Reality Check – Warren Highlights Oligopoly Control Of Our Economy
Reality Check – a weekly presentation of facts and figures to help us all discuss important issues with some degree of understanding. Because, despite living in this post-modern, post-truth world, the fact remains that facts still remain.
I’d like to highlight something that you may have missed right before the July 4th weekend. Elizabeth Warren gave her usual fabulous speech on the need for better antitrust enforcement in order to break up the oligopolies that rule most American industries these days. Among the sectors of the economy she highlighted were:
- Four airlines, American, Delta, United, and Southwest, control over 80% of the airline traffic in this country.
- Five health care insurers, Anthem, Blue Cross Blue Shield, United Healthcare, Aetna, and Cigna, control over 80% of the health insurance market in this country.
- Three chains, CVS, Walgreen’s, and Rite Aid, control just shy of 100% of the drug stores in the country.
- Four companies, Tyson Foods, Cargill, JBS USA, and National Beef control 80% of the beef and 65% of the pork slaughtered in this country.
- Four companies, Tyson, Perdue, Sanderson Farms and Pilgrim’s Pride, control over 60% of the chicken market in this country.
- Google, Apple, Amazon, and Microsoft dominate the tech industry.
- Comcast has over half of all cable and internet subscribers in the country today.
- Five banks, JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, and US Bancorp control nearly half of the assets in the financial industry.
And finally, the enormous profits that these huge firms create primarily go to only the top executives and shareholders, increasing inequality and helping to destroy the middle class. The top 500 firms in the US account for nearly 50% of all profits. The aforementioned WalMart pays its workers so little that it is estimated that their employees receive about $6 billion per year in government assistance even as the company rakes in big profits. Taxpayers are actually subsidizing WalMart executives’ and shareholders’ income.
Other side effects of this increased concentration in all sectors of the economy could be the decline in productivity that has occurred since the Great Recession. Without any real competition, firms spend more effort exploiting their market position while firms with innovative new ideas cannot hurdle the barriers to enter these markets. In addition, higher CEO pay has also been linked to this increased concentration due the common ownership of these oligopolies by mutual funds.
How did we end up here? Well it all goes back to the infamous Robert Bork in the 1970s who managed to convince the Supreme Court that there should be no antitrust enforcement if it could be shown that the consumer will somehow benefit from the creation of the larger company. And companies could always find a way to show that consumers would benefit, at least initially. If the efficiencies of that larger company never materialized, then, Bork reasoned, the market would intervene and break the monopoly or oligopoly up. It was a classic laissez-faire argument that totally ignored the reality of the political power and the ability create enormous obstacles to any other competitor trying to get in the market. But that’s how all these firms were allowed to get bigger and bigger until we are left with what we see today.
These are all good ideas but I’m afraid the real answer is to go back to the previous standard where a certain size and market share will just not be tolerated. Unfortunately, that will require legislation and guess what, all those powerful companies listed above will be fighting every step of the way to make that legislation never sees the light of day.
We love to talk about all the great competition in the American economy, but these days that is just a myth. In some of the most important areas of our economy, there really is no competition, just an oligopoly controlling the vast majority of the market. Please go and read Warren’s speech in its entirety. Low wages, inequality, higher prices, lack of choice, and poor customer service are all problems that are rampant at present. Reducing the concentration of power in our business sectors won’t solve these problems but it will mitigate them. Competition is the lifeblood of capitalism and a dynamic economy. Sadly, we have lost that over the last 30 or 40 years in this country.