In his book, Sapiens, author Yuval Noah Harari describes the post-agricultural history of human civilization as the history of empire. The natural resources and means of production for most civilizations throughout our history have been owned and controlled by a tiny ruling class. For whatever reason, this form of government has been a common configuration, arising spontaneously multiple times throughout human history. Our current political and economic situation appears to be headed down the same path.
Am I just pearl clutching? You decide.
Last Tuesday, Judge Richard Leon issued a ruling on an anti-trust lawsuit which had been brought forward by the US Dept. of Justice against AT&T’s $85 billion bid to merge with Time Warner. The DOJ argued that this merger represents a consolidation across industries which would have deleterious effects on competition. AT&T and Time Warner argued, on the other hand, that this merger was necessary in order for the two companies to compete in a rapidly changing entertainment industry populated by tech giants like Amazon, Facebook, Google, and Netflix. The merger would put AT&T and Time Warner (owner of HBO and, therefore, Game of Thrones) on equal footing with the tech giants, increasing competition and offering consumers yet another streaming video service.
I certainly was not surprised when Judge Richard Leon declared not only that the merger was 100% legal according to our current anti-trust laws, but neither did he recommend any conditions for the merger. AT&T and Time Warner would not be required to restructure in any way. As I described in a previous article, we are living in a world which has been fundamentally shaped by far right-wing economic ideology. At the foundation of this ideology is the assumption that there exists a self-regulating free market. This free market must not be tampered with in any way, lest we disturb it and cause some sort of economic crisis or reduce productivity. It is from the driving force of this neo-liberal free market mythology that the Republican and Democratic parties of the last 40 years have continually cut taxes, de-regulated finance, gutted our Unions, and continued to push for the dismantling of our social safety nets. We now live in a world where wealth has accumulated into very few hands. Bill Gates, Warren Buffet, and Jeff Bezos are wealthier than the bottom 50% of all United States citizens.
There are many factors at play here, one of which is the neutering of our anti-trust enforcement. Anti-trust legislation is no longer enforced in the way it was originally intended to be. When these laws were written, it was believed that corporations should be broken up when they became too large. Industries populated by only a few very large companies were seen to be less competitive than industries with a lot of smaller companies. The reasoning behind this belief was that large companies presented a barrier to entry for competitors and had an unacceptable amount of leverage when it came to pricing and hiring.
The 1980s free market ideology of Reaganomics tossed away these long standing assumptions. Instead, businesses were allowed to merge and consolidate however they saw fit. It didn’t matter how big a company became, as long as prices didn’t go up. Faith had been placed in the invisible hand of the market. Competition is always seen to be a threat, even to the largest and most vertically integrated of companies. It is apparently a myth that heavily consolidated industries pose a barrier to entry for new businesses. Thanks to this new world view, anti-trust enforcement of the last 40 years has been extremely anemic. We have seen our corporate landscape transform into an oligopoly. A few major players run the table in every industry. Apple and Amazon are now larger and more powerful than most nation-states. But despite what these priests of neo-liberalism might want you to believe, the free market is NOT a fundamental force of nature which underlays all of the actions taken by business interests. It does not arise from the natural properties of the universe like gravity or electromagnetism. Market dynamics are a direct reflection of whichever idiosyncratic policy mix our governments happen to be enforcing at any given time. Currently, we are living in a time of extreme financial deregulation. Competition does not favor companies which most efficiently produce high quality goods like they want us to believe. Instead, it favors companies based on their size, integration, and diversity of products.
Here’s how it works: corporations are able to issue their own debt in the form of corporate bonds, similar to how governments issue government bonds. The interest rates on these bonds are determined by the market. If investors decide that a company is not likely to pay them back, they will demand a higher yield on their bonds to make up for that higher level of risk. If, however, investors see a corporate bond as a safe bet, then the interest they are willing to accept is much lower. The larger and more diverse a corporation, the more stable it is and therefore the less risky it is to hold its corporate debt. This is a situation which heavily favors behemoth companies like Amazon, Alphabet (Google), and Facebook. These companies have so many revenue streams that a downturn in one sector can be made up for by profits it any number of other sectors.
Typically, corporations take on debt for two reasons:
1) To buy back their own stock and artificially increase value for their shareholders
2) To buy other companies and increase the number of available revenue streams.
#1 explains why we have a stock market bubble right now. #2 explains Amazon’s entire business model. In order to purchase Whole Foods, Amazon issued debt at around 4%. Considering that inflation is about 2%, this means that the real interest rate of Amazon’s debt was 2%. This is essentially free money. By adding Whole Foods to its snowballing number of revenue streams, Amazon’s corporate debt has now become even less risky. The next time they want to buy a competitor, the money will be easier to raise.
This is a winner take all game which incentivizes multi-national corporations to get as big as possible as quickly as possible. The result is more and more of our economy being owned and controlled by fewer and fewer people. And despite what you’ve been told by neo-liberal economic conservatives, consolidated industries DO present a barrier to entry for new companies. Why do you think AT&T is merging with Time Warner? They said it themselves, it’s the only way they can compete with the gigantic companies already in the market! So clearly, there IS a barrier to entry!
Power is being concentrated in the hands of too few people. As technology continues to make human labor redundant, it’s becoming harder and harder for people of average means and average intelligence to make a living. The cost of healthcare is astronomical because instead of a single-payer system, we have some sort of Frankenstein’s monster of a health insurance industry where the government is handing out blank checks to massive health companies. Student loans are essentially legalized usury because we’re unable to default on them. The gains from technology are not being shared. Instead, profits are piling up in California where billionaire tech-bros are reinvesting them back into venture capital funds 20 times larger than the national average. Meanwhile, mid-western cities continue to lose business, money, jobs, and population. Crime is on the rise, property values are falling everywhere except for the top tier cities where they are skyrocketing to unsustainable levels. Trump wants to privatize education and sell our public utilities to the highest bidder. Even the military has been semi-privatized.
At what point do we start calling this an empire?
It’s not like it would be an unnatural state of affairs. Like Hurari says, the history of humanity IS the history of empire. We’re simply regressing to the mean. This AT&T / Time Warner merger is just another step in that direction.
Vote Progressive, my friends. If there’s no Progressive on the ticket then vote for the nearest Democrat. If there’s no Democrat, then start looking for somebody to run.
In the meantime, let’s just hope that the California tech-bros manage to invent the Replicator device from Star Trek, because otherwise, we are all fucked.
Great article and you brought up some interesting points. The idea that an unrestrained free market system will always produce the best possible economy, that economic growth of any kind will provide a widespread benefit to all citizens, (i.e., a rising tide will lift all boats), seems reasonable in theory. In fact it seemed to work for a number of years especially after WWII. But capitalism was much more restrained in those days because of the heavy regulations put in place after the depression, and it worked out pretty well. But in the modern economy, where many of those restraints are gone, that system is not working as it once did. It seems obvious that the tide has been rising for some time, but a great many boats have NOT been rising. As time goes by, the rewards of progress and growth in a community are being shared by fewer and fewer individuals.
I think certainly a lot of it is, as you suggest, the changes in laws and policies over the past few decades, and certainly very recently (i.e., the big tax law that heavily favors investors and large companies, changes to banking and labor laws, recent court decisions limiting the rights of individuals to joint together to sue larger entities) but I also think it has to do with natural forces, the unavoidable progression of the world. The changes that have come through technology and global communication have changed the way people work and live. Yet, despite the new and changing economy, today’s laws seem more suited to the economic conditions of the 80s and 90s. It seems that the conservatives who are running our country today are unwilling to accept the reality of our current economy and are still trying to solve problems as they existed in the Reagan years. But those policies are ill suited to the needs and demands of the current condition in which we find ourselves. I think it’s true that money and power are naturally always going to consolidate at the top, but the US economy has been very successful for decades because our leaders recognized that restraints and laws are necessary – in addition to the freedom of capitalism, to keep things more fair and even. Those laws have changed over the years and we are seeing the results of that. Fortunately, I think things can be turned around if new people, with new ideas based on realistic solutions, start running for office and winning and then perhaps we can avoid the disaster that seems to be moving quickly towards us.