Economic Giantism Threatens Democracy
January 27, 1998 – published in St. Paul Pioneer Press
The numbers are numbing. In 1997, a trillion dollars in mergers took place in this country. USA Today reports that health care providers are merging at a rate of 3.3 per day. The Big Five accounting firms will become the Big Four when Ernst & Young merges with KPMG Peat Marwick. A single firm will audit the books of 20 of the nation’s 25 biggest banks.
The number of military contractors has shrunk to three. Time Warner and TCI serve about 50 percent of the nation’s cable customers, along with many of the most popular cable programs and channels, like HBO and CNN. United Dominion Realty Trust and ASR Investments Corporation are now a single company that owns 70,000 apartments in 24 cities. Some analysts believe that one company could soon own a third or more of the commercial real estate in a large city.
The data on the rapid concentration of economic power are chilling. But not chilling enough to spur our elected officials into action. “So far, little concern has been expressed in Washington”, observes the New York Times.
As Michael Sandel points out in his sterling book, Democracy and its Discontents, this reticence is recent. For Senator John Sherman, the author of the first major anti-trust act passed in the 1890s, concentrated economic power amounted to “a kingly prerogative, inconsistent with our form of government…If anything is wrong, this is wrong. If we will not endure a king as a political power we should not endure a king over the production, transportation and sale of any of the necessaries of life.” In the 1930s, FDR insisted “the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself.”
As late as the 1970s, Senator Hubert Humphrey thundered, “We are not necessarily talking about whether some penny-pinching person is going to be able to save half a cent on a loaf of bread. We are talking about the kind of America we want…Do we want an America where the economic marketplace is filled with a few Frankensteins and giants? Or do we want an America where there are thousands upon thousands of small entrepreneurs, independent businessmen and landholders who can stand on their own feet and talk back to their Government to to anyone else.”
Again and again we have exercised our collective judgment in defense of liberty. We refused to allow interstate mergers of banks. We broke up Standard Oil and U.S. Steel. We uncoupled the ownership of entertainment products from the ownership of entertainment outlets like theaters and t.v.. In 1966 the Supreme Court blocked the merger of grocery store chains in southern California that would have given a single company control of just 7.5 percent of the market.
Today the federal government sees nothing inherently wrong with concentrated power. Robert Pitofsky, chairman of the Federal Trade Commission candidly observes, “Mergers go through now that would have been challenged just l0 years ago…” “I do not believe that size alone is a basis to challenge a merger transaction”, he declares A Justice Department spokeswoman let the New York Times conceded, “We have very flexible guidelines.”
Instead of denouncing giantism, we encourage it. In February 1996, Congress relaxed the rules on radio ownership. Over the next 22 months, more than 1000 radio stations were sold. Some 450 owners left the field. Single companies are coming to dominate local radio broadcasting. To the federal government this is a problem only if advertising rates increase. What a pitifully limited and sterile conception of the implications of concentrated economic power.
The economic evidence is that giantism doesn’t make either the individual corporation or the economy more efficient. But it certainly corrupts and undermines our democratic will. A $100 billion company can spend $100 million to lobby local, state or federal governments in the pursuit of increased privilege.
The disappearance of community is linked to the disappearance of rooted economies. Absentee ownership and giantism undermines our sense of ourselves. We have powerful laws on the books that give us the authority to stop and reverse this trend toward economic giantism. We need to demand in this election year that those running for office pledge to exercise that authority.