Matt Stoller on Monopoly Power and Democracy (Episode 83)

Date: 17 Oct 2019 | posted in: Building Local Power, Retail | 0 Facebooktwitterredditmail

Host Stacy Mitchell is joined by Matt Stoller, fellow at the Open Markets Institute, for a conversation about Matt’s new book Goliath: The 100 Year War Between Monopoly Power and Democracy. Stacy and Matt dive into the rise of corporate monopolies starting in the 20th century and American movements to control corporate power. They also discuss:

Matt Stoller, Open Markets Institute
  • What we can glean from history to oppose concentrated corporate power today and establish a fairer economy.
  • Why small business used to be a core part of the constituency of the Democratic party.
  • How the rise of the law and economics movement converged with the collapse of the New Deal to produce a shift in the Democratic party, causing Democrats to turn away from anti-monopolist views.
  • How powerful financiers and monopolists like Andrew Mellon manipulated our tax code to favor big business in the 1920s, and pushed back against the anti-monopoly movement in the 1950s.



The question I tried to answer [in the book] is why did Democrats with power screw up so badly? And how can we not do that again? That’s a really important question to have right now because we see a lot of the same trends, the rise in autocratic and fascist movements all over the world, corporate concentration, regional inequality, despair, and also this amazing moment of potential hope and solutions. I think the lessons, the heritage that we have as Americans, we have a tradition of opposing concentrated corporate power.


Stacy Mitchell: Hello and welcome to Building Local Power. I’m Stacy Mitchell, co-director of the Institute for Local Self-Reliance. Today on the show we have Matt Stoller, he’s a fellow at the Open Markets Institute and the author of a new book, it’s called Goliath: The 100-Year War Between Monopoly Power and Democracy. Matt, welcome to Building Local Power.
Matt Stoller: Thanks for having me. Your work is amazing and then so I’m just really happy to be here.
Stacy Mitchell: That’s great. Yeah, you do great work too. You’re one of my favorite followers on Twitter and of course Open Markets is a longtime friend and ally of ILSR’s. So the book is terrific and I wanted to get you on early, as it’s just coming out, to make sure that our listeners heard about it because I think it’s really one of the great, worthwhile reads out there. It’s Goliath: The 100-Year War Between Monopoly Power and Democracy. And there’s so much in this book that we could talk about. You start at the beginning of the 20th century and take us right through to today, and chart this back and forth war between monopoly concentration, corporate control on the one hand and democracy on the other. And really chart the rise of a democratic framework for controlling corporate power that’s pretty powerful for several decades in the 20th century, and then also chart its demise.

And in thinking about how to approach this conversation, I think I want to take it in two parts. So I want to start first by just zeroing in on a few key periods in that history and asking you to tell us a little bit about what was going on. And then I want to step back and ask you a few questions about some of the broader themes and issues that the book raises and how we should think about those in the context of the current moment. So, the first period that I want to start with is the 1920s. This is a period that I think is kind of in popular imagination, it’s sort of the go, go ’20s, flappers, it’s roaring economic times supposedly. But you write that it’s actually quite a dark decade, that a lot of people aren’t doing very well at all. Fascism is very much in the air, not just in Europe, but here. There are academics who are saying that democracy doesn’t really work and we should get rid of it. And there is this powerful figure who really encapsulates a lot of what is going on in this decade and who’s very much a villain in your book, Andrew Mellon. So tell us who is Andrew Mellon and what was going on in the 1920s.

Matt Stoller: Andrew Mellon is one of the great, and today unknown, villains of American history and totally a fascinating guy. So he was the secretary of the treasury from 1921 to 1932 in, I think what we know of as, you are right, it’s sort of the roaring ’20s. And he was also one of the richest men in the country, he was probably second or third wealthiest and he owned the equivalent of three Fortune 500 companies. The one you’d know of today would be Chevron, but he also owned Alcoa, which at that point was an aluminum monopoly and aluminum was one of the key high tech industries of the decade. It was this new great light metal that went into aerospace, which was the new sort of… You know, flying was amazing at the time. And so he also controlled the network of banks in Pennsylvania. He had interests in everything from steel to coal to real estate to all these metals and magnesium and just kind of, he had his fingers in the pie everywhere.

Effectively, he was a private equity magnate of the 1920s and then he also became the secretary of the treasury, which gave him public power as well. So adding to his immense private power he had, he controlled the treasury. He also controlled the nascent taxing bureaucracy with the IRS, at the time it was called the Bureau of Revenue. And that had just been set up… Really a lot of the income tax had just been set up in 1912 or 1913 and so… You know, and it was really only first used in World War I to tax corporations and to tax the wealthy. And so he then structured all of the legal decisions around, “Oh, what do we do if we have some sort of tax loophole or tax problem.” And he was giving himself massive tax rebates and also a whole bunch of others, kind of business leaders and stuff, tax rebates.

And then there was huge battles between him and the senators over publicly releasing tax records to embarrass people, vindictiveness around political opponents. And then the other thing he did is… The portfolio that he controlled, is he was… At the time, the federal reserve was structured differently. So he was actually also the chair of the federal reserve, right? So, basically, the richest guy in the country, or maybe behind John D. Rockefeller, who controlled huge swaths of certainly the heavy industry in Pittsburgh, which was the main kind of place where we constructed things. Then he also had all of these governing portfolios. He was so powerful and he kind of… That decade was… You know, there had been 20 years of an attempt at reformism, really from 1901, which was when Teddy Roosevelt became president, all the way up to 1920, which was the end of the Wilson administration.

And so you saw, you know, this attempt. It was called the new nationalism, which was Roosevelt’s frame to really contain corporate power. And then you saw Wilson, who brought what was called the new freedom and a Brandeisian frame to try to construct kind of public controls on concentrated capital. And then you saw World War I, which was this massive, massive cultural and political and economic shock. I mean, when World War I started, the stock market in the US shut down for six months. I mean it was just this unbelievable… It’s hard to even describe what it did to the country and the world. And by 1920 all of this energy for reform… And World War I, you know, Wilson was like, “We’re going to take our reforms that we’re doing domestically and we’re going to make them global. We’re going to not just attack the concentrated corporate aristocrats here, but we’re going to get rid of the actual aristocrats and monarchs in Europe and give self-determination.”

There was just all of this kind of energy for reform and by the end of the twenties it was total disaster. Wilson was on basically his death bed. There were the Palmer raids. It was just a… You know, the government was engaged in basically reigns of terror, the first red scare. And so there was this immense… And then there was a huge boom and bust right in the early ’20s, lots of agricultural depressions, all over the world. That’s when Mussolini first emerged, in 1922, ’23, and took power in Italy. It’s when there was the Beer Hall Putsch with Hitler in Germany. So corporatism is immense, disillusionment of these 20 years of reform and this world war. And that’s when Walter Lippmann wrote a book basically saying democracy doesn’t work. It’s when the US Army training manual said democracy leads to all of these problems.

There was just this total change and disillusionment among the public at large, all over the world, about whether self-government was even a good way to control all of this industrial power. And in the US you had the… It wasn’t quite as aggressive a turn towards autocratic corporate structures as it was in certain parts of Europe, but it was definitely a turn towards that in the form of people like Mellon, in the form of the US Chamber of Commerce. And then also in the rise of institutions like the second KU Klux Klan, which was enormously powerful in the 1920s, there were millions of members and not just in the South. In Portland, Oregon and Portland, Maine in 1922, both mayors were members of the KKK and the main issue in the 1924 Democratic National Convention, right? And the Democrats had been the party of kind of anti-monopolism under Wilson. And William Jennings Bryan had brought that to the party in the 1890s.

The main issue in 1924, was prohibition and the KKK, should they have an endorsement from the KKK or not… Sorry, it was kind of like sort of approve or not of the KKK. And this was a huge kind of conflict. And so the party of monopoly tore itself to pieces over these kinds of social and cultural questions having to do with xenophobia and extreme racism, really putting corporate power to the side as not really even an issue at all. And so in this decade you saw huge financial bubbles, both the Florida real estate in 1924,, 25 where there was… It’s just comical, they were selling lands in towns, they were like, “You can get land in this amazing Florida town called…” I think it was called Nitty.

And the people were speculating on it and it was like the town actually didn’t exist. Right? And that’s actually one of the, I think, funny things that I found flowing throughout the 20th century, is that somehow Florida real estate always plays the dumbest role. But anyways, so the 1920s is this fascinating era of just these monopolists and financiers who were doing incredibly well. And then in the agricultural areas and the industrial workers and then the South, like all of these places that there was a commodities depression, people were doing horribly. So this period is a lot like today, in that you had this stark regional inequality, you had stark economic inequality, and you had corruption and self-dealing in a government. And tied to a big business apparatus and basically a public that didn’t like it but was just totally disillusioned about the prospects for anything different.

Stacy Mitchell: Mm-hmm (affirmative). It does sound incredibly familiar, a lot of echoes to today. So I want to skip ahead to the middle of the 20th century. I think we all have a fairly good understanding of what happens after FDR gets elected. His government really beefs up the anti-monopoly laws and enforcement, they go after big business, check a lot of corporate power. We have the banking laws that really restructure the banking system and put banks in their place. We have labor laws that beef up unions and the right to organize, social security, all of these things. And it’s a pretty dramatic change in the basic philosophy of governance and how people think about political economy. And that philosophy really holds for several decades, even as Republicans are sometimes elected during the those decades. Talk about what the ’40s, ’50s and ’60s were like in that regard.
Matt Stoller: In the 1950s what you saw was there were competing trends. So one of the things that was really important in the new deal is the rise of the Nazis and the rise of fascism around the world. Today we look at Europe and we say, “Oh, what are their privacy laws?” In the 1930s they looked at Europe and they said, “Oh, what are there different political systems? Are there things we can learn or copy?” And so New Dealers thought of fascism as emerging from among many things, corporate concentration, and they wanted to address corporate concentration because they feared fascism emerging in the US as well. And that philosophy of political threat from corporate concentration really dominated antitrust and anti-monopoly policy from the 1950s into the 1970s. You know, Nixon, he was a New Dealer. He was a corrupt New Dealer, but he was a New Dealer. Eisenhower had a very aggressive antitrust program.

But you also saw, in the 1950s, a return of kind of the thinking of people like Al Smith, who really came from… His thinking… He wasn’t really a thinker, he was just a political operator. It really came from Teddy Roosevelt and earlier that sort of the Walter Lippmann, the Thorstein Veblen’s, the people who believed in a kind of state command and control model, quasi-socialist but more just centralizers. And that you saw happen on the left and the right. And on the left you saw it through thinkers like John Kenneth Galbraith, who was in many ways a heroic antiwar leader in terms of the Vietnam war and military industrial posture, but he also was a centralizer and he thought that anti-monopolism was silly. He believed that monopolies were more progressive.

And then there was Richard Hofstetter and what was called the consensus school of historians, who really took the battles from the 1870s and ’80s until the 1930s, which were really where these battles about what industrial power in banking power would look like. And he said, “Well, that was all kind of a conspiracy theory and a set of myths. There really wasn’t a money trust. There really wasn’t banking power. It was actually just a bunch of farmers who were Anglo-Saxons, who were afraid of losing their Anglo-Saxon status, polyglot world of new immigrants. So they just use railroad power and banking power as kind of a fake myth to justify their own status anxiety.” And that was really colored by the McCarthy period, right? So there was this tremendous fear of the red scare. The red scare, people went after Patman, they also went after leftists all over the place, they went after academics. And one of the responses was to say, “Well, you know, who are the antecedents to McCarthy and the McCarthyites?” And they looked and they said, “Oh, well really this is coming from democracy itself.” This is the populists and the small merchants and small business people. They are the McCarthyites and they really demonize the idea of populism.

And at the same time, John Kenneth Galbraith created this framework called affluence, right? So he published a book called The Affluent Society in 1958 and he said, “America is just inevitably wealthy. We have an endless productive capacity of jobs and stuff that’s just coming out and politics was based on scarcity, but now it’s based on surplus. So what we have to figure out is how to distribute the bounty. And the politics of production, that’s an old problem that we don’t have to deal with anymore. Big corporations have solved that. Inequality is not a problem anymore. Corporate power is not a problem anymore. It’s all run by these managers.” And these were the people who create a kind of corporate liberalism and they got rid of the anti-monopoly tradition on the left. Or at least they started to in the 1950s because the institutions were still controlled by people who had gotten their training in the 1930s and ’40s, and that was true up until the 1970s.

Then on the right, you saw a very similar new corporatist way of thinking. And this was the law and economics movement, which was started… People know of Milton Friedman, he’s sort of the most famous guy, maybe Robert Bork, but it was really started by this guy named Aaron Director in the late 1940s and they started reconceptualizing. They wanted to overturn the New Deal, and so they started to conceptualize how to do that. And they built up, over the course of several decades, a set of legal tools and ideas to reorder our legal and policy environment. And they were also part of the red scare. I mean, the people that funded, initially, the law and economics movement in Chicago, also was this guy named Herald Luhnow and what was called the Volker Fund. He also funded parts of the red scare, as well. So just an attack on economists and Keynesians.

So does it was this interesting dynamic where the red scare is really… I reframe the red scare is kind of like, it’s not totally this but it was a pushback on New Dealers, and particularly as it as it sort of… It wasn’t intended entirely this way, but it ended up really damaging the anti-monopolists.

Stacy Mitchell: That’s interesting.
Matt Stoller: I should add this, there were also a whole series of antitrust cases that started in the late ’40s. Because antitrust had been temporarily suspended during World War II and Truman made the decision just restart all these giant cases against General Motors and DuPont and A&P. And so the corporate world started to really reorganize its posture in the late 1940s and ’50s.
Stacy Mitchell: That’s really interesting. So you have these strands of opposition that are building up, corporations getting more organized as Truman and others are going after some of the big ones. You’ve got this sort of pro-corporatist, liberalism in Galbraith and Hofstatter. Talk a little bit more about the law and economics movement. I mean, this is the set of ideas that I think… I mean for a lot of those years, wouldn’t it be safe to say that Aaron Director and the folks at the Chicago school who were doing this work probably… I mean, they wouldn’t have been seen as very successful for like decades, but in fact they were building something up that very much frames how we think about the economy now, right?
Matt Stoller: Yeah. So they really had their coming out party in 1964 with the Goldwater campaign. The Republicans had rejected… The law and economics movement had this weird relationship with big business, where big business would give them some money through the American Enterprise Institute. But it was like your embarrassing aunt, right? You like love her, you know her, you’ll give her a hug, but like you don’t want to be seen in public with her. Right? Like that was the way that big business related to the law and economics movement. And so they would say things that were ridiculous, like unions have too much power. And everybody was like, that’s crazy. Or they would say things like, the antitrust laws are too aggressive. And that was just like… The big business people would look at that and you’d be like, “I guess I would prefer not to have to deal with unions. And I guess I would prefer not to have to deal with antitrust suits, but that’s a crazy world that we could never live in. So, I’m going to live in my regulated channels and make my money and not rock the boat.” Their coming out party was in 1964 with the Goldwater campaign, and the Goldwater campaign was really run by the… The policy shop was run by the law and economics and, Robert Bork, who was a student of Aaron Director was important in that, although a lot of them, Milton Friedman was involved, a lot of them were involved. This is for a couple of reasons. So, the Aaron Director structured, or Bork did this actually, built a political coalition based on three essential groups. So, first was big law. So, the corporate law firms who understood all the antitrust suits in the 1930s and ’40s and didn’t like them. So, the lawyers who had worked on Alcoa, the lawyers who had worked on the A&P. Just to give you a sense for how disrespected the law and economics movement worked, Robert Bork, I think he was rejected for a job at Kirkland & Ellis when he applied, which I got that rejection letter. It’s in his archives. It’s kind of funny.

So, he gets a job at Yale kind of accidentally, actually. Then, he writes an article where he opposes Section Two of the Civil Rights Act, and he says, “Racism is bad and the public government shouldn’t discriminate. However, if you own a hotel or you own a restaurant, you should be able to serve anybody you want and not serve anybody you want. The law that says that you cannot discriminate against black people is an infringement of property rights.” This was a way of an attack on a basic nondiscrimination clause in Anglo American property rights. Nondiscrimination can be a core part of how we organize public utility-ish type of businesses or businesses with a public presence. Robert Bork was saying, “I oppose this,” and this built a Southern racist constituency, really an elite Southern racist constituency for Robert Bork and the law and economics movement. Bork ended up helping Goldwater write his speeches around why he opposed the Civil Rights Act. Then, he also started, they started building power with business leaders.

So, in 1964, the Chicago school comes out of its fringe and doesn’t dominate, but it becomes the loyal opposition, right? That’s when Bork starts debating in grand ballrooms the major business associations, and they don’t have to hide in the attic anymore. That’s when the debate sort of starts, and the Supreme Court starts quoting them mid-’60s. So, they’re having influence in the debate, but they’re not winning. They’re still losing, but they’re having influence. And, that’s when Bork, these guys, Director basically understands something about the liberal mind. So, director understands that liberals, elite liberals are snobs. One of the things about a snob is that if you expose that snob, they’ll get really embarrassed. So, if you just say, “Oh,” you bluff, and you say, “Oh, you don’t understand economics, the real science,” A lot of liberals will get intimidated and be like, “Oh, you’re right.”

And, that’s what Aaron Director did. He was very influenced by Mencken, who was a great satirist. He basically put various scholars up to discrediting a core part, whatever, a whole set of precedents, and just to essentially make fun of the precedent as just ignorant, not understanding the science of economics. So, he basically embarrassed the left into, and liberals, into getting rid of their view on antitrust. That started in the 1960s when Bork was doing … He became friendly with Don Turner who was LBJs antitrust chief. And, you can see this kind of social climbing vibe going on where Bork is being really nice to Don Turner and Don Turner is getting criticized by the public, by muckrakers for not being aggressive enough on antitrust. And, Bork is like, “Oh, they’re so mean to you. You’re really a good guy.”

He kind of starts drawing the antitrust establishment towards the snotty corporatist world being like, “Oh, the rabble, they don’t understand how technical and hard this is.” Then, that takes over in the 1970s. What happens in 1970, and there’s this view today that there was this right wing conspiracy that just kind of took over, but that didn’t make any sense in the 1970s. That didn’t make any sense to me, because it’s not like people were greedier in the 1970s than they were in the 1960s or the 1950s or the 1940s. Why did it work in the 1970s? And, the reason, as it turns out, is because The New Deal started to collapse, right? I have a chapter on the bankruptcy of most of the train system in 1970, which is called, it’s the company called Penn Central, which was most of the Northeast train system. It’s the largest bankruptcy in American history to that point, sort of the Enron of its day.

Also, the first bailout, because the Fed had to actually bail out the banks that had lent to Penn Central. Then, that was the first of many problems in the 1970s, everything from Con Ed had huge problems. Con Ed is always having problems, to Pan Am, to the bankruptcy of New York City. This created a crisis where business leaders who before had said, “Yeah, I’ll live in my regulated channel, and you guys can make your arguments, and I agree with you, but I’m not going to rock the boat.”

All of a sudden, they saw their buddies over at Penn Central lose their shirts. They were like, “Oh my gosh, the problems that these guys have been talking about are here, and we have to act.” That’s when they started to organize politically, and that’s when the debate really started about how to reorient a kind of a fraying New Deal structure whose rules had been … There had been enough loopholes put in them, and there was enough. They hadn’t necessarily been updated as much as they needed to consistent with new technologies. So, what do you do at that moment? And, that was the debate in the 1970s.

Stacy Mitchell: You’re listening to Matt Stoller, author of the new book Goliath: The 100 Year War Between Monopoly Power and Democracy. I’m Stacy Mitchell with the Institute for Local Self-Reliance. We’ll be right back after a short break.

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So, when you say The New Deal was starting to collapse, you mean partly that the laws themselves were no longer fully up to the task, or that there had been cracks that had formed in them, or do you mean sort of ideologically? What do you mean by that?

Matt Stoller: So, there had been cracks in the laws. This sort of the big one started in, I think it was 1961. I have a series of chapters on the return of Wall Street. It started in 1961 when the regulators had very aggressive controls on the banking system, really since the ’30s until the late 1950s, until 1961. There were restrictions on how banks could get deposits, and deposits are the rocket fuel for banking. Because of this, the big banks in New York who had been able to get deposits from all over the world were now restricted to getting deposits in their own areas. So, they were shrinking relative to everyone else. National City or Citibank, which was run by this very aggressive guy named Walter Wriston, who then became an enemy of Wright Patman, and they fought bitterly, he wanted to break these controls. And, he did in 1961 with something called the certificate of deposit, which once again allowed banks to get deposits from anywhere in the world.

It gave them huge, huge rocket fuel, and it was a way of getting around what was essentially Glass-Steagall. So, Glass-Steagall is weakened really starting from 1961 until it was finally repealed in 1999. Although, there were moments when it was strengthened, as well. The 1961 rocket fuel led to the go-go 1960s, and the go-go 1960s had very strong antitrust laws, but you did see Wall Street start to kind of play around again. That’s when mutual funds started developing, which were just an old 1920s model. They were regulated this time, but an old 1920s model. Then, you saw the beginnings of private equity, which in the 1960s were called conglomerates. Conglomerates, there had been conglomerates before, but these new conglomerates were really just the early financialization, buying companies so that you can juice your earnings and use the stock market, a higher stock market to buy other companies.

So, I have a whole thing on conglomerates and how that brought … There were all these sort of quasi-ethnic conflicts going on. It was sort of fascinating, but 1970, in these regulated industries, and the train system was not regulated particularly well, for political reasons. But, the train, the leaders of Penn Central were like, “You know what? We don’t want to run a train system anymore. It’s heavily regulated. It’s annoying. We have to do work. We have to do maintenance. Let’s take all of our cash and try to become a conglomerate.” So, they did that, and it was of course a disaster. There was all sorts of self-dealing. They tried to start a private airline, which was illegal at the time, and they had basically hired sort of sex workers as stewardesses. It was bad, the kind of dirty management stuff they were doing.

There was accounting fraud, and there were problems with regulations, and there was problems with unions. It was just a mess, and it all collapsed in 1970s. One of the reasons that the regulations didn’t work is because of the emergence of trucking, which was a competitor to railroads. The highways had been built in the 1950s, and then The New Deal, one of the things that it did is it redistributed wealth in the country. It got rid of regional inequality. It moved production from the Northeast to all over the country. So, Penn Central, which was predicated upon a rich industrial Northeast, the structure changed, but the pricing laws that they had to obey didn’t. So, it just became less and less profitable, and they didn’t update it.

So, there were real problems there, and what they did instead of updating the law, but of course the management of Penn Central still wanted to pay dividends. So, when they were like, “Oh, we need to charge higher prices,” Congress was like, “You’re still paying dividends.” So, it was bad faith on the part of management, but it collapsed, right? And, so the CDs weakened banking rules. Regulators kind of looked the other way, and then the train system collapsed, and you saw problems kind of across the board. Really, what you needed, well, then that’s the debate in the 1970s. What do you do when you have a financial system which is once again spinning out of control. The Penn Central, you needed a bail out of the banks that had lent to them through an unregulated shadow banking instrument called the commercial credit. I think it was commercial paper.

Then, in 1974, you saw a bank using this other unregulated instrument, which was called the Eurodollar market. You saw real estate investment trusts had a huge liquidity crisis. You essentially saw the same things that were going on in the 1920s, but only in this time, this time, every time there was a problem, instead of letting the system collapse, the Fed bailed them out and backstopped that credit instrument, which meant that there wasn’t a deep depression. There was a quick recession, and bankers started to realize they could just lend, and they wouldn’t be held accountable for it. So, you saw the effect that this has is it creates inflation, huge amounts of inflation instead of a deflation. So, that moment when you see, all of a sudden, the financial cash management in businesses becomes much more important than actually running the business, because you’re just trying to predict what the prices are going to be.

You see this slow down of productivity, and you see a crisis as people are like, “Our system is clearly not working.” Then, that’s when you have a political debate. There were three different wings of this political debate. You still had Wright Patman who by in 1961 or two, I think, he became the chair of the Banking Committee, and he was still the chair up until 1975. He and old populace, Phil Hart was another one, they said, “We need to redo The New Deal, effectively. We need to re-regulate the banking system, and we need to break up basically all big businesses, because big businesses are causing huge problems across our economy once again.” Then, you had the law and economics movement who by this time had become very embedded with big business.

Big business was funding them, and there were all of these kind of exchanges back and forth. They said, “No, no. The problem is these controls on concentrated capital. That’s what’s causing inflation. That’s what’s causing all of these bankruptcies.” Then, you have this huge swing group in the middle, which were the new baby boom generation. Where are they going to go? And, they had built themselves off of the frame of affluence that they were reading as kids in the 1950s and ’60s. It was hard to go into a college dorm room in the 1960s and not see one of Galbraith’s books, right? So, this frame of affluence and the irrelevance of political economy led them and then anti-war counter-cultural stuff, because Galbraith was very important in the counterculture, as were the kind of C. Wright Mills and a whole series of people who did not particularly care about monopoly and didn’t like small business people.

So, these people in the 1970s, they were led by Ralph Nader who really reshaped … He took Galbraith’s concept, and he said, “Politics is not about citizenship,” and this is the change that happens in the 1970s. Prior to the 1970s, people thought about politics as the act of being a citizen in a society which involved how we produce things and how we trade and also how we consume. But, it was being a citizen in a society. Ralph Nader under Galbraith’s influence reshaped politics towards being a consumer. So, we thought, well, production doesn’t matter. Citizenship doesn’t matter. Consumerism matters, and the consumer rights movement is the dominant left wing trend in the 1970s. So, that’s the third wing. In this debate between the corporate guys, the law and economics guys who say we need to make things more efficient by taking controls off of corporate capital or concentrated capital.

And, the Patman guys who were perceived to have gotten us into Vietnam and were not necessarily perceived to be always on the right side on civil rights or environmentalism. Not necessarily true, but that was sort of the perception. They were kind of black and white TV in a color TV world. The sort of consumer rights guys drifted over to concentrated capital. And, actually Nader was the guy that said we need to get rid of regulations on airlines. He was very aggressive on that. He said we need to get rid of … They called them cartel regulations on trucking and banking and all of these things that Jimmy Carter eventually did. Jimmy Carter was very tight with Nader. That came from the consumer rights movement, and it sort of cemented an alliance between the consumer rights and the baby boom generation and the law and economics movement.

They crushed the anti-monopolists. So, this became, the way I storify this is, I talk about how in 1975, Wright Patman who had been fighting against monopolists for 40 plus years, and actually was the first Democrat to investigate Watergate. He didn’t just impeach Mellon. In 1972, he was tracking down Nixon. Basically, without him, the impeachment wouldn’t, or the Watergate wouldn’t have happened, that scandal. This new generation of Watergate babies, they’re called Watergate babies. A huge number of Democrats enter into the House and Senate and state legislators all over the world, or sorry, not all over the world, all over the country in 1974 as a reaction against Nixon. This is actually, Bill Clinton’s first election was in 1974 for Congress. He didn’t win, but he came very close. He’s a Watergate baby.

That’s the Clinton generation. They come into Congress, and they’re mad. They want to do something about Nixon. They want to do something about the war in Vietnam, but these are both over. So, they turn on Patman, and they get rid of him from the chair of the Banking Committee. They’re like, “He’s too old. He’s not in touch with modern concepts anymore.” And, they also get rid of one of his strong allies, this woman named Leonor Sullivan. That’s the revolution. That’s the intellectual revolution in the democratic party. when They turn on Patman, because they’re like, “He doesn’t understand modern economics anymore.” And, then they’re beset with all of these problems, like the bankruptcy of New York City and so on and so forth. So, one of the other things that they do in 1975, is they get rid of the fair trade laws, right?

So, resale price maintenance, that’s the Consumer Goods Pricing Act of 1975, and that opens the door for Walmart, which at the beginning of the decade has $20 million of revenue. By 1980, it has a billion dollars of revenue. By 1985, Sam Walton is the richest man in the country. That was the doing of the Watergate baby class who were under the influence of the consumer rights movement and the law and economics movement, and had sort of turned away from anti-monopolism. The revolution of the party started in 1975, and then later on, what I noticed is that they got … The Democrats weren’t corrupt. They just believed in all these weird ideas. They hated small business because of their intellectual training. Then, effectively after Patman, he dies shortly thereafter he’s overthrown.

And then in the 1980s, Jimmy Carter tries his whole austerity politics. He’s sort of the first neo-liberal president. It doesn’t work. Reagan comes in. And Reagan really is the guy who brings, he brings law and economics movement into positions of authority, all of the government and into the judiciary. But by this time, antitrust is kind of already a dead letter intellectually, right? Because the people from World War II are dead, and all the liberals, including Don Turner, there’s this moment when he flips. They’re all just like, “Oh that antitrust stuff, that’s all musty old nonsense. We’re in the computer age.” They say that. By the way, all of this stuff that we’re talking about today, it’s not like millennials invented this. The boomers were doing it. It’s kind of embarrassing, but hilarious.

So anyway, so in 1980s, you see this massive concentration of corporate power, and it’s like … but you also see these huge expansions of these retail chains and shopping malls. So the shopping mall is kind of the iconic moment of the decade. And the ’80s is like the worst of conservatism and liberalism, right? Because you have corporate concentration, which is the Aaron Director break from the traditional anti-monopoly conservatism. And then you have the shopping mall, which is like the gross perversion of the consumer rights movement. Consumerism and it’s gross. And Wall Street is booming and Silicon Valley starts to boom as the technology, which it had been a place of high technology for a while. And it was actually created by antitrust suits and new dealers. But then all of a sudden they’re able to monopolize key segments of the personal computer. And so that creates enormous amounts of extracted wealth.

And so that’s when you see the, you know Apple’s the first big company that produces a lot of millionaires. That’s in the early 1980s. And then what I noticed is … So I did a chapter on Michael Milken, who’s kind of like, he really reconstructs the robber baron structure, the Mellons and the Morgans, that whole way of running the world. And it’s explicit, like the Drexel Morgan, which is, or Drexel Burnham Lambert, which is their investment bank. They explicitly say that. They say, “Our goal is to build the robber barons of the future.”

Stacy Mitchell: And they succeed. They succeed spectacularly, as we have all experienced.
Matt Stoller: Totally. And I’m sorry to keep talking about this, but it’s just such a fascinating story and a lot of the guys that Michael Milken stakes or trains, like the Carl Icahns of the world, they’re all Trump guys now. So the culture of chip on your shoulder, hating on the corporate waspy new deal establishment, and then they all become billionaires. They still have that chip on their shoulder and that’s the Trump people, right? So he basically creates, through what is effectively a giant Ponzi scheme in the junk bond market, he effectively creates the private equity industry. At the time it was called leverage buyouts. And I notice the Democrats who were confused in the 1970s … So there’s this thing called the predators ball, which are these parties for these M and A specialists with cocaine and hookers and deals. It’s Wall Street in the ’80s.
Stacy Mitchell: And aptly named.
Matt Stoller: Aptly named. Right. Well, I mean it wasn’t called that. It had some boring name, but Connie Bruck, who’s this wonderful journalist who did, she wrote a book called the predators ball. It was nicknamed the predators ball. And a lot of these guys actually got their training in the conglomerate era of the 1960s and then the coming out party was in the ’80s. So they also invited politicians. And it was like the new cool politicians of the Democratic parties, they were the guests at the predators ball. And I notice a bunch of the Democrats who were confused in the ’70s, all of a sudden they were showing up on Michael Milken’s payroll or on the payroll of big banks. And that was the story of modern … That was the turn in the Democratic party.
Stacy Mitchell: One of the things I really hope your book does is reconnect progressives and Democrats with the fact that small business used to be a core part of their constituency. You know, I was really, like I went to college in Minnesota and lived out there for like 10 years and studied history. My studying of history sort of ended mostly around World War II. So those later decades of the 20th century, I didn’t get anything on those.
Matt Stoller: Yeah, the rest of those decades are trash.
Stacy Mitchell: Yeah, I mean it just, for whatever reason-
Matt Stoller: I’m just kidding.
Stacy Mitchell: … this was never in the classes, right? But I spent a lot of time, all this stuff that was going on with these farmer populous across North Dakota taking control of the state government and creating a publicly owned bank. These movements across Minnesota of farmers, small business people, and timber workers united against the timber companies who had screwed over everybody in various ways. You know, the Democratic Farmer Labor party, right? This constituency that was small business people and labor together, and that’s really the basis of the New Deal.

And then, so I graduated from college in ’96. Bill Clinton’s president and obviously the Democratic party, the sort of dominant wing of the Democratic party is completely in bed with big business and with Wall Street. You know, Clinton overturns the remnants of Glass-Steagall and so on and so forth. But the thing that was confusing to me is that to what existed for an opposition to, you know, a left wing opposition to Bill Clinton and that part of the party, was a sort of socialist opposition that was just as antagonistic, if not more so towards small business. And it took me a long time to sort of understand, you know, then you had the US Chamber of Commerce basically saying, “Oh, small business, their political interests are right in line with big business.” That was a line that they sold to all of us. People really believed that. It took me a long time to figure out that the Democrats effectively kicked small business out of the coalition. I mean, that’s how that happened. They abandoned them.

Matt Stoller: I mean, that’s right. So wait, so Hubert Humphrey, he’s a Minnesota guy, right?
Stacy Mitchell: Mm-hmmm (affirmative).
Matt Stoller: Yeah. So, Hubert Humphrey is just one of these great heroes of American politics who was really treated, I think he’s been treated badly by the baby boom generation and then by historians. He was this great new dealer. He stood up for civil rights in 1948 in the Democratic convention. I mean, he was also a great economic populist. He was disliked because he was LBJ’s VP and would not break on the Vietnam War. Although privately, I think he was not happy about it. But he was a pharmacist. He was an independent pharmacist and pharmacists were such a big part of the, and small business people were such a big part of Wright Patman’s politics and Hubert Humphrey’s politics and the politics of people out west because they were civic leaders and they were running independent businesses.

And this was actually not just true … This was true in the south. A lot of civil rights movement was run and supported by independent black owned businesses. You know, the funeral parlors and beauty salons and supermarkets or markets, things like that. And that’s because they couldn’t be … When you run a small business … I mean, you saw us with Harvey Milk too. He ran a camera store in the Castro. When you run your own business, if you can make money off of it and you’re not dependent on … You’re dependent on your customers, obviously. But you’re not dependent on a boss. And so you can build an independent living. And most business people just want to make some money. But if you want to do politics, you can do politics. If you want to support your community, you can support your community.

And this was a core part of how Democrats thought about politics. It really gets back to the Jeffersonian view of the yeoman farmer, which was really updated by Brandeis and then was updated again, I think in the civil rights movement. And that idea of the independent citizen is, gets to the basic question of can we have a democracy? And I think what happened in the 1970s when both the left and the right flipped against small business people was that we said that democracy is not really important. What we need is technocrats to run things on behalf of consumers. And the right said, “Well, we should have people that are good at generating cash run, be those technocrats.” And the left said, “We should have people who have more of social re-distributionist bent be those technocrats.” And so debates in the 1980s and 1990s really revolved around, do we raise marginal tax rates on the wealthy? Do we have more or less social welfare? How do we redistribute the quote unquote gains from trade?

All of the questions that come after the politics of production have been debated and decided. And what we saw with the … You know, they had this assumption that banks and corporations were just these neutral, apolitical, almost scientific institutions. Kind of like the weather right? Yet saying, “Hey, we should break up a company or we should restructure a market,” would be like pointing at a cloud and saying, “Make that cloud rain.” It just doesn’t … Maybe you need rain, but it doesn’t make any sense to say that. It might be a problem, but it’s not a political problem. So when we saw … What happened is the financial crisis really showed, I think that our corporations and our banks are highly political institutions and the structure that they exist in is highly politicized, and the rules and markets, they’re political institutions that we must act to do politics to structure our society and our trading relationships. You obviously saw that in the 1990s, but I don’t think it became a kind of a popular consensus view until the financial crisis.

Stacy Mitchell: One of the things I want to ask you about is about how race and gender fits into this narrative. I think the sort of story of we had … I think for the story of this period in the ’30s, ’40s, and 50s where we did a lot more to control corporate power, we had more economic liberty, more local power. There’s no way that I want to go back to the 1950s, right? As a woman, I have far more economic freedom now than I would have then. And so there’s this way in which that story doesn’t quite line up with people’s actual experience because a majority of the country, whether people of color or women were very much marginalized from having a proper role in the economy and politics at that time. So, how do you think about that in terms of how we learn from this history and then like where we go from here?
Matt Stoller: Well, that is an incredibly important question and I’m not going to go into too much detail, but I’ll give you the conceptual answer, you know what I learned. So, I look at the New Deal and I think it was an anti-racist set of institutions that was grafted onto a country that was incredibly racist and became less so over time. So the 1920s was one of the more racist and anti-Semitic decades in American history. And I look at a guy. There’s a character in my book called Clifford Durr, who was very important in the build-up to defeat the Nazis, and he had to fight the domestic robber barons to do that. He was from Montgomery, Alabama and sort of from a patrician family and he was a mild segregationist when he joined the New Deal. And then he worked in the New Deal for quite some time, and eventually he was put on the FCC as a commissioner, but he refused to take a loyalty oath to … He just opposed it on a moral grounds.

And then he starts … So he had to resign. And then he started representing people who were attacked by, as in the witch hunt, the communist witch hunts. And a lot of them were just black employees who were fired from the federal government. And then he went back to Alabama and he again, just represented, as a lawyer, he represented … He said, “I’ll take all customers.” And so, white people didn’t want to use him and so he ended up having a mostly black clientele. Eventually got involved with civil rights movement and he and his wife, Virginia, ultimately became very involved as part of the legal architects of the Rosa Parks’ bus boycott.

So, that story, that path of someone like Clifford Durr changing as a person, but also using legal tools to address corporate concentration and really, which is just scaled bullying and saying we’re going to address other forms of bullying. I think that shows that the struggle for democracy’s tied to the struggle for who in a democracy gets to govern. And that’s I think the core of it because there are always two questions in America. The first question is, can citizens in a democracy govern a democracy? Can we rule ourselves as citizens? And that’s what the question the new dealers were asking in the 1930s. The second question is, who is a citizen? Can you be a citizen if you’re a woman? Can you be a citizen if you’re black? Can you be a citizen if you’re gay? And that’s the question that the new dealers didn’t start asking really. I mean they wanted to ask it, but they didn’t start asking it until the ’40s, ’50s and ’60s.

But if you don’t ask the first question, which is can we have a democracy, but you ask the second question, then what you end up with is a kind of multi-racial oligarchy and I think that that’s the challenge that we’re confronting right now. And so I think both questions are really important. And I wouldn’t say we … The idea is not to go back to the 1950s, when you would have to ask your husband if you wanted to get credit to buy something. The idea is how do we ask and answer both of those questions in a way that guarantees liberty for all?

Stacy Mitchell: Writing this book was, I assume, took years of research and I assume it was done with a mind towards this moment. Like, why is this set of questions and this history that you wanted to unearth important now? So, how do you think about that? What is the outlook for the moment that we’re in?
Matt Stoller: Right. So I started doing this research because I was involved as a congressional staffer during the bailouts. And I was like, “Why are we doing all of these things that are really harmful?” I didn’t think Democrats were bribed to it, to concentrate wealth and power. I didn’t think there was corruption going on. I mean there were a little bit, but there’s always corruption. I thought there was a set of bad ideas that people had, a set of stories in their heads that were weird. And I didn’t understand those stories and I didn’t understand that they were reacting against it. So the research was like, what are they thinking? And then I had to go back to the movement that they, or the people they taught, reacted against, which was Patman’s movement. And then I had to go back to how Patman, what Patman was reacting against, which was Mellon. And that was the book.

And so the question that I had that I had tried to answer is why did Democrats with power screw up so badly? And how can we not do that again? And I think that that’s a really important question to have right now because we see a lot of the same trends, the rise in autocratic and fascist movements all over the world, corporate concentration, regional inequality, despair, and also this amazing moment of potential hope and solutions. And I think the lessons, the heritage that we have as Americans and just as people, we have a tradition of opposing concentrated corporate power. It is our birthright and we should know about it and we should use it so that we can have liberty for all.

Stacy Mitchell: Matt, it’s been great to have you on the show. Thank you so much.
Matt Stoller: Thanks for having me. And again, you guys are the best.
Stacy Mitchell: Matt Stoller’s new book is Goliath, The 100 Year War Between Monopoly Power and Democracy. Matt is a fellow at the Open Markets Institute. You can buy his book at any independent bookstore in the country or online at If you buy it from Indy Bound, your purchase will go to your nearest locally on bookstore that does e-commerce. And of course it might be available at other booksellers as well, but those are the ones we’d encourage you to try first. Thanks again, Matt.
Matt Stoller: Thanks for having me.
Stacy Mitchell: Thank you for tuning in to this episode of Building Local Power. You can find links to what we discussed today by going to our website, and clicking on the show page for this episode. That’s While you’re there, you can sign up for one of our newsletters and follow us on Facebook and Twitter. And if you like this podcast, please consider rating it and sharing it with your friends. This show is edited by Lisa Gonzales and produced by Lisa, Hibba Meraay, and Zach Freed. Our theme music is Funk Interlude by Dysfunction_AL. For the Institute for Local Self-Reliance, I’m Stacy Mitchell. I hope you will join us again in two weeks for the next episode of Building Local Power.


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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

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