Why Our Best Opportunity to Challenge Corporate Control is at the Local Level (Episode 105)

Date: 23 Jul 2020 | posted in: Building Local Power | 0 Facebooktwitterredditmail

In this episode of Building Local Power, host Jess Del Fiacco is joined by Zach Freed, researcher with ILSR’s Independent Business initiative, and John Farrell, ILSR co-director. The three discuss ILSR’s new Fighting Monopoly Power guide, which spells out how local leaders can challenge concentrated corporate power in the banking, broadband, electricity, food and farming, pharmacy, small business, and waste sectors.

Jess, John, and Zach talk about:

  • Why we believe federal policy alone isn’t an effective tool for challenging monopoly power, and the strong history of action at the local level.
  • How corporate concentration is tied into issues like climate change, the Covid-19 pandemic, and racial injustice, and why addressing it is now more crucial than ever.
  • How monopoly power impacts our day-to-day lives, including high prices, poor service, and less accessibility.
  • Ways we’ve seen states and communities successfully take power back from corporations, including North Dakota implementing policies to support independent pharmacies; Portland, Ore., taxing large retailers in order to fund local renewable energy projects; and multiple states bringing an antitrust case against Google.

 

“…unfortunately the economic power that accumulates when companies get very big turns into political power, influence over regulators, influence in legislatures. And it really only exacerbates things like racial inequality, where we’ve also got a lot of people who are disenfranchised because of decades of racial injustice, for example.

So you have that power of suppressed and corporate power is elevated by the kinds of choices that we’ve made. And so, this guide is about getting to the root of that. What is the problem? The problem is that we let companies get too large to be politically manageable in a democratic system.”

 

Jess Del Fiacco: Hello and welcome to Building Local Power, a podcast dedicated to thought-provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco, the host of Building Local Power and communications manager here at the Institute for Local Self-Reliance. For 45 years, ILSR has worked to build thriving, equitable communities where power, wealth, and accountability remain in local hands. Today, I am joined by John Farrell, co-director of ILSR, as well as Zach Freed, who is a researcher with our independent business team. And we are going to dive into ILSR’s latest report, which is a massive, Zach, would you say year long project, more than a year?
Zach Freed: We had the idea for it about a year ago, and there were kind of pauses as things came up, but yeah.
Jess Del Fiacco: It’s been gestating for that long.
Zach Freed: In many ways it’s the result of 40 years of work.
Jess Del Fiacco: Yeah, there you go. So this report is called, Fighting Monopoly Power, how states and cities can beat back corporate control and build thriving communities. So Zach, can you talk about why, I mean, your team led the charge on this, but it’s got, we cover many different sectors, so all of ILSR contributed to it. So Zach, can you talk about why we decided to create this guide and why is it focused at the local level rather than the federal policy level?
Zach Freed: For sure. So a couple of things. First of all, to my knowledge ILSR, hasn’t done a kind of project where we unite all of the different initiatives. And that was, I think, part of the impetus behind getting started on this guide, is to sort of combine all the institutional knowledge that we have at the Institute and to a single unified work. The other driving force behind the guide was the sort of history of economic policymaking since mid 20th century, I want to say, has been very heavily focused on federal policy in terms of where power lies and where a lot of the big decision making has taken place. And if you think about it, it hasn’t really been a positive thing for most people in America. A lot of the federal economic policymaking decisions that have taken place have resulted in poverty and inequality and the decimation of main streets and local businesses and further consolidation and empowerment of big companies.
Zach Freed: And kind of, we’re starting to see the logical conclusion of all that federal economic policymaking in what’s happening is as COVID-19 is hitting our country. You’re having local businesses are shuttering and big tech companies like Amazon and other big retailers like Walmart are kind of poised to be the the only kinds of institutions with power that are left.
Jess Del Fiacco: Is there a particular precedent for states or cities fighting without pulling power that we’ve seen in the past?
Zach Freed: Yeah, definitely. The first labor and antitrust laws passed in this country were passed on the state level and similarly the kind of political energy that it took to pass them on a federal level began with the states. That’s really another big reason why we decided to write this guide because we find ourselves in a situation where there’s kind of a real vacuum when it comes to progressive economic policymaking, that reorients power into the hands of ordinary people. And so, we wanted to give state and local policy-makers kind of how to, so that they can start doing the work of restructuring the economy to work for ordinary working people.
John Farrell: I would like to add just a little bit on institutional history here too. We did do one kind of collective project like this before. And it’s the video that you see on the about us page of ILRS’s website, about breaking the chains of corporate power and building local power. And so what I see this as is the final fruition of that six or seven years ago project, where we first really recognized that there was this common theme running through all of the research that we were doing.
John Farrell: We’ve always for over 40 years have been focused on helping communities strengthen their local economies across these different sectors that we work in. But we came to this understanding of, “Oh, you know what? This issue of corporate concentration and monopoly power is really pressing in all of these different areas at the state and the federal level.”
John Farrell: So the video was the first chance we took to articulate that clearly, that we saw that theme across. And I see this as finally being able to say with some really good data, and it’s a really good evidence that it is happening and that there are things that we see across all these different sectors that States can do to push back against corporate concentration.
Jess Del Fiacco: The introduction to the guide says that too often policymakers try to alleviate symptoms and that this guy deals with the root problem. So this could be a question for either of you, but could you unpack what the root problem is and why do policymakers often avoid it?
Zach Freed: The root problem is, well, there are a lot of different problems, but one of the biggest ones is, corporate capture of our policymaking process.
Jess Del Fiacco: So we have too much influence from corporations in the only way that we really have to control corporations, we have this sort of feedback loop going on and that the policy tools that we could use perhaps at the federal level are ineffective due to corporate influence in politics. Is that kind of what-
Zach Freed: Totally. It’s that and it’s also kind of half dependence from decades and decades of deference to private power. A good example of this is the Dodd-Frank Act that came out of the aftermath of the O7/08 financial collapse. There, you had a lot of very complicated, difficult to understand, in some cases kind of watered down half measures that as we see now has been easily undone by a hostile presidential administration.
Zach Freed: It’s very different from the kinds of things that were passed to check the power of the railroad and oil and steel monopolies of the early 20th century. These earlier laws were written in ways that people could understand and read easily, and they were very kind of blunt instruments. And we have sort of moved away from that way of making policy as lawyers and economists have come into power and sort of we’ve deferred to the technocratic expertise of people who aren’t necessarily interested in really orienting power in a fundamental way, but just kind of eating away at the edges of things.
John Farrell: I like what you’re saying there Zack. But I think I would even go a little bit further in saying that I think we have sort of a naive belief that we can make our federal government powerful enough to overcome the shortcomings of our failures, that economic regulation to keep companies competitive and small enough. We have decades of, as Zach was saying there, the deference to elites and technocrats to successfully control the power of corporations that we’ve let grow really big.
John Farrell: We took our foot off the brake in terms of allowing corporations to grow in size. And you see this in the guide and the discussion of, electric utilities and retail companies and these internet giants. And so they have all this influence we know they do, and it’s because they’re big. And the funny thing is that we let them get big deliberately by refusing to intervene in a way that we actually had been doing. And I will nod to representative Wright Patman, who was pushed out of his committee chairmanship in the 70s and who had a lot of leadership at the federal level.
John Farrell: So, I see this as a problem of having too much faith that you can let companies get big and that you can size up government to successfully contend with them. Whereas I think our philosophy has always been, and it’s being proved out by how things are going, that we’re better off if we keep our economy competitive by not allowing that much power to accumulate, because unfortunately the economic power that accumulates when companies get very big turns into political power, influence over regulators, influence in legislatures. And it really only exacerbates things like racial inequality, where we’ve also got a lot of people who are disenfranchised because of decades of racial injustice, for example.
John Farrell: So you have that power of suppressed and corporate power is elevated by the kinds of choices that we’ve made. And so, this guide is about getting to the root of that. What is the problem? The problem is that we let companies get too large to be politically manageable in a democratic system.
Zach Freed: Yeah. And I’d also add that this has been something that’s continued at basically the same rate throughout Democratic and Republican presidential administrations and congresses. So it’s really a problem that’s pervaded our entire system. It’s also one of the reasons that we decided to have this guy be at the state level because really the federal government for decades and decades has been systematically weakened by both parties to the point where it’s, there’s really no power there anymore.
Zach Freed: And so the real work that has to take place, I think, over the next few decades is going to take place at the state and local level, if we’re going to arrest power back from the system that has enabled all this kind of transfer of wealth and power over the last few decades under both parties.
Jess Del Fiacco: Thank you guys for that. That gives us a really good sense of kind of why this is important on the top level, zoomed out. But how about, how does corporate power, monopoly power, impact our everyday lives? For me, for many consumers, I might say like, “Well, groceries are going to be a lot cheaper if I go to Walmart instead of going to the grocery store on the end of my block. That seems like it would be good for me.” Obviously, that’s not really the case. So, could you guys talk about how this hurts us every day in individuals.
John Farrell: Well, I’d love to at least dispel the myth that Walmart, because they’re good at advertising that they’re inexpensive, is actually cheaper because if you actually look at some investigative reporting on who’s inexpensive around groceries, it’s not actually true that you’re going to save money at Walmart. They’ll have a few loss leader items that get you in the store.
Jess Del Fiacco: Well, certainly being able to advertise at that scale is part of the whole problem.
John Farrell: Absolutely. So they’re able to, with their size, advertise the crap out of the fact that they are potentially less expensive than other places you would shop. So, I mean, I think that obviously is one piece of it. I’ll just give an example in the electricity sector. Most people don’t think a lot about who they get their electricity from because in most states you don’t get to pick, you just have one electric provider when you move into an apartment or a house and you just sign up with them.
John Farrell: Well, these utilities have actually been merging with one another. So they used to be kind of regional and state level utilities. There’s for example, Madison Gas and Electric, is an investor owned utility, but it’s owned by shareholders. But it basically just serves the city of Madison, Wisconsin. And that’s what all utilities used to look like.
John Farrell: And now there are ones that span multiple states and serve over 10 million customers compared to tens of thousands of customers. And what they’ve become really successful at is that they have these lobbying arms of their corporation that get very efficient because they operate in multiple states. And so they’ve got all these lawyers who can kind of parachute in to all these different state regulatory things and allow them to do things like make plans for new power plants, that maybe aren’t quite necessary, but they’re really experienced at convincing regulators that they are. And so your electric bill is definitely higher in a lot of cases because the one utility company that you can select is very successful at convincing regulators that the things that they need in order to benefit their shareholders are things that you need and should pay for.
Zach Freed: In the pharmacy sector, you are seeing local independent pharmacies vanish across the US and in many cases, you’re seeing areas that have been termed pharmacy deserts, where there’s no pharmacy within an easy distance. This is an especially bad problem, now that we’re facing a pandemic that’s ravaging the globe. For example, since 2013, more than 400 pharmacies have closed in just Ohio. There was a 2018 study from the University of Iowa that found that 600 rural communities had lost at least one retail pharmacy in 2013 and had none 15 years later. So from 2013 to 2018, in 600 communities, there were no pharmacies.
Zach Freed: And part of the reason this is happening is because you have these companies called pharmacy benefits managers, which basically administer drug benefits for health plans and reimburse pharmacies for the cost of a drug on behalf of a health plan. There are three big PBMs Pharmacy Benefit Managers, and they’ve grown big through mega mergers that have taken place since the 1990s. And one of the byproducts of their market power is they’ve been able to kind of decide winners and losers in the pharmacy space. And unsurprisingly, because of the fact that these PBMs are by and large owned by chain pharmacies, we’ve seen a lot of the independent, smaller pharmacies that are consistently rated higher on things like wait times and even drug prices disappear across the country while chain pharmacies like CVS have popped up on pretty much every corner of every community. That’s one of the ways that federal policy in this case, lacks merger enforcement and encouraging consolidation in the healthcare field has led to the kind of decimation of local economies.
John Farrell: I’ll offer one other example, I think that probably is very familiar to most people as most people pay a cable bill, whether it’s for internet and TV or just for television. And if your cable bill has been going up, it’s because of this problem. It is because cable companies ever since the federal government deregulated them have merged into giant companies where they control both the content like the channels, as well as the wires that get to your home. And so they have the freedom to continue to jack up prices.
John Farrell: So I’m actually in a novel situation in Minneapolis where we have an independent internet provider that does fiber internet, that competes with Comcast and CenturyLink and whatever with fast service. And in fact it really they just compete with Comcast because there’s only two companies that can actually offer fast service. But I actually have affordable internet and you can even get affordable prices from Comcast because they have to compete with USI, this small internet company. So, I think that’s the place where people, most people see that as a problem and feel powerless to do anything about it, but we could through state and federal government take action to make broadband access and make cable access more affordable.
Jess Del Fiacco: Could either of you talk about the ways communities have been successful and why? Communities or states, I suppose.
Zach Freed: Definitely. So they’re a good example of a state that’s been successful in keeping corporate power at bay, is North Dakota and the pharmacy sector as well. North Dakota has a law that in order to own a pharmacy, you have to be a pharmacist. And as a result, there are far fewer chains and North Dakota is among the states with the lowest drug prices.
John Farrell: And I believe more pharmacies per capita as well. So you have better service in terms of more accessibility to pharmacies for a state that’s relatively rural.
Jess Del Fiacco: I feel like ILSR could have a whole initiative that’s just like, the secrets of North Dakota. The things you didn’t know about the state that you might not think about.
John Farrell: Yeah.
Zach Freed: Another good example is in the banking sector in North Dakota. North Dakota has a state-owned bank. And as a result, they’re able to have a more thriving, independent business ecosystem. Small businesses are able to go to the state-owned bank instead of one of the mega banks for loans. And as a result, they have a much healthier, independent business ecosystem in the state as well.
John Farrell: I’ll add one other example of how states are changing this a little bit. There are now seven states that have what’s called community choice aggregation or community choice energy in electricity markets. And what it does is, it allows cities or counties or groups of cities and counties to create alternative electric companies essentially to sell electricity to customers. And so it radically changes who manages the electricity system.
John Farrell: So instead of, in some States, individuals shopping around for electricity, but not really having any buying power, they’re sort of a Costco for electricity and that they’re this, they can go out and they can buy it in bulk for these communities. But they can also make value judgments and say like, “Well, we want to buy more renewables.” Just like a Costco might say, “Well, we want more organic beef,” or something like that.
John Farrell: And so the states that have are seeing a lot of communities take advantage of that. So it doesn’t force communities to choose their energy supplier, but it allows them to, and we find that lots of communities are making that choice because they can get energy that is often more affordable or at least that’s more in line with their values for the same price.
Jess Del Fiacco: Before we go to the next question, let’s take a short break. Thanks for tuning in to this episode of the Building Local Power podcast. If you enjoy listening to the show, if you appreciate the fighting monopoly power guide or the other resources we publish, we hope you’ll consider making a donation to the Institute for Local Self-Reliance. Your support makes it possible to create resources like this, and to make them available for free to everyone on our website. If you want to help us return power to local communities, please go to ilsr.org/donate. Any amount is sincerely appreciated. So for communities or States who might want to take action on challenging corporate monopolies or use some of the tools that we put in this guide, are they facing any barriers or pushback from the federal level or other forces that are preventing them from doing so?
John Farrell: Well, we’ve definitely seen in internet service that the federal government has not been particularly helpful in overturning states that have preempted local governments from doing stuff. So it’s sort of this interesting multilayer federalism experiment, where you have cities that are saying, “We want to solve internet affordability problems.” And then you have states who are sometimes saying, “Oh no, these telecom companies have a lobby it hasn’t told us.” That’s a terrible idea and we’re not going to let you do it.
John Farrell: And then the federal government has kind of waffled back and forth from saying, “We want to support you cities in doing the right thing, because that’s actually one of the federal government’s goals, is broadband access,” at least on its face and then turning around and then being unhelpful. And for example, you see this with the net neutrality fight, allowing to discriminatory pricing and things like that. So, I think that’s one interesting way in which you’re seeing different levels of government, at least headed in different places in terms of how they approach this.
Jess Del Fiacco: So, I guess my next question, and sort of to wrap up, what do we want to happen next? Is there anything that’s happening right now that we think is really promising? Is there anything in particular like specific examples of actions communities are taking that we kind of outlined in the guide? What’s the latest news in local antitrust movements, basically?
John Farrell: I think we’re seeing a number of different ways that states and local governments can be involved. One of the things that I see as really promising, even though it’s kind of a small thing, is that some cities that are doing work around climate and energy and so in the electricity markets where you have this concentration of utilities, are hiring staff to be involved at the state regulatory commission. So you often see this very big gap between cities that have made climate and energy commitments. Over 100 cities in the United States have a commitment to get to 100% renewable energy. They don’t regulate energy. They often don’t own the utility. I think four or five of them own their own utility.
John Farrell: And so the fact that they’re recognizing that they need to be in that space and in that conversation at the state level is really important. And it’s also cool to see that even on their lobbying agenda, which usually includes things like, hey, local government aid or money for police or something like that, that the cities are now talking about energy as a way in which they want to interface with state legislation and state government.
John Farrell: We also have seen some antitrust action actually against utilities. It wasn’t initiated by states, but it could be, but in Arizona, Salt River Project, which is a fairly large utility imposed, really significant fees on rooftop, solar customers, and only rooftop solar customers, under the bogus claim that they were costing them a lot more money to serve those customers. And as a utility, you’re not allowed, even though those customers are buying less energy from you, if you’re a monopoly, you are not allowed to punish them for that. It is the right of every customer to generate energy from solar, if they want to take advantage of that sun that falls on their property.
John Farrell: And so there’s an antitrust case against them, which is really fascinating because in the utility sector, there’s a bunch of laws sort of protecting utilities from antitrust when they’re granted a monopoly by a state. And this is one of those exceptions where customers have a right to produce their own energy. And the utility is essentially forcing them not to, by saying, “We’re going to penalize you financially.”
John Farrell: And the US department of justice actually just joined in that case, in that antitrust case in Arizona. And it’s something that, for example, state’s attorneys general could also join in and participate in. So we are seeing some examples of stuff like that that can happen. And it’s really a new, it’s a totally new Avenue in the energy sector. We haven’t seen a lot of antitrust action because generally speaking, these utilities with the state-granted monopolies have been kind of shielded from antitrust and now people are starting to say, “Oh, but there are ways now in which this market is changing in which people can produce their own energy. And therefore we need to actually think about antitrust again.”
Zach Freed: For sure. And more broadly on antitrust, in the 1980s, when the Reagan administration came in, one of the first things that they did was gut the Federal Trade Commission, one of our federal antitrust enforcers, and kind of replace all the existing staff with people who they knew weren’t going to do anything. And as a result, you saw this movement in the 1980s to strengthen state level antitrust enforcement. And once again, like I said earlier, the first antitrust laws were passed on the state level and many of those laws are still on the books in the States. There are state laws that prevent unfair competition and deceptive practices in pretty much every state.
Zach Freed: And so you’re starting to see more antitrust energy on the state level. We have a big multi-state antitrust case being put together against Google right now, Facebook and also Amazon, are under investigation by different state attorneys general. And I think as we see more kind of movement on the state level like this, we’re going to see more funding for these AG offices, many of which have sort of been allowed to wither away. And yeah, it’s really exciting to see states take on these big tech companies in the way that they have over the last couple of years. And it seems like it’s only going to keep trending in this way.
Jess Del Fiacco: Right. Is there anything else that you’d like to share about the guide Zach or John that you want to add?
John Farrell: I just want to offer one other example of, I think, an interesting intersection between corporate concentration and then local action around climate and clean energy is that, in Portland, Oregon, they passed, they had a local ballot initiative to tax large retailers in order to fund local, renewable energy projects that would help build up the local economy, like community solar projects, solar project in low income neighborhoods, that kind of thing.
John Farrell: I think it is really interesting in the way in which they said, “We have this large global problem of climate and energy. We want to try to solve it locally. We want to do it in a way that boosts our local economy and helps communities that have traditionally been under-resourced. And we recognize that the way to do that…” So it’s not specifically an antitrust move, but it is an explicit way of saying we’re going to take money from the folks who we know make it hand over fist in part, because they are big that they were, and they targeted specifically, I think it was retailers that met more than a million dollars a year or something. So it was clearly attacks or a fee associated with businesses that are large.
John Farrell: And so it doesn’t change necessarily whether or not these businesses can operate at that scale, in the same way that antitrust. But I think it’s a recognition of the fact that this is the right issue that we’re facing, that it is the size and power of these corporations. And that if we want to be able to have thriving, equitable communities, that we need to get those resources from those big companies and redistribute them back into our communities.
Jess Del Fiacco: Zach, anything else?
Zach Freed: You should check out the guide. We worked really hard on it. There’s tips for state policymakers to the concentrate corporate power in the banking, broadband, electricity, food, and farming, pharmacy, small business and waste sectors. So if you’re interested in any of those policy areas, definitely give it a read.
Jess Del Fiacco: Yeah. We’ve talked about how big it is, but these sections do stand alone. So if you only want to read about waste policy or broadband policy, you can just click on that. And we will definitely have the guide linked on the show page for this episode, but it’s also kind of plastered all over our homepage of our website. And I think the URL is ilsr.org/fighting-monopoly-power. So we’ve made it very easy for you to find, I hope everyone will check it out. And with that, thank you guys for joining me.
Zach Freed: Thanks Jess.
John Farrell: Thanks for having us.
Jess Del Fiacco: And thanks everyone for listening. Thank you for tuning in this episode of the Building Local Power podcast from the Institute for Local Self-Reliance. You can find links to the report and everything else we discussed today by going to ilsr.org and clicking on the show page for this episode, that’s ilsr.org. While you’re there, you can sign up for more of our many newsletters and connect with us on social media.
Jess Del Fiacco: Finally, you can help us out with a gift that helps produce this very podcast and supports the research and resources we make available on our website. You can also help us out by rating this podcast and sharing it with your friends on iTunes or wherever you find your podcasts. This show is produced by Zach Freed and me, Jess Del Fiacco. My theme music is, Funk Interlude by Dysfunction_AL. For the Institute for Local Self-Reliance, I’m Jess Del Fiacco and I hope you’ll 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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Jess Del Fiacco
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Jess Del Fiacco

Jessica Del Fiacco is the Institute for Local Self-Reliance’s Communications Manager. She works closely with all of our initiatives to build community power and combat monopolies, and she runs ILSR’s social media networks on Facebook, LinkedIn, and Twitter. Jessica also produces the Institute’s Building Local Power podcast. Contact Jessica for media inquiries.

Jess Del Fiacco
Follow Jess Del Fiacco:
Jessica Del Fiacco is the Institute for Local Self-Reliance’s Communications Manager. She works closely with all of our initiatives to build community power and combat monopolies, and she runs ILSR’s social media networks on Facebook, LinkedIn, and Twitter. Jessica also produces the Institute’s Building Local Power podcast. Contact Jessica for media inquiries.