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December 10, 2012 4:40 PM Return of the Oligarchs

By Ed Kilgore

Paul Krugman had a much-discussed column today that discussed record corporate profits and weighed the effects of technology and sheer corporate power in keeping those profits from benefitting workers via more jobs and higher pay.

On the latter subject, he touted a 2010 Washington Monthly article by Barry Lynn and Phillip Longman (“Who Broke America’s Jobs Machine”) as persuading him that growing business concentration “could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.”

Indeed. Here’s a key quote from that Lynn/Longmann piece:

It is now widely accepted among scholars that small businesses are responsible for most of the net job creation in the United States. It is also widely agreed that small businesses tend to be more inventive, producing more patents per employee, for example, than do larger firms. Less well established is what role concentration plays in suppressing new business formation and the expansion of existing businesses, along with the jobs and innovation that go with such growth. Evidence is growing, however, that the radical, wide-ranging consolidation of recent years has reduced job creation at both big and small firms simultaneously. At one extreme, ever more dominant Goliaths increasingly lack any real incentive to create new jobs; after all, many can increase their earnings merely by using their power to charge customers more or pay suppliers less. At the other extreme, the people who run our small enterprises enjoy fewer opportunities than in the past to grow their businesses. The Goliaths of today are so big and so adept at protecting their turf that they leave few niches open to exploit.

They attribute this baleful development largely to the virtual suspension of the enforcement of antitrust laws during the Reagan administration, a counterrevolution that was only marginally reversed by the Clinton and Obama administrations. If you haven’t heard much about that—well, you’ve gotten a taste for why so much economic debate in Washington revolves around a limited range of fiscal policies for creating jobs. Reducing the power of Big Business to distort and control markets remains the most direct path to ensuring that robust profits go hand in hand with broader gains in jobs and prosperity.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • dweb on December 10, 2012 5:00 PM:

    Behold....the true glory of "free markets."

  • Darsan54 on December 10, 2012 5:06 PM:

    To paraphrase Lenin, capitalists are selling their hangmen the rope for their own executions. And they will advertise on FOX.

  • beb on December 10, 2012 8:50 PM:

    On Slashdot every day the blog is filled with news items about one tech company suing another over copyright infringement. Apple doesn't want to compete with Samsung, so they sue. It's become clear there that patents are incompatible with innovation. How can one hope to innovate when there's an estimated 250,000 patents involved in smartphones.

  • jhm on December 11, 2012 7:29 AM:

    " If you havenít heard much about that...."

    If my local TV news had 86'ed the item on how well McDonald's was doing lately, perhaps they might have had time to cover media concentration's effect on the dearth of news coverage of ill effects of concentrated corporate power on the economy.

    Please be aware that the hydra of increasing media concentration is again showing its teeth in the FCC. Don't sit this one out.

    http://billmoyers.com/segment/bernie-sanders-on-why-big-media-shouldnt-get-bigger/

  • paul on December 11, 2012 9:42 AM:

    At this point, the big companies stifle small ones almost reflexively. Consider, for example, the Chick-Fil-A vs "Eat More Kale" thing, where a bunch of fast-food company lawyers have been trying to shut down a guy who makes tee shirts in his house. There is no possible profit for them in this, and a lot of potential bad publicity, but all the machinery is set up to stifle perceived competition, so it has to be used to justify the billings.

  • Fritz Strand on December 11, 2012 10:10 AM:

    'marginally reversed by Clinton....'

    You're kidding, right?

    Degulation of the commodities markets, ditching Glass Steagall and the communications act of '96. You could have fooled me, it looks like The Big Blue Dog loved monopolies.