Whatever Happened to Antitrust?
by Dave LindorffNow here’s a word you’re not hearing in America these days: anti-trust.
The country is being dragged down by monstrous businesses, all of which, we’re told, are just “too big to fail.” As a consequence of this, the nation’s taxpayers, and their progeny born and yet unborn, are having trillions of dollars sucked away to prop up these giant rotting corporate corpses.
Zombie banks, zombie automakers, zombie insurance companies, all bigger than nation states, and all on life-support.
There is a simple answer to this problem. Bust them up. Then sort through the pieces and let the worst parts go bust.
Looking at the nation’s largest banks—Bank of America, Citicorp, JP Morgan Chase, Wells Fargo and others—it’s clear that some parts of them are functional. They have, for example, massive deposits. They also have massive debts, many of these toxic and pretty much worthless. Instead of bailing these failed institutions out, which is not going to work anyhow, and which only delays and makes more costly the final day of reckoning, the answer is to have the government carve out the profitable banking parts of these financial institutions, and set them up as free-standing banks, and then let the rest of the carcass of each bank go down the tubes, taking gullible shareholders and bondholders with them.
Then the remaining banks left from this process should be broken up by anti-trust actions into regional or even state entities.
There is simply no need for national banks. Such institutions are a disaster for smaller companies and individuals, since they are only really interested in lending to big national or multinational companies. I remember years ago, back in the early 1980s, when bank consolidation was just getting underway, how Citibank began adding fees to its checking services simply because it wanted to drive away small customers. It was an indication of what was coming. Screw the little guy.
It doesn’t matter to large companies if there are no national banks. When they want a big loan, they simply arrange for a syndicate of smaller regional banks to put a package together. That is the way things used to be done, and it can be done again.
Insurance companies too should be broken up. It is ridiculous to have companies the size of AIG or Aetna or Prudential, any of whose failures can threaten the global economy. Again, there is simply no rationale for the existence of such mega-corporations. Insurance companies have ways of sharing risk through reinsurers, so that smaller companies are no more vulnerable to disaster than larger firms. They may, in fact, be less vulnerable, since their managers will be closer to their customers and probably more careful about what they insure and what they invest in.
Finally, let’s look at what used to be called “Detroit.” In its heyday, there were many more car companies than simply three. There were American Motors, Hudson, Packard, and Studebaker, there was Mack Trucks. Then we had a wave of consolidation and bankruptcy. In the end, several companies—Ford, GM and Chrysler—won the day, but not because they had better products. Rather, they were bigger, and had bigger marketing budgets and more extensive dealership networks. Unable to compete, good companies went bust.
As the number of car companies dwindled, so did the need to innovate. With Chrysler just a shadow of its former self, there are really only two domestic carmakers today, and they have spent much more time and money using their political clout to block efforts in Congress to force them to make better, more efficient and more socially responsible products, than they have devoted to actually competing in the marketplace. They have become “too big to fail.”
So now we’re being asked to bail them out to the tune of tens of billions, and ultimately probably hundreds of billions of dollars.
Okay, I’m willing to agree that it is a good idea for the US to have a domestic car industry, but there is no reason why it should consist or two or three giant companies.
Let’s break these companies up into smaller enterprises, each making one nameplate, and let them compete. With smaller, nimbler car companies, we would see quality electric cars at affordable prices in no time, and gas mileage would soar.
While we’re at it, let’s not stop there. The Federal Trade Commission and the Justice Department should conduct a broad study of the US economy, looking at every industry, with an eye to busting up every company that is deemed “too big to fail” because of the impact such a failure could have on the broader economy.
“Too big to fail” should mean “too big to exist.” It’s not just that giant companies put the economy at risk. Their size makes them way too powerful economically and politically, too. (Just look at how Microsoft, a company that has a mediocre product line, has been able to succeed in killing off its competition not by making a better mousetrap, but by simply crushing or buying up those firms that do make better ones.) Politically, breaking up mega companies prevents such monopolistic behavior. It also creates more diversity of interest within each industry, thus providing openings for other political groups—like trade unions, environmentalists, etc.-- to play companies off against each other on particular issues.
While we’re at it, let’s also break up the huge companies that dominate three crucial sectors of the economy, to the detriment of the public good: energy, the media and the military. Does anyone doubt that the phenomenal rise in energy prices we have been experiencing is related directly to the mergers that have occurred over the last decade in the energy industry? Or that America’s endless wars, and its military budget—now equal in size to that of all other military budgets in the world combined—are a direct result of the dominance of several giant military companies—GE, Westinghouse, Boeing, Northrop-Grumman and Raytheon? Finally, if it weren't for all those media mergers, we wouldn't have newspapers closing down all over the place, and we wouldn't have the homogenized, sanitized network news we're stuck with now, either.
The tools are already at hand to tear all these anti-democratic, anti-social and uneconomic corporate monstrosities apart. So let’s fire up the legal chainsaws and start cutting them down to size. Instead of bailout, we need to start hearing the word anti-trust in Washington.