that some of the
biggest and the richest had agreed not to poach one another's workers managed
to shock. In an editorial, the New York Times wondered "What Century Are
We In?" Yet in the Valley itself, from those most directly affected,
we've heard only the rarest of whimpers. The anger is there. But it's tamped
down by fear.
crossroads just south of Apple headquarters, in front of a Valero gas
station, I caught up with John, who was speed-walking to the dentist.
"Of course I don't like it," he told me, and proceeded to recount
the facts of the settlement in detail. "But what can we do? It's not
like anyone ever dares to speak about it. I mean, they actively encourage us
not to talk to one another. It's all taboo."
The broiler industry was one of the first in which the generation of
monopolists succeeded in replacing open markets with vertically integrated
systems designed to be controlled by a single local buyer. The men who rule
America's chicken-processing plants have therefore had decades to master the
art of setting individual farmers--who still own the land, equipment, and
liabilities--against one another.
bad enough. But when I sit down with poultry grower Mike Weaver in his snug
rambler to learn how such tournaments work in practice, he seems astonished
at my naïveté. "That's not even the half of it," he
former fish and game officer who can raise flocks as large as 94,000 birds on
his farm, slides a "settlement sheet" across the table. It records
the amounts JBS paid to seventeen farmers who delivered their flocks to the
plant on one particular day. The company, he shows me, paid the top-ranked
chicken grower 63 percent more per pound than it paid the bottom-ranked
grower. "Naturally," he says, "this sort of differential will
tend to make a man work harder to stay ahead of the next fella."
the system truly insidious, Weaver adds, is that the whole competition takes
place without any set standards. "There is no baseline," he
explains. For one thing, JBS requires the farmers to procure from the company
itself all the chicks they raise and all the feed they blow into the houses.
Yet the quality of the chicks and the feed can differ tremendously, from day
to day and from farm to farm.
the full-grown chickens are weighed after being trucked off the farm. The
farmer is not allowed to see whether the figure on the scale is accurate--nor
can he tell whether the chickens he's being paid for even came from his farm.
He is simply expected to take the money he is given and say thank you.
As much as he
resents being forced into a gladiatorial relationship with his neighbors,
Weaver says an actual tournament with a level playing field would be
"far better than what we have now." Under the current regimen, the
processors "don't just force us to compete against each other. They rig
the competition any way they like. They can be as sloppy as they wish or as
manipulative as they wish. We are entirely subject to the company."
After a moment, Weaver modifies his statement. "Really, we are entirely
subject to the foreman at the plant, to the technician who keeps a watch on
us. Those men can make us and they can break us, and they know it."
reddens. "The market in this valley is very simple to understand. They
give preferential treatment to those who kiss their ass."
For the local
community, the outcome of this arrangement can be devastating. Traditionally,
farmers have tended to join politically with their neighbors. But Weaver, who
heads the local poultry-growers association, says nowadays many farmers end
up viewing their neighbors as rivals. Most of the 400 or so farmers who sell
into the Moorefield plant "try to resist such feelings," he says.
But over time, the system wears them down. It also makes them highly
reluctant to speak out in public. "Most of the farmers are afraid to say
boo for fear the companies will take away their chickens," Weaver tells
me. The processors "know we have our house and our land in hock to pay
for the equipment. They know we are honorable people who won't walk on a
promise. And they exploit this."
learned this from bitter experience. In 2010, he spoke at two Department of
Agriculture hearings on the consolidation of the packing and processing
industries. Ever since, he tells me, the foremen have rated his chickens near
or at the bottom, after years of ranking them near the top. This costs him
thousands of dollars per flock.
prove a thing," Weaver says when I ask if there's any way to verify that
the company is retaliating against him for speaking out. "That's the
beauty of the system. They know everything and we know nothing. They get to
decide what's real."
But perhaps the best way to understand the true structure of America's
political economy in the twenty-first century is to talk to some of the
people who publish, edit, and write books in America. These days, most
articles on the book industry focus on technology. The recent death of the
retailer Borders is depicted as a victory of Internet sales over
brick-and-mortar stores, the e-book market as a battle between the Kindle
e-reader and the iPad. But if we look behind the
glib narrative of digitization, we find that a parallel revolution has taken
place, one that has resulted in a dramatic concentration of power over
individuals who work in this essential, surprisingly fragile industry.
ago, America's book market was entirely open and very vibrant. According to
some estimates, the five largest publishers in the mid-1970s controlled only
about 30 percent of trade book sales, and the biggest fifty publishers
controlled only 75 percent. The retail business was even more dispersed, with
the top four chains accounting for little more than 10 percent of sales.
Today, a single company--Amazon--accounts for more than 20 percent of the
domestic book market. And even this statistic fails to convey the company's
enormous reach. In many key categories, it sells more than half the books
purchased in the United States. And according to the company's estimates, its
share of the e-book market, the fastest-growing segment of the industry, was
between 70 and 80 percent in 2010. (Its share of the online sale of physical
books is roughly the same.)
surprisingly, then, we find the same sort of fear among our book publishers
as we do among the chicken farmers of the Sweedlin
Valley. I recently sat down with the CEO of one of the biggest publishing houses
in America. In his corner office overlooking a busy Manhattan street, he
explained that Amazon was once a "wonderful customer with whom to do
business." As Jeff Bezos's company became more powerful, however, it
changed. "The question is, do you wear your
power lightly?" My host paused for a moment, searching for the right
words. "Mr. Bezos has not. He is reckless. He is dangerous."
same day, I spoke with the head of one of the few remaining small publishers
in America, in a tattered conference room in a squat Midtown office building.
"Amazon is a bully. Jeff Bezos is a bully," he said, his voice
rising, his cheeks flushing. "Anyone who gets that powerful can push
people around, and Amazon pushes people around. They do not exercise their
power responsibly." Neither man allowed me to use his name. Amazon, they
made clear, had long since accumulated sufficient influence over their
business to ensure that even these most dedicated defenders of the book--and
of the First Amendment--dare not speak openly of the company's predations.
If a single
event best illustrates our confusion as to what makes an open market--and the
role such markets play in protecting our liberties--it was our failure to
respond to Amazon's decision in early 2010 to cut off one of our biggest
publishers from its readers. At the time, Amazon and Macmillan were scrapping
over which firm would set the price for Macmillan's ebooks.
Amazon wanted to price every Macmillan e-book, and indeed every e-book of
every publisher, at $9.99 or less. This scorched-earth tactic, which
guaranteed that Amazon lost money on many of the e-books it sold, was
designed to cement the online retailer's dominance in the nascent market. It
also had the effect of persuading customers that this deeply discounted
price, which publishers considered ruinously low, was the "natural"
one for an e-book.
2010, Macmillan at last claimed the right to set the price for each of its
own products as it alone saw fit. Amazon resisted this arrangement, known in
publishing as the "agency model." When the two companies
deadlocked, Amazon simply turned off the buttons that allowed customers to
order Macmillan titles, in both their print and their e-book versions....
In 1978, 43
firms made and sold beer in the US, with the biggest controlling less than a
quarter of the market. Today, more than 1,750 companies make beer in this
country but Anheuser-Busch and MillerCoors control
90% of the market. Harper's asserts that this gives them the ability to decide
which small brewers survive, and quotes a microbrewer: "When I want to
get my beer on a store shelf, I don't call the retailer. I have to beg
In the 1980s,
there were more than a dozen large ad agencies and scores of smaller ones on
Madison Avenue. Today four--WPP, Interpublic, Omnicom, and Publicis--control almost the entire industry. "WPP
alone controls more than 300 ad agencies, including such once iconic shops as
the Grey Group, Ogilvy & Mather, and Hill & Knowlton. And the four
giants vigorously shore up this power with strict non-compete employment
being squeezed by Live Nation, doctors by hospital management corporations.
Retailing is concentrating into a few mega-box chains. The list just keeps
One thing the
article doesn't mention is the concentration of Wall Street financial power.
The vast majority of home mortgages and financial derivatives are now
originated by a handful of mega-banks. These banks are among the biggest
campaign contributors to both parties, while the Fed and Treasury are run by
their alumni, so it's no surprise that financial policy tends to benefit Wall
Street at the expense of pretty much everyone else.
against monopolies has been going on since the days when Alexander Hamilton,
the spiritual father of the Federal Reserve and Goldman Sachs, attempted to
use government power to consolidate control of various industries in the
hands of his banking cronies. More recently, the early 20th century US economy
was run largely by a handful of railroad and natural resource "robber
barons." So what's happening now is not new, and the solution -- break
the bastards up -- has historically worked, at least for a while. Our problem
today is that this relative handful of companies seems to own so much of the
government that the two sectors -- mega-corporations and big government --
are now essentially business partners.
farming story illustrates the connection between economic and political
dominance. When a single company or oligopoly controls an industry, workers
can't speak out or organize because they fear for their livelihoods. They're
serfs in every meaningful way.
All of which
makes the left/right divide irrelevant, because both ideologies are getting what
they want as well as what they fear. The left wants a big, active government
and fears corporate control, while the right (including libertarians) wants
free enterprise and fears government control. Yet as things are playing out
we're getting the worst of both: pervasive government and corporate
dictatorships controlling huge sections of our lives. Whether we call it
fascism or totalitarianism or neo-feudalism, the end result will be
indistinguishable on the ground.