As anyone who knows me well will tell you, I am in no way a fan of laissez-faire economics. I believe that history has proven time and time again that industry is wholly incapable of regulating itself. Pollution, poverty, suppression of worker rights and economic stagnation have significantly increased over the last forty years, all under the banner of deregulation. This was a movement which was supposed to provide a better future for everyone, but has failed spectacularly to improve the lives of anyone outside of a privileged few.
Yet, inexplicably, we still cling to this belief. Despite the evidence, we continue to hold to this idea that an unregulated marketplace will lead to wealth creation for the masses. In fact, if anything, this belief has taken on new life during the Trump administration. It is telling that, even as unemployment sits at record levels and Americans are relying on food banks to eat, the stock market sits at an all time high. Wealth is being created, but it is not trickling down to the masses as advertised.
The movement towards regulation in industry was centered on the belief that it was lack of oversite that led to the great depression. The power and wealth of the United States had become concentrated in the hands of a powerful elite, resulting in the stock market crash of 1929. The powerful elite, with no restrictions limiting their unquenchable thirst for wealth, had overextended themselves and the result was disaster. As a direct result, one of FDR’s primary goals under his New Deal was that industry needed to be regulated for the benefit of society as a whole. Though I am in no way contending that this was the only reason (economic expansion during world war II certainly had a lot to do with it), and contrary to what industry giants today want you to believe, this led to one of the greatest periods of economic expansion in history. This was especially true in terms of the middle class, which grew immensely during this time.
That all changed during the 1970s and 80s. At this time, a resurgence of laissez-faire thought gained traction within political circles, especially within the republican party (though the democrats embraced this philosophy as well). Led by the influential Chicago School of Economics, a regression back to the deregulation of the 20’s was begun. Started during the Nixon administration, it of course reached its full momentum under Reagan.
Now, a great deal has been written on the failure of trickle-down economics (including by me), so that will not be my focus here. Besides, though trickle-down economics have done immeasurable harm within our society, I do not believe that this was Reagan’s worst folly. A far more insidious program took place behind the scenes, a program that has also produced even more far-reaching consequences.
During his tenure (1980-1988 for all you youngins out there), Reagan became enthralled with a legal scholar and wanna-be economist named Robert Bork. It was Bork’s contention that regulation, in particular the anti-trust laws, severely hampered the growth of industry and stifled innovation. It was under his guidance that Reagan began to steadily dismantle the anti-trust laws in the United States. For those not familiar, anti-trust laws are laws that prohibit corporations from taking action that directly limits competition in any given area. They were put in place to restrict the formation of monopolies as this was deemed to be against public interest. A famous example was the breakup of Standard Oil in 1911, as Standard was deemed to have a virtual monopoly at the time.
Despite Reagan’s enthusiasm, legislators within Congress and the Senate remained sceptical. Some legislation was passed to make it easier for company mergers to take place, but such legislation was nowhere near as radical as Reagan and industry leaders wanted. Thus, during his second term in office, Reagan began to focus his attention more on the judiciary. He stacked the courts with judges who agreed with his views, creating an environment in which the laws governing anti-trust remained but were simply no longer enforced. He even attempted to have Robert Bork appointed to the Supreme Court, though a democrat led senate put an end to that. In the end, Reagan achieved his goal and ushered in a new era.
Now, why would I view this as being more dangerous than his theories on trickle-down economics? Because what he did was to effectively rid corporations of any impediments to their growth. This was the effective birthplace of the huge multi-national corporations that we see today.
40 years later, this has had consequences so far reaching that the way our entire economy functions has been altered. This has become especially obvious during covid, where economic concerns are pushed to the forefront while more human concerns take a back seat.
One of the fundamental beliefs of capitalism (for those who believe that capitalism can be a force for good) is a belief that competition is at the heart of a functioning capitalist economy. Competition forces companies to keep prices low. It forces companies to innovate in order to stay ahead of their competitors. It also helps to keep wages high, as companies attempt to recruit the best and the brightest.
Unfortunately, that is not the situation we have today. Unchecked growth has, instead, stifled competition. Despite what seems, on the surface at least, to be a vast ocean of choices available to consumers, the reality is that the opposite is true. Huge corporate entities buy up competitors and absorb them, creating a mirage in which we see choice even as different brands are owned by the exact same people. For instance, through corporate holdings and mergers, just 10 corporations now control most of the food production and distribution within the United States. For instance, you might want to pick up a bag of chips at the grocery store. You go to the chip isle and see an almost endless assortment of choices before you. Would it distress you then to learn that many of these brands are owned by Pepsi? Everything from Lays and Doritos to Miss Vickie’s. The sad reality is that the essence of a free market, competition, is nothing but a carefully orchestrated illusion.
So, what effects does this have on our economy? Perhaps the most insidious is that, with no direct competition, there is really no incentive to keep prices low. This is the primary reason why, when browsing through the potato chip isle, there is almost no variation in price. Without competition, companies are free to charge what they will for products, which invariably leads to higher prices for the consumer as maximizing profit becomes the driving force of economics as opposed to market share. If Doritos drops 5% in sales, Lays picks up 5%, so what’s the difference. As prices have continued to rise, real buying power for consumers has dropped significantly over the last 40 years.
Inversely, real wages have declined over the last 40 years. Granted, not by much (less than 5%), but this decline has had a snowball effect. Coupled with rising prices, there has been a decline in purchasing power that has devastated the middle class. Without competition, there is no real need to hire workers who are the best and brightest. Therefor, if all you need are warm bodies, why pay them?
This has also led to a devaluation of the labor force as value. If labor only exists to maintain an edifice of corporate control, rather than to add value to the economy as a whole, then individuals themselves cease to be valued. Also, without value, any calls for improved conditions for workers are met with stiff resistance as an impediment to corporate success. It is ironic that where anti-trust laws have been successfully used over the past four decades is in union busting. Several unions have been broken up, citing a monopoly on workers rights. The very tool that was designed to improve the lives of the average person through competition is now being used to undermine it through the suppression of collective bargaining. By denying workers the right to unite, to change the conditions that keep them subservient to capital, ensures that this economic supremacy can never be challenged.
None of this has been limited to the United States either. As corporations have grown, their economic power has translated into a disproportionate political power as well. As they grow, corporations are able to transcend international borders as competition within other countries dry up. Countries are then forced to rely solely on these mega-corporations for wealth generation. This creates a vicious cycle, whereby countries are held for ransom by large corporations. They must deregulate or die. Thus, the corporation expands, increasing their ability to apply pressure to governments.
In the industrialized world, this has led to many countries given free reign to corporate entities, in fear that corporations will simply go elsewhere. Before deregulation, corporations (and the people who owned them) existed in a reality that was far removed from the day-to-day realities of most working people. Still, even as the rich lived a world apart, they were still dependant on that world for success. They had a vested interest in maintaining the well being of the community, because they were geographically tied to THAT community. Now, when a corporation can simply pick up and move, there is no longer any interest in maintaining any sort of standards to protect the community. Poison the water supply? No problem. Just move to somewhere else. If the new community tries to pass laws so that THEIR water doesn’t get poisoned as well, just move on again. The evolution of the multi-national corporation ensures that not only is corporate responsibility undermined, it is actually seen as a hinderance to growth.
In the developing world, this has become even more problematic. In order to have any chance at accessing capital to improve the lives of their citizens, many countries are forced to self off whatever they can at rock bottom prices. Resources are bought up and hoarded, then sold back to those same countries at highly inflated prices. Water is a prime example, with many countries now paying outrageous fees to have access to their own water supplies.
The most surprising aspect of this is that, back in the 70’s when all of this started, the primary argument made was that deregulation would increase innovation. Companies, free to expand, would be able to better concentrate on creating new ideas. This has, for the most part, failed to materialize. Sure, companies bring out new products all the time. Those products, however, are mostly just the old products with some new features. They are designed to keep us buying and upgrading rather than actually improving our lives in any significant way. Even when innovation does happen, such as the tech revolution that came about during the eighties, the corporations that lead these innovations soon use their newfound wealth to suppress other innovations in order to maintain their own status. The internet was just such an innovation. It had the power to create a revolution in the way we communicate. Instead, it is now controlled by a few key players who shut everyone else out.
In the 70’s, one of the most powerful forces for innovation was small businesses. Someone had a great idea, and, by bringing that idea to market, they forced larger corporations to adapt to such changes to survive. Small businesses were also economic powerhouses, accounting for large percentages of wealth creation and employment. Now, unable to compete with large multi-nationals who can afford to keep prices low, most small businesses fail. They occupy a smaller and smaller portion of the economy. They account for half of the employment that they once did. From a large corporation’s point of view, why innovate and compete when you can just crush for so much less.
The sad thing is, it doesn’t have to be this way. The truth is, these vast conglomerates need us far more than we need them. The economic power that they hold over us exists only because we say it does. The truth is that the economy is far more fluid than we think it is, because it is a human construct. We make the rules, and therefor we can change them at any time. If there is one thing that I have come to realize during covid, it is this. The economy, as it stands now, has no benefit for most of us. It is a tool used to keep the masses in a constant state of desperation for the benefit of a few. We are therefor expected to march to our (possible) deaths just to keep food on the table. Rather than accepting our fate as something beyond our control, we need to realize that there is no economy without us. That is why they are so desperate to get us back to work. Perhaps it is time to use our own power so that we may return to an economy that benefits us all.