Link among monopolies, income mal-distribution and local mismanagement

The ‘Watchdog’ was active in Lancaster affairs 40 years ago and then, despite local residency, only again within the past four years.   He was shocked by the transformation over the decades  from a paragon of democracy led by over thirty local businesses and local institutions to the concentration of power and influence in a handful of local elements.

It took the publication of “Cornered” by Barry Lynn, perhaps the most important book on economics in a quarter century, to provide an explanation not only about the detrimental  drift that had occurred in Lancaster, but what has been the cause of the recent ‘Great Recession’ and the growing disparity among incomes between the top 3% of our population and the rest.

Early chapters established that,  whether we are shopping in department stores, purchasing beer, selecting tooth paste or soap, picking food off the shelves in a super market, we see more choices today than ever.   What we do not realize is one or two companies control so large a share of the market as to be able to dictate their will to both manufacturers and consumers.  For example, two companies, a Belgian and  South African,  control 94% of all the beer sold in this country!  This was not the case prior to the Reagan Administration when laws constraining monopolies were reinterpreted.

What followed were three decades of the killing fields of mergers and acquisitions, whereby promised efficiencies seldom resulted but market share and monopolistic control of pricing was generated.

Lynn notes “…  one reason it has taken us so long to notice the return of monopolists to America is because they long ago seized control of both of our main political parties.  One of the ways the monopolists managed this feat was precisely to devise an entirely new philosophy of political economics that enabled them to replace one language system with another.  …”

“Though all but forgotten today, the consumer Goods Pricing Act must be credited with setting into motion the fantastic concentration of power in the hands of the giant retailers and trading companies that we have witnessed in the last generation.  The decision six years later in 1981, to all but suspend enforcement of our classic antitrust laws only accelerated the process.  Perhaps the biggest proof of the lack of wisdom of the act is that the consolidation of power among the retailers eventually provided an excuse for round after round of consolidation among the very producers that the authors had originally set out to weaken, like Procter & Gamble.”

He then goes on to explain how the original laws against monopolies were meant to protect individual “freedom”. However in the 1970’s and 1980’s economists (largely the “Chicago School”) altered the intent to “efficiency”, a concept that had been categorically rejected previously by the legislators and the courts.  The laws didn’t change, but administrations from Reagan forward construed the laws differently, thus allowing the consolidation into oligopolies and virtual monopolies  throughout our economy that followed.  (The trend was accelerated by the Internet.)

Now let us consider the article “Ill Fares the land” that appeared in the April 29^th issue of The New York Review of Books by one of the world’s foremost historians, Tony Judt .

Per Judt, “…In the early years of this [21^st] century, the ‘Washington consensus’ held the field.  Everywhere you went there was an economist or ‘expert’ expounding the virtues of deregulation, the minimal state, and low taxation.”

He goes on to report “All around us, even in a recession, we see a level of individual wealth unequaled since the early years of the twentieth century.  …The wealthy, like the poor, have always been with us.  But relative to everyone else, they are today wealthier and more conspicuous than at any time in living memory. …The greatest extremes of private privilege and public indifference have resurfaced in the US and the UK, epicenters of enthusiasm for deregulated market capitalism.”

Judt continues “Contrast 1968, when the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker.  Today the CEO of Wal-Mart earns nine hundred times the wages of his average employee.  Indeed, the wealth of the Wal-Mart founder’s family in 2005 was estimated at about the same ($90 billion) as that of the bottom 40 percent of the US population:  120 million people.”

He concludes “Inequality is corrosive.  It rots societies from within….. people feel a growing sense of superiority (or inferiority) based on their possessions; prejudice toward those on the lower rungs of the social ladder hardens; crime spikes and the pathologies of social disadvantage become ever more marked.  The legacy of unregulated wealth creation is bitter indeed.”

A natural desire of parents is that their children should do as well and hopefully better economically than themselves.   However, according to Judt, “There has been a collapse in intergenerational mobility: in contrast to their parents and grandparents, children today in the UK as in the US have very little expectation of improving upon the condition into which they were born.  The poor stay poor.”

It turns out that the local concentration of power in a few hands that the Watchdog first recognized when he became drawn into the Convention Center controversy is really  but a manifestation of alterations throughout world’s and nation’s economies and our body politic of the past three decades.   Although exacerbated here in Lancaster by the internecine nature of our tight knit community which encourages, yea virtually requires, everyone to make ‘nice’ and not make waves, it represents the national trend, not an exception.