Editor's Note

Robber Barons
on K Street

By Paul Glastris

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Since the Reagan administration rewrote the rules of anti-
trust enforcement nearly three decades ago, the American economy has undergone wave after wave of corporate consolidation. As Barry Lynn and Phillip Longman make clear in this issue (“Who Broke America’s Jobs Machine?”), markets for everything from pet food to auto parts to microchips are now dominated by one or a handful of giant companies. This trend toward oligopoly has been hiding in plain sight for years. It affects countless aspects of our daily lives, yet we don’t really notice it until something goes terribly wrong. It took the financial crisis for most of us to become aware of how dangerously consolidated the banking industry had become. Similarly, it took a yearlong debate over health care reform for the news to get out that insurance companies enjoy near-monopoly power in certain parts of the country.

The biggest problem the nation faces right now is unemployment. Could corporate consolidation be contributing to this, too? That’s the argument Lynn and Longman make: with so many industries now dominated by a few big corporations, small businesses—the source of most new job growth—have less and less opportunity to thrive, expand, and ultimately challenge the behemoths. If their argument is right, then it’s going to take a good deal more than tax breaks and stimulus spending to get America’s jobs machine working again. It’s going to require a much stronger effort by the federal government to enforce antitrust laws and bring more competition back into markets.

Might the corporate consolidation trend be warping Washington as well, giving big corporations greater leverage over the political process? Common sense suggests it should, and political science does, too. In 1965, the great theorist of lobbying, Mancur Olson, argued that interest groups with large and diverse memberships have a hard time organizing around a common agenda, whereas those made up of a small number of players—or dominated by one big player—find it much easier to speak with one voice and get what they want from government. Last year, Jeffrey M. Drope of Marquette University and Wendy L. Hansen of the University of New Mexico published research confirming Olson’s theory: the more concentrated an industry, they found, the more likely it is to have a politically active trade association.

We see evidence of this in recent Washington policy battles, where the power of highly concentrated industries often leads to unpalatable compromises. Consider PhRMA, the pharmaceutical industry’s trade association, whose list of full members has shrunk from thirty-eight to twenty-eight in the last ten years thanks to mergers and acquisitions, even as its clout in Washington has grown. Aware of the group’s power to kill any health care reform legislation, Democratic leaders in Congress essentially built their whole legislative strategy around keeping PhRMA inside the tent. That meant killing provisions that Democrats have long supported, such as making it easier for Americans to buy their prescription drugs from abroad and stopping brand-name drugmakers from, in effect, paying off generic drug manufacturers to delay putting their lower-priced alternatives on the market.

Similarly, to get their cap-and-trade bill through, House Democrats handed out lavish benefits to big coal companies and coal-burning utilities in the form of free pollution permits and spending on still-unproven clean coal technology. They gave little, however, to the natural gas industry, even though natural gas emits half as much carbon as coal. One big reason natural gas lost out, NPR reported last September, is that the industry is made up mostly of small companies, and its lobbyists simply weren’t at the table. (The industry did better in the Senate after it partnered with environmental groups.)

If you think about it, there’s perhaps a big play here for the Obama administration. The president ran on the promise of changing the way Washington works. Now his chief task is figuring out how to get the economy to create more jobs. Stricter antitrust enforcement might help him achieve both. It wouldn’t cost the government much, and could be done without having to go to Congress. The same people who engineered the financial crisis, Obama can tell the country, have killed the businesses that create your jobs, and have kept your voice from being heard in the halls of Congress. For a president with a bank bailout and 10 percent unemployment hanging over his head, it might be just the thing he needs to reclaim the populist rage upon which the Republicans have capitalized of late, and point the pitchforks in a more constructive direction.

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Paul Glastris is editor in chief of the Washington Monthly.  
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