Barry C. Lynn, author and director of New America’s Open Markets program, explains how every major industry and marketplace in America came to be controlled by a single, monolithic player.

On September 21, 1999, a devastating 7.6-magnitude earthquake hit Taiwan, killing close to 2,500 people and displacing more than 100,000. The earthquake also affected the PC industry: as Taiwan was home to factories that manufactured most of the world’s motherboards and semiconductors, many firms were cut off from their supplies due to local electricity interruptions. As a result, computer factories in places like California and Texas were forced to shut down.

This event (later known as the 921 earthquake), says journalist and author Barry C. Lynn, was what “clued me in to the fact that America has a monopoly problem.” He adds: “This was 1999, and I thought ‘Oh goodness, we’ve been told globalization is going to lead to more of everything in every place,’ and here was evidence that all of something really important was concentrated in one place. At least when it came to this important semiconductor, we had put all our eggs in one basket, and that basket was really far away from us.”

This revelation was the subject of Lynn’s first book, End of the Line: The Rise and Coming Fall of the Global Corporation (Doubleday, 2005), which was about the interdependence and inherent fragility of a highly concentrated global industrial system.

Lynn is currently a senior fellow at New America Foundation and directs New America’s Open Markets program. His years-long research into the effect of concentration on the stability of the industrial system led to his second book: Cornered: The New Monopoly Capitalism and the Economics of Destruction (Wiley, 2010). In the book, Lynn gives an exhaustive account of how the U.S. economy fell victim to widespread monopolization and how every major industry and marketplace in America—from consumer goods to food processing to banking to advertising—came to be controlled by a single, monolithic player.

According to Lynn, the monopolization of the U.S. economy has been extremely harmful not only to consumers, but also to the integrity of the political process, as firms use their power and control over critical supply chains to buy influence, all the while maintaining the illusion of a competitive free market. The financial meltdown of 2008 and the rush of bailouts and nationalizations that followed it, which took place as Lynn was working on Cornered, served as a grim punchline for the book’s basic argument: “Our political economy is run by a compact elite that is able to fuse the power of our public government with the power of private corporate governments in ways that enable members of the elite not merely to offload their risk onto us but also to determine with almost complete freedom who wins, who loses, and who pays.” It has also made Cornered “a chronicle of a death foretold,” he wrote. “And the corpse on the street was the American Republic.”

The United States has dealt with powerful monopolies in the past, most notably in the late 19th century. The current wave of consolidation, says Lynn, began with “a pretty radical revolution in antitrust enforcement” that took place in the late 1970s and early 1980s, and continued well into the 1990s. “The goals of the old antitrust regime were to preserve competition in all parts of the political economy in order to protect the liberties of the individual, our democratic institutions, the stability of our economy, and also local communities. Those were all thrown out, and replaced by the idea that we should just have efficient structures that serve the interest of the consumer,” he tells ProMarket. “People now in this country are coming to understand that this was a serious error, which has allowed for a concentration of wealth and power that we have not seen since the days of the plutocrats.”

In a phone interview with ProMarket, Lynn spoke about the need to return to an antitrust regime that focuses on competition instead of consumers, about the contribution of both right-wing and left-wing economists to the growing concentration of the American economy, and about the growing power of digital monopolies like Amazon and Google.

“I came upon this by studying the effects of concentration on the stability of a complex system: the international industrial system,” he says. “What concentration does is create multiple single points of failure, where you have a system that is built to break.”

Barry Lynn

Q: Very few people in the press or academia deal with this problem or even acknowledge it. How do you explain that?

There’s a number of answers to that, and some of those have to do with money. From my own experience, I have been asking the same question for 15 years: how is it that people don’t see this? “Don’t put all your eggs in one basket”—that’s an ancient saying and basic common sense. How is it that we as a society, millions of rational actors, all get together and make many millions of rational decisions that add up to a system that is irrationally built?

The only thing I could come up with is that we went through an ideological revolution. We changed the ideas we use to interpret the world around us. If you go back to the revolution that took place in the 1970s, what it really comes down to is a conception that can be traced back to 19th-century socialists: that efficiency is all, that what you really want is everything at one place.

The people that affected the revolution in antitrust policy in the 1970s were a group of people from the hard left and the hard right (hard left in a U.S. context). There were a bunch of Galbraithians, Lester Thurow, Robert Reich (who is now repentant). It was Robert Bork, who may have later realized there were some errors in his thinking; it was Judge Richard Posner.

The revolution that took place during that period wasn’t merely a legal revolution. It was a revolution in how people see the world. They were so successful that every economics program in the United States ended up teaching these truths. Every person who has gone to business school or law school for the last 35 years or more, this is the truth they have been trained to see.

Once you establish this new idea, and once this new idea starts to deliver monetary benefits to certain people, that money gets reinvested in reinforcing the idea. Then the people with the money hire a bunch of second- and third-rate functionaries to sit in chairs in various academic institutions and speak these truths over and over again, until that idea is harder to change.

In the history of America, the one thing average Americans have focused on is concentration of power in the government and the private sector. How is it that we have this kind of concentration of power in this country? Only by pulling the wool over people’s eyes.

Part of it is that we have a more sophisticated apparatus of lying to the American people than we did in the past. The modern libertarian movement is one of the most sophisticated Orwellian creations we’ve ever seen in the United States. They sing liberty, but they are the vanguard of the plutocrats. People who aren’t that sophisticated or well educated, but distrust power in the same way that their grandparents did, they listen to the libertarians, and the libertarians sound exactly like what they believe.

Q: But as you said, it wasn’t just the right wing that was responsible for this, right? Left-leaning economists and policymakers were responsible as well?

Absolutely. You go back to 19811982, when Ronald Reagan was in power and William Baxter, his antitrust chief, was going to Congress and saying we were going to apply antitrust law according to efficiency tests, instead of applying the competition tests that we had before, who said “Amen”? A whole bunch of people stood up and said, “This sounds really dangerous,” but people like Lester Thurow and the left wing of the Democratic Party supported this. We ended up with the left wing of the Democratic Party essentially working with the right wing.

This kind of embrace between socialists and corporatists, we see it often in history. Both groups believe in top-down autocratic systems, very undemocratic systems, in which power is concentrated. What they do is they fight over the summits of power. It has served many people in the left side of this who have promoted this kind of concentration. They have done very well as the so-called regulators of this system. This is a very little group within the left: the Jeffersonian left is not there.

If you actually go back to the 1960s and look at what we have now, did anyone get what they said they wanted to get? What we have today is what a certain group wanted, and it was the Galbraithians—though they didn’t get exactly what they wanted, because there was a little flaw. What they envisioned having was something that looked a lot like what Teddy Roosevelt preached in 1912 when he was in Bull Moose, which is to let the masters of some corporations take control over some human activity, and then stick government regulators on top of the people in the corporation. And you regulate that activity, so the outcomes are good for society. It’s a vision of top-down semi-autocratic control over the systems of production by a tiny elite of experts. That’s what Galbraith was preaching, what Lester Thurow was preaching.

They thought that obviously, once you would concentrate all power, then people would rationally choose to regulate the system in a way that works for everybody, and what we’ll do is we will democratically choose the regulators, and that’s how we’ll keep control over them and ensure that their autocratic manner is used in ways that serve the greater democracy. What they forgot is that if you lose control over the government, and some other group grabs control over these giant concentrations of power, then what you have created isn’t yours anymore. Someone else is going to use them.

Q: In Cornered, you describe monopoly as a form of “private government.” Can you explain this?

Look at the book industry: what we now see in the book industry is the emergence of a single regulator or governor within the system—Amazon—who has the ability to choose winners and losers, and steer profits to some and away from others. That was the power of government.

This is something that people in America have understood since well into the 19th century: monopoly takes away from the individual’s most important rights, which is to make his or her own way within an open marketplace, interacting directly with the buyers of what the individual has to sell, whether it is goods or ideas.

In any system, apart from certain chaotic periods, you’re always going to have a regulator. It’s going to be either private government or public government.

Q: You recently held an event at New America where publishers, authors, and antitrust experts discussed the implications of Amazon’s dominance in the book market. What was your takeaway from that event?

My takeaway was that Amazon is violating antitrust law, by almost any reasonable interpretation of antitrust law in the United States. My other takeaway was that what’s preventing the government from taking action is not lack of evidence but lack of will. Regulators, I think, are pretty scared of taking on a company of the size and power of Amazon.

I actually think many of the regulators are personally very concerned about this kind of concentration of power in such a vital marketplace of ideas, and they want to do something, but what they need is cover—from politicians, from the White House. And they certainly have not gotten it from this White House.

Q: Last year, along with Hachette writer Douglas Preston, founder of Authors United, you wrote a 24-page position paper that looked into Amazon’s book-selling practices and called for the Department of Justice to investigate it. What is the effect of Amazon’s power in the book market on American readers?

The effect today is that we’ve already seen Amazon make it harder to get hold of certain books, so already they have intervened with the free flow of information in our society.

Going forward, the way Amazon will use is power is to disrupt the traditional market structure in the book business. There’s no doubt that the arrival of the Internet and the arrival of e-books have disrupted the traditional relationships and structure in a number of ways, but there’s a profound and important difference between having innumerable players working their way through these new technologies to figure out new means of communication and new business models, and having a single dominant player basically pushing people down particular pathways, toward particular outcomes.

We should be embracing brand-new technologies that make it easier than ever before for readers and authors to interact. But we should be condemning, as a society, the fact that we have allowed a single company to intermediate this relationship.

Q: Online in general, we seem to have this increasingly monopolized ecosystem, where most fields are controlled by a single player. Is there possibly something in the structure of the digital economy that encourages monopolies?

What has exacerbated this problem is that we had a technological revolution that followed the ideological revolution that took place at that point in time. With the Internet, it became easier for well-capitalized companies to take over entire sectors. It took Walmart 30 years and an immense amount of money to buy up the physical real estate it needed to monopolize 3040 percent of the grocery and general merchandise business in the United States. That was a real physical effort, in the physical world, which required them to buy physical real estate. When someone like Amazon comes along in this digital world, it doesn’t need to own physical real estate or tie its capital up in physical real estate. Its ability to grow swiftly and over the entire marketplace gives it a vastly inflated ability to exert its power.

What we’ve seen is a revolution that followed another revolution. We need to disentangle these two in order to bring reasonable order to the American political economy again.

Q: With Google, Facebook, and Amazon wielding immense political power, isn’t it too late to disentangle the two revolutions?

Certainly the people in Washington, a lot of the policymakers, have been afraid to write about this. If I was in the Washington Post right now, I would probably not run out and risk my career writing a big exposé on any business in which Jeff Bezos happens to have a major stake.

People have been afraid to talk about this up to this point, and continue to be afraid to talk about it. I think it is changing, as we and other people put out information and start to question this concentration of power. A lot of people have had this fear inside them, they just haven’t had someone explain to them why that fear is a reasonable fear to have.

There’s another side to this, which is that because no one really had this public discussion about them, Amazon, Google, and Facebook have been able to concentrate power over very large corporations in a way no one paid much attention to. What we’re seeing now is that a very large company like Google is basically threatening the Detroit companies, because they want to put their operating system inside the car, which would basically eliminate the board of directors at GM and Ford from having much say over the future of the automobile. And we see Facebook concentrating power over things like the New York Times and the Financial Times. We see Amazon taking on companies like Fedex and UPS; we see the Silicon Valley companies as a group taking on the banking companies of Wall Street. What we see emerging is a big-time war between different classes of companies.

Q: Can you elaborate?

A hundred years ago you saw something similar, a period in which the railroaders were able to roll up control over other companies. Then there was this period where a couple of very sophisticated players were able to leverage the railroads to roll up control over their industry. That’s what John D. Rockefeller did: he used the railroads to master the oil business. And Carnegie did that in Steel. But then, after that point, there was this whole class of businesspeople that said, “I don’t want to work for those guys, I want to be independent.” And those people worked together to impose a different regulatory regime in the political economy of the Unites States, to ensure there were serious restrictions on the extent to which large companies can grow.

If you look at the language of the 1912 election, you see that is the language: the way to protect business—small, medium-sized, even large businesses—is through antitrust and real competition policy, fair and transparent rules.

You establish a political economy based on simple principles, and that frees up everyone to be rivals of one another in a way that may endanger a particular company on a particular day, but doesn’t endanger the political system or the economic system.

Q: You wrote in Cornered that in 1981 “we all but stopped enforcing our antimonopoly laws.” Has regulatory capture affected the enforcement of antitrust laws in the United States (or lack thereof)?

What you see among regulators in the United States is people moving “back and forth,” but regulatory capture is not just people moving back and forth. It’s the ideological thing: if you control the ideology, then the regulators, when they look at something, they don’t see the problem. It’s not that they’re afraid to enforce something: before they become afraid, they have already dismissed the problem entirely. That is why an ideological revolution of the kind that we had can be so powerful for so long. What we have is capture of the regulators’ minds, which is a much more sophisticated form of capture than putting money in their pockets or a promise of a future job. Even the ones who are careerists, who had no intentions of going to the private sector, are still controlled by the same set of ideas.

Q: As you point out in Cornered, the U.S. has successfully dealt with monopolization and concentration on two separate occasions. What can history teach us about the ways to solve this problem today? Would you say the solution is a wide coalition of businesses, citizens, journalists, and politicians, like the one Theodore Roosevelt had?

Let me back up a second: when I started with this story about the fragility of the industrial system and the way it could crash and cause catastrophic harm in the United States, or how a foreign power like China can play with the bottleneck that has been built into the system in a way that would yield a political disaster of the first magnitude, I thought that going into the offices and meetings of the elite and telling these stories would short-circuit the need for a movement, that rational members of the elite would say, “Oh my lord, we need to change this,” because the system is fragile, and that makes it subject to coercion by an autocratic regime.

I spent six to seven years of my life mainly doing that, and I continue to do it. But what I found is that most people, except for the economists, immediately understood what I was talking about, but also felt that they didn’t have any ability to change that and didn’t know what to do about it. So what they really wanted is for me to leave the room.

I was hoping there was some kind of ability within the elite to act in a coherent, rational way, but there is not. Given that factor, I think that only a movement will allow us to make the changes that we need to make. In the same way a monopoly can get much bigger much faster today, movements can also get much bigger much faster than in the past. Before the election of 1912, you had the populist movement that percolated for 2030 years. I think things can explode quite rapidly now, partly because while most people have not been well educated, they also have not been miseducated. Ninety-five percent of the population still follows commonsense rules; they don’t have to unlearn what they learned in law school or economics.

Q: With the presidential election largely focusing so far on the influence of special interests on the political process, there seems to be a growing public awareness of the issue. Do you see this as a positive development?

Predicting that one day soon we’ll be dealing with an angry population that is seeking answers, I would talk to big funders for years, telling them, “You have to be ready with trained cadre of populists who are constructive in their vision, who have a vision of a democracy in the United States.” Had we had this stuff ready four years ago, we probably would have had one of the candidates out there singing a real coherent, principled Jeffersonian song that would be able to hold all the candidates to certain principles.

There’s anger out there, but the danger is that it can be manipulated by demagogues. What we see with Donald Trump is demagoguery. It’s scary, and it’s getting scarier, but I think what we’re seeing right now all the things that we need in order to see a third democratic revolution in the United States: we had one between 1776 and 1800, and a second one between 1896 and 1932, and now we’ll have a third one. I actually think that if we can avoid a crash of some sort, and that’s a big “if,” I am optimistic.