How the GOP's embrace of 'greed is good' brought us being on hold for hours

A Boeing 737-Max9 lost a side door during flight, and commentators in the industry point out the plane manufacturer used to be run by engineers, but now, at the insistence of Wall Street, is run by bean-counters looking out for profits.

One of my kids bought a new American-made car last year. While driving on the highway it died, complete with smoke coming out from under the hood; she barely made it to the shoulder where a tow truck could pick her up. The dealer held the car for months before she hired a lawyer who — after more months — finally forced them to take back the car and give her a partial refund under Oregon’s lemon law: at every turn, she was stonewalled by both the manufacturer and their dealer here. Apparently this has happened to a lot of Americans.

And then a friend had the same thing happen with a different US automaker two weeks ago; his lemon is still stuck with the dealer.

Every day, millions of Americans are frustrated as they wait on hold for hours to get help from giant, monopolistic corporations that don’t seem to give a damn about their own customers. Some big banks are even charging if you want to talk to a human being when you call.

Stores are jettisoning checkout clerks and cutting staff to increase profits for shareholders. Try getting quick or personalized service at your local pharmacy (which is no longer locally owned, but instead a billion-dollar cash cow for Wall Street).

You could jump out of an airplane and land in any random town in America and have no idea where you are because the local businesses — from banks to restaurants to hotels — that used to carry the town’s name have all been replaced by massive national chains.

It wasn’t always this way.

In 1933, a handful of plutocrats who ran the largest companies in America conspired to kidnap or kill President Franklin D. Roosevelt: the so-called “Business Plot” that was exposed by retired Marine General Smedley Butler. FDR called them out, raised their taxes, and increased regulation on their companies to protect the public good.

In response, from 1934 until 1981, the morbidly rich backed down: most large American corporations and their CEOs didn’t involve themselves in politics. Instead, they attended to the five realms every company’s senior management had to consider when doing business: customers, workers, the local community, the institution of the corporation itself, and the shareholders.

Yes, prior to the Reagan Revolution American companies actually invested in their workers, their communities, and their businesses. They attended to the needs of their customers. They used profits to develop new products or improve existing ones. And, of course, they paid dividends out of profits to shareholders.

The result of this balanced, well-regulated approach to business was that the wages of working people grew even faster than did the wages of the morbidly rich. Communities prospered, as local businesses reinvested locally. And most CEOs had worked their way up within the company, so were experts on most aspects of the business rather than just being bean-counters looking for new ways to squeeze profits out of customers, workers, and communities.

But then came Robert Bork, who Ronald Reagan tried unsuccessfully to put on the Supreme Court. Bork had been peddling a bizarre theory for years, saying that corporate executives shouldn’t worry about their workers, their communities, or even the health and future of their corporations: their only goal should be to make money for their shareholders by undercutting others on price.

To incentivize CEOs, Bork argued that Reagan should abandon rules against corporate monopolies and a form of stock manipulation that the SEC had put into place under Joe Kennedy and FDR in the 1930s. He wanted to decriminalize corporations buying back their own shares in the public marketplace, a practice that converts corporate profits into cash for shareholders and senior executives.

In 43 short years, because Reagan implemented Bork’s policies, America has devolved from being a relatively open market economy and a functioning democracy into a largely monopolistic economy with a bought-off political system.

Most Americans, if they remember Robert Bork at all, remember him as the guy who railed against homosexuality and “forced racial integration” in such extreme language that his nomination to the Supreme Court by Ronald Reagan had to be withdrawn.

Bork was Reagan’s nominee to the Court in 1987, but he was rejected by the Senate because of his racist, Neo-Confederate beliefs. In 2012, Bork was Mitt Romney’s “constitutional adviser.”

Back in 1987, at the time of Bork’s SCOTUS nomination, the late Senator Ted Kennedy took to the floor of the Senate to talk about Bork’s grim vision of America:

“Robert Bork’s America is a land in which women would be forced into back-alley abortions, Blacks would sit at segregated lunch counters, rogue police could break down citizens’ doors in midnight raids, schoolchildren could not be taught about evolution, writers and artists could be censored at the whim of the Government, and the doors of the Federal courts would be shut on the fingers of millions of citizens for whom the judiciary is — and is often the only — protector of the individual rights that are the heart of our democracy.”

But Bork’s most important effort — the one he worked on for more than 15 years nearly full-time — was in reshaping the business landscape of this country.

Attending the University of Chicago, Bork took a class in anti-trust from an acolyte of Milton Friedman, a professor named Aaron Director, as I lay out in The Hidden History of Monopolies. Bork described the class as a “religious conversion” that changed his “entire view of the world.”

After graduation, he continued working with Director as a research associate for Director’s “Antitrust Project” and repeatedly gushed about Director in his book The Antitrust Paradox, which is credited (at least by Wikipedia) for nearly singlehandedly changing America’s antitrust laws.

Bork was a brilliant writer and used vivid imagery to make his points. “Anti-free-market forces now have the upper hand and are steadily broadening and consolidating their victory,” he wrote in “The Crisis in Antitrust,” published in 1965 in the Columbia Law Review and cowritten with Ward S. Bowman Jr.

“One may begin to suspect that antitrust,” he wrote, “is less a science than an elaborate mythology, that it has operated for years on hearsay and legends rather than on reality.”

In fact, Bork wrote, the entire notion of antitrust law as a vehicle to protect small and local businesses from large and national predators was a terrible mistake.

Trying to stop “a [market] trend toward a more concentrated condition” is a blunder, Bork said, because “the existence of the trend is prima facie evidence that greater concentration is socially desirable. The trend indicates that there are emerging efficiencies or economies of scale … which make larger size more efficient.” FDR’s theory of antitrust, he noted, is “unsophisticated, but currently ascendant.”

Bork argued for the Walmartification of America, saying:

“It would be hard to demonstrate that the independent druggist or groceryman is any more solid and virtuous a citizen than the local manager of a chain operation. The notion that such persons are entitled to special consideration by the state is an ugly demand for class privilege.”
He condemned “vague philosophizing by courts that lack the qualifications and the mandate to behave as philosopher kings. … [T]he system hardly deserves the name law.”

In Bork’s mind, when dozens of small companies are bought up by one large monopolistic corporation and their redundant R&D, HR, sales, and promotion/advertising departments are consolidated, laying off thousands of workers, that’s a good thing.

“If it now takes fewer salesmen and distribution personnel to move a product from the factory to the consumer than it used to; if advertising or promotion can be accomplished less expensively, that is a net gain to society. We are all richer to that extent. Multiply such additions to social wealth by hundreds and thousands of transactions and an enormously important social phenomenon is perceived. . . . To inhibit the creation of efficiency . . . is to impose a tax upon efficiency for the purpose of subsidizing the inept.”

In a particularly eloquent paragraph, he compared large companies buying up or killing off smaller competitors through predatory practices as “an evolutionary process.” After all, “[t]he business equivalents of dodoes, the dinosaurs, and the great ground sloths are in for a bad time — and they should be.”

To say that Bork’s paper (and numerous others, and 15 years of work advocating this position) changed America would be a dramatic understatement. As he himself pointed out in his paper, in the 1962 antitrust case of Brown Shoe Co. v. United States, the Supreme Court blocked the merger of Brown and G. R. Kinney, two shoe manufacturers, because the combination of the two would have captured about 5% of the US shoe market. (For comparison, post-Reagan Nike today has 18% of the US shoe market.)

When Robert Bork said that the only thing that mattered was the price to the consumer and shareholder’s profits, he never considered the value of good food freshly made in a local restaurant as opposed to things arriving from across the country in giant plastic boxes to chain restaurants; he never considered the value of a hardware store or a bookstore or clothing store or furniture store whose local staff would go out of their way to look through all the hundreds of suppliers to find exactly what you wanted and make sure you knew when it was available.

He never considered the importance of the local hotel and the local restaurant and the local five-and-dime and the local bank and 50 other local businesses all operating in a single cycle of local cash, each supporting all the others and all the others supporting each one.

He never considered new entrepreneurial opportunities for small and medium-sized businesses. He never considered keeping money within local economies.

He never considered the impact on a community now having no say in how destructively businesses in that community were run. He never considered the impact on workers of giant employers engaging in nationwide union-busting and pension-stripping.

He never considered how many locally owned businesses would be wiped out when giant chains moved in and undercut their prices while also undercutting the local wage floor. He never considered how massive political power — growing from overwhelming economic/market power — would distort democracy from the level of town governance all the way up to the US Congress and the White House.

All Robert Bork thought about was low prices to consumers and high profits to shareholders, because that’s all he knew. And that’s what he brought America.

As a direct result of Reagan implementing Bork’s policies, publicly-traded companies began to collapse in earnest by the mid-1990s, as the Clinton administration maintained Reagan’s neoliberal policy of not seriously enforcing the Sherman Antitrust Act and keeping share buybacks legal.

In 1996, there were roughly 8,000 publicly traded companies; today it’s under 4,000.

In my lifetime, America has been transformed from a nation of small and local family businesses into a nation of functional monopolies where small handfuls, typically three to five giant companies, control around 80% of pretty much every industry and marketplace while making pricing and other decisions in concert with each other.

We see this clearly in industries like airlines and pharmaceuticals, but it exists in pretty much every industry in America of any consequence. It’s often obscured, because companies operate under dozens or even hundreds of brand names, and they rarely list on their packaging or advertising the name of the corporate behemoth that owns them.

As Jonathan Tepper pointed out in The Myth of Capitalism, fully 90% of the beer that Americans drink is controlled by two companies. Air travel is mostly controlled by four companies, and over half of the nation’s banking is done by five banks.

In multiple states there are only one or two health insurance companies, high-speed internet is in a near-monopoly state virtually everywhere in America (75% of us can “choose” only one company), and three companies control around three-quarters of the entire pesticide and seed markets.

The vast majority of radio and TV stations in the country are owned by a small handful of companies, and the internet is dominated by Google, X, and Facebook.

Right now, 10 giant corporations control, either directly or indirectly, virtually every consumer product we buy. Kraft, Coca-Cola, PepsiCo, Nestlé, Procter & Gamble, General Mills, Kellogg’s, Mars, Unilever, and Johnson & Johnson together have a stranglehold on the American consumer. You can pick just about any industry in America and see the same monopolistic characteristics.

A study published in November 2018 by Jan De Loecker, Jan Eeckhout, and Gabriel Unger showed that as companies have gotten bigger and bigger, squashing their small and medium-sized competitors, they’ve used their increased market power to fatten their own bottom lines rather than develop new products or do things helpful to their communities or employees.

Much of this shows up in increased profit margins, the benefits of which are passed along to shareholders and executives, rather than consumers.

They note that, “while aggregate markups were more or less stable between 1955 and 1980, there has been a steady rise since 1980, from 21% above cost to 61% above cost in 2016.”

Markups (the price charged above production costs), they note, were fairly constant between the 1950s and the 1980s, but there was a sharp increase starting when Reagan was elected in 1980. Thus, they conclude, “[i]n 2016, the average markup charged is 61% over marginal cost, compared to 21% in 1980.”

It’s gotten even worse since the pandemic gave corporate America a “shock doctrine” opportunity.

A new report from the think tank Groundwork Collaborative documents how obscene corporate profits caused about 53% of the inflation we all suffered under during the second and third quarters of last year.

While prices consumers paid last year went up 3.4%, for example, the “input costs” (raw materials, rent, electricity, wages, benefits) to big corporations only went up 1%, drawing from data supplied by the Bureau of Economic Analysis and National Income and Products Accounts.

If we had real competition in America, like we did before the Reagan Revolution, this wouldn’t be a problem: the marketplace would quickly realign prices.

Instead, this is all happening now because in 1983 Ronald Reagan instructed his DOJ, FTC, and SEC to stop enforcing the Sherman Anti-Trust and other anti-monopoly laws, leading to a decade of “Mergers & Acquisitions Mania” as was documented in Michael Douglas’ “greed is good” movie, Wall Street.

Add that to Reagan decriminalizing share buybacks and you have the perfect storm of perverse incentives that end up with doors falling off airplanes, workers and communities being screwed, and a new low standard of crappy customer service — all fed by a lack of competition.

The good news is that the Biden administration is the first of either party since 1981 to seriously try to regulate corporate monopolistic behavior and stock share buybacks.

But the cancer of share buybacks and Bork’s theory that only the shareholders and product prices need be considered still must be repudiated and fixed, both by Congress and by executive orders from President Biden to the SEC, DOJ, and FTC.

Corporate America will squeal and howl, and since five corrupt Republicans on the Supreme Court legalized political bribery in America, will throw millions at stopping any effort to regulate their behavior. But the ongoing damage to our business landscape, our communities, and our families can’t be ignored any longer.