Monopoly and Its Discontents
In 1974, the Watergate babies swept into Congress to clean house and revolutionize government. This new generation of Democrats rewrote presidential nominating and committee appointment rules, and transformed the party’s economic agenda from equality to national competitiveness, innovation, and entrepreneurship. Among the displaced was the longtime chair of the House Banking and Currency Committee, Wright Patman. It made no difference that Patman initiated the Watergate investigation, or that he had led the fight to rein in corporate power since the New Deal. The New Democrats saw an anachronism who deified small business, the family farm, and restrictive labor unions in an age of global competition, stagflation, and technological change.
The deposing of Chairman Patman is a pivotal moment for Matt Stoller, author of Goliath: The 100-Year War Between Monopoly Power and Democracy. It signaled not only the Democratic Party’s abandonment of anti-monopolism; it ushered in an era of political amnesia that makes Americans unable to understand the relationship between financial oligarchy, commercial monopoly, and authoritarian politics in our own time.
Goliath: The 100-Year War Between Monopoly Power and Democracy
By Matt Stoller
Simon & Schuster; 608 pages
October 15, 2019
A history of and for the present, Goliath seeks to recover and explain the anti-monopoly tradition of the 20th century. Wright Patman is center stage. Anti-monopolism, Stoller explains, is much more than an ideology. As Patman—and Louis Brandeis before him—teaches us, anti-monopoly is a mode of democratic inquiry, necessary for political and economic agency. For anti-monopolists, democracy and markets are fragile, easily undermined by concentrations of power and a people insufficiently independent from oligarchy to shoulder the burdens of positive liberty and democratic citizenship. Democracy and markets necessitate vigilant inquiry: How is monopoly power acquired, consolidated, concealed, abused? How is it unmasked, taken down, and prevented? Anti-monopolists are not, as is so often charged, anti-intellectual. Committed as they are to democratic agency, they are hell-bent on unmasking academic obscurantism, false necessity, and apologetics for power.
There is no greater way to entrench power, Patman said, than to convince plain people that finance is too hard for them to understand. For Patman, as for populists before him, democratic government was a schoolroom. He used congressional committees to study and publicize the techniques of monopoly power. With Patman as his guide, Stoller explains with great clarity how bankers took control of industry and politics in the 1920s and the 1970s by inventing byzantine financial instruments to hide double-dealing, circumvent regulation, monopolize industry, and mobilize a broad constituency for their anti-democratic project.
While Goliath begins with Woodrow Wilson’s efforts to dismantle the House of Morgan’s vast network of monopolies in oil, manufacturing, and transportation, Stoller’s most original contributions involve the revolt against Andrew Mellon’s empire in the New Deal, the role of anti-monopolism in the New Deal order, and the formation of financial oligarchy and commercial monopoly since 1960.
Andrew Mellon learned his trade from J.P. Morgan. By the time he became Secretary of the Treasury for three straight Republican presidents in the 1920s, Mellon owned a network of 99 banks through which he controlled critical junctures in the economy—coal, steel, aluminum, electricity, chemicals, and rails. Though Mellon’s empire paled in comparison to Morgan’s, he developed an asset Morgan lacked: control over the administrative state. Harding appointed Mellon Secretary of the Treasury in 1921, a job he held until 1932. As progressive Senator George Norris said, three presidents served under Secretary Mellon.
Stoller imaginatively reconstructs “Mellonism” and Patman’s revolt against it. The stock market crash of 1929 unleashed a series of public investigations and lawsuits, which elicited a detailed record of financial manipulation, predatory competition, self-dealing, and political corruption. Stoller mines those archives to explain how Mellonism worked, how Patman led anti-monopolists in his party to dismantle it, and how the Democrats created institutions to prevent it from reconsolidating. Anti-monopolism became a keystone of the New Deal order, turning banking into a quasi-public utility, fragmenting industrial power, nurturing independent farming and commerce, and reining in employer power over unions.
By the end of the 1980s, the anti-monopoly tradition had disappeared—its institutions turned instead to reconsolidating financial oligarchy and commercial monopoly and bailing them out when they failed. There was nothing inevitable in this process. No scientific laws of modernization, capitalist development, globalization, technological change, or industrial economics explain the consolidation of economic power and corruption of democracy. Three deliberate projects, begun in the 1950s, had to converge: the Chicago school’s law and economics movement, the creation of an unregulated market in hot money, and the consumer movement.
Initially favorably devoted to antitrust, Chicago school economists had to rethink competition and convince lawyers that monopoly was unproblematic, as long as it didn’t raise prices. Similarly, it took a great deal of work for Citibank’s CEO, Walter Wriston, and his allies to build a market for tradable financial instruments that could enable industrial mergers and circumvent regulation. Consumer advocates, led by Ralph Nader, had to square their support for the new social regulation with their opposition to antitrust. Different as they were, economists, financiers, and consumerists worked independently and together to reconfigure legal pedagogy and indoctrinate politicians. They succeeded in enacting legislation and making judicial and administrative appointments to dismantle New Deal financial regulation and antitrust. By 1992, antitrust had disappeared from the Democratic Party platform and an active market for mergers, acquisitions, and short-term stock gains held the whip hand over corporate management. With anti-monopoly a distant memory, it became harder and harder for Americans to understand the rise of monopoly power in retail and the tech platform economy, why the crash of 2007 entrenched those who caused it, and the victory of authoritarian politics.
Goliath delivers. By carefully recounting anti-monopoly’s contributions to liberty, democracy, and prosperity in the 20th century, Stoller teaches his readers how to perform anti-monopoly inquiry themselves. We learn how to see and analyze economic power—how it’s created, circulates, and corrupts—and how to oppose, disentrench, and prevent it from returning. These are invaluable and timely lessons, as the center-left mobilizes to reverse authoritarianism.
This is a lot to accomplish. Even so, Goliath has two blind spots, which limit its ambitions: race and liberal corporatism. Both warrant historical criticism, so anti-monopoly’s teachings can be more relevant today.
Wright Patman represented a Texas district with a proud populist and a segregationist legacy. Stoller says Patman walked the line between them. He fought the Klan in the 1920s and cultivated black electoral support throughout his career. But segregationists supported him, and he signed the 1956 Southern Manifesto against Brown v. Board of Education in order to be re-elected. Influenced by Southerners like Patman, the New Deal was a mixed bag for civil rights. In Stoller’s view, it locked African Americans out of social provision and housing markets, but provided the civil rights movement with constitutional resources and organizing models critical to its success. Anti-monopolism and segregation, in short, were tragic, but fundamentally incompatible, partners.
Perhaps. We need to know a lot more about the context and consequences of Patman’s actions to assess whether anti-monopolism and racism were incompatible. Given the state of knowledge about anti-monopoly and racism, those who want to revitalize the anti-monopoly tradition (myself included) must probe more deeply. The historical record is mixed. On the one hand, Michael Kazin, Chip Berlet and Matthew Lyons, Daniel HoSang and Joseph Lowndes, and Sarah Jaffe show how anti-monopoly’s producerist ideology can look down as readily as up to identify adversaries. When it does, immigrants, African Americans, and women are coded as nonproducers alongside bankers and monopolists, equally worthy of vilification, regulation, and exclusion. On the other hand, studies of black chapters of the Farmers’ Alliance by Lawrence Goodwyn, Gretchen Ritter, and Omar Ali; the importance of antitrust in protecting black businesses which supported the civil rights movement by Brian Feldman; and anti-monopoly support for Native Americans in Portland, Oregon, by Robert Johnston show how anti-monopoly and racial movements work together toward interracial freedom from economic oppression.
The debate over these contradictory findings is productive when it empowers us to ask how economic power works and how movements for racial and economic justice work at odds and together; it becomes unproductive when it turns into a doctrinaire fight over whether the white middle class is inherently racist. In Patman’s case, we need to know how segregationists in his district understood the association between producerism and racism and whether Patman’s actions put light between that relationship. Did anti-monopolism reinforce or loosen paternalism in his relations with black constituents? Answering these sorts of questions will teach us a lot about how to break the ties between producerism and racism today and how to turn the anti-monopoly tradition toward racial justice instead.
Goliath’s second blind spot is liberal corporatism. Best conceptualized at mid-century by John Kenneth Galbraith, this is the idea that we ought not worry about monopoly, because it is inevitable, efficient, and naturally spawns countervailing powers in unions, consumer groups, and the state. In Stoller’s grand narrative, corporatism—whether Hamiltonian, fascist, or liberal—always clashes with anti-monopolism. While this frame illuminates the conflicts between Roosevelt and Wilson in 1912, the National Recovery Administration and antitrust in the 1930s, and the New Democrats and Patman in the 1970s, the relationship between anti-monopolism and liberal corporatism was much more diverse in practice. It needs careful conceptualization.
By Stoller’s own lights, anti-monopoly cleared the way for a variety of projects in the New Deal order, including countervailing powers. Under pressure from antitrust enforcement and the anti–chain store movement, once-dominant supermarket A&P incorporated unions, a retail clerks association, and consumer groups into its organizational structure. Similarly, it was not antitrusters alone who broke up Mellon’s aluminum monopoly in the 1940s. Military planners directed state investment into new competitors. Or consider Tom McCraw’s account of securities regulation. Although anti-monopolists were responsible for the Securities Exchange Act of 1934, the SEC became successful because it organized countervailing powers to investment banks in the American Institute of Accountants, the National Association of Security Dealers, and the New York Stock Exchange’s regulatory mechanisms.
It may be that anti-monopoly served two purposes in the New Deal order. By dismantling Mellonism and fragmenting industrial monopoly, it opened the way to countervailing powers inside and outside of corporate enterprise. Once in place, the ongoing threat of antitrust action acted as a penalty default for corporations that were tempted to amass power by oppressing workers, small investors, subcontractors, communities, and less powerful competitors. Galbraith was right about countervailing powers, but wrong that they were inevitable and that antitrust was anachronistic. The opposite, Stoller shows, is closer to the truth: Antitrust was necessary for the emergence and effectiveness of countervailing powers. But although anti-monopoly was a necessary condition for regulation, collective bargaining, and welfare provision, other traditions had a say in their design and execution.
Taking care to conceptualize the relationship between anti-monopolism and other ideological traditions isn’t just an academic or historical exercise. It is a pressing political problem, because anti-monopolism has returned to public debate at a moment when the Democrats are more divided ideologically than they have been since the 1960s. Seen as an epilogue to Goliath, the current Democratic presidential primary looks a lot like the election of 1912—a battle between socialists (Eugene Debs then, Sanders now), anti-monopolists (Wilson then, Warren now), and liberal corporatists (Theodore Roosevelt then, Biden now).
But Democrats of all stripes speak the language of anti-monopoly now, whether they acknowledge it or not. Some, like Warren, speak it in a pure form. Others combine anti-monopoly inquiry with rival forms of analysis, which look incompatible at first glance. Sanders’s plan for rural America combines anti-monopoly and class analysis to explain how corporate monopolies turned independent farmers into an impoverished proletariat through an oppressive subcontracting system. His solution is antitrust and price supports, not public ownership. Neoliberal corporatists Hillary Clinton, Mark Warner, and Amy Klobuchar, who once saw government regulation as the primary obstacle to technological innovation and entrepreneurship, now place tech monopolies atop their list.
Imagine this epilogue to Goliath has a happy ending and an anti-monopolist like Warren wins the presidency. While wielding the power of the executive branch and its antitrust authorities is considerable, it’s unlikely she will be able to fully dislodge democratic socialists or neoliberal corporatists without undermining the vitality they bring to the party. As in the New Deal, anti-monopoly will do its best political and institutional work in combination with other traditions. A party at war with itself, which fashions new and effective ways to use the anti-monopoly tradition, may have a future. Democrats who seek to revitalize their party would do well to study Matt Stoller’s Goliath and incorporate—in a complex and thoughtful manner—its central teachings.
Author Matt Stoller is a Fellow at the Open Markets Institute. Previously, he was a Senior Policy Advisor and Budget Analyst to the Senate Budget Committee. He also worked in the US House of Representatives on financial services policy, including Dodd-Frank, the Federal Reserve, and the foreclosure crisis. He has written for The New York Times, The Washington Post, The New Republic, Vice, and Salon. He lives in Washington, DC. Goliath is his first book.
[Essayist Gerald Berk teaches political science at the University of Oregon.]
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