In an interview with ProMarket, investigative journalist David Dayen discusses the toll that monopoly power takes on the lives of ordinary Americans and why he believes the term “deregulation” is a misnomer.

Last month, two Federal Reserve economists, Isabel Cairó and Jae Sim, published a study that showed how many of the negative trends that have plagued the US economy in the past four decades—the decline of the labor share and the rise of the profit share, the rise of income and wealth inequalities, as well as financial instability resulting from rising household leverage—may have been generated by the increase in market power in both product and labor markets.

The Fed paper is just the latest in a long—and still growing—series of academic studies that document the effects of concentration and market power on the American economy.

In addition to this growing literature, the last four years have seen a number of influential books that discuss the rise of monopoly capitalism in America, the forgotten legacy of American antimonopoly, the risk that an increasingly concentrated global economy marked by historic levels of inequality and political power poses for liberal democracies (and history’s hard-earned lessons about the relationship between authoritarianism and monopoly power), and how Europe came to be better than the US at free markets.

While rich in data and figures, what academic and policy discussions often miss is the effect that monopoly power can have on people’s day-to-day lives. Enter Monopolized, an engrossing new book by investigative journalist David Dayen that seeks to document—through interviews and case studies—how the concentration of economic power pervades every corner of American life.

Monopolized is jam-packed with research and policy discussions but, as Hal Singer recently noted in his review of the book, the heart of Dayen’s book is the personal accounts of ordinary Americans—airline passengers, hospital patients, farmers, and small business owners—attempting to achieve a slice of the American dream and facing insurmountable barriers in the form of unaccountable private monopolies. It is, as Dayen recently put it, “a travelogue of monopoly.”

Dayen, the executive editor of The American Prospect, is also the author of Chain of Title (2016), in which he investigated the widespread fraud behind the Great Recession’s foreclosure crisis. In a recent interview with ProMarket, he discussed the toll that monopoly power takes on the lives of ordinary people and why he believes the term “deregulation” is a misnomer.

[The following conversation has been edited and condensed for clarity and length.]

Q: Your book follows several books on antimonopoly. Where I think Monopolized differs from previous books about monopolies in America is that you don’t just discuss policy or history or economics. You focus on ordinary people and how their day-to-day lives are affected by monopoly power. What set you on this path?

I just thought that was the missing ingredient in this new literature we see from the antimonopoly movement. I knew a lot about history from reading. I knew a lot about policy and market shares and harms.

What I didn’t know is whether people understood that what they were going through in their own lives was the untrammeled power of big corporations.

I was pleased, or at least gratified, that my instinct was correct. When I talked to people about this, they did make that connection. They understood that the reason the quality of certain products is suffering is because of monopoly, that the reason that small businesses are basically at the whim of these giant corporations is a function of monopoly, that the shortages that we see and the disruptions to the system are tied to the way these companies are managed and the hidden risk that monopoly creates.

They might not have been able to name it. They might not have been able to shout out the Herfindahl–Hirschman Index. They did understand that they were increasingly being governed by the actions and desires of a handful of large corporations.

Q: The contrast between ordinary people and the experts is at the heart of your book. The people you interview (and polls show that most Americans as well) seem to have at least an intuitive understanding that competition is waning, yet at least until very recently, most antitrust experts were very opposed to this notion. How do you explain this disconnect?

You have to give the American people a little bit of credit here. They don’t sit there and study the changes in antitrust doctrine and how it has moved from a story of anticompetitive harms to a story about consumer welfare. That’s not how they live their lives.

They don’t just see themselves as consumers. They are workers. They are members of the community. They are, in some cases, small businesses and entrepreneurs. They are all citizens.

They see the infringement on their liberty as such, in all of those different contexts. They see themselves that we are more than our Amazon Prime accounts. We’re more well-rounded than that. The antitrust doctrine that we’ve seen over the last 40 years simply does not match the lived experience of people.

“There are always going to be rules that markets will have to follow and that people who are in markets will have to follow. They’re either going to be made by governments, or they’re going to be made by corporations acting in their own interest.”

Q: You criticize the consumer welfare standard in antitrust enforcement, but in the book, you also address it on its own terms, showing that, in many respects, consumers are not better off in today’s America.

One of the chapters that most powerfully shows that is the chapter on airlines. Anybody who has experienced air travel in the last 40 years knows that it has gradually grown worse and worse as the industry has become more and more consolidated.

There is no way in which an airline can make themselves distinct by being the airline that caters to people’s comfort. In fact, JetBlue tried that. The industry, mainly the Wall Street analysts, rode the CEO out of town because he was trying to actually make things marginally tolerable.

What we see is that what was once standard is now an optional extra that you have to pay for. That is a coordinated action. Four airlines control about 80 percent of the routes. One of them raises their bag fees and they all raise their bag fees. One of them charges for priority boarding or charges for more legroom, and they all charge for it, usually at the same price.

The fact that people are squeezed so tightly into these airplanes that they’re contracting deep vein thrombosis, that too is consumer welfare. Some antitrust experts say, “Well, that is in the law. That is part of the law,” but it’s not really in the law as practiced.

Q: The airline industry seems emblematic. In their 2018 book The Myth of Capitalism, Jonathan Tepper and Denise Hearn describe what happened to David Dao, the passenger who was forcibly dragged out of a United Airlines flight in 2017, as a metaphor for the state of American capitalism in the 21st century.

That was a situation where the guy had a ticket. He had a legal right to board that plane and take it to his destination, and the airline just unilaterally voided that by force, pulling him off the plane in order to make room for some crew members. The point was we are all at the whim of a large corporation that makes decisions in its own interest.

One thing I talk about quite a bit in the book is this theory of deregulation, which is kind of a misnomer. You either have regulation in the public context, which is done through a democratic process and through normal systems that are made by representatives of people allegedly in the public interest, or you have regulation done in corporate boardrooms.

There are always going to be rules that markets will have to follow and that people who are in markets will have to follow. They’re either going to be made by governments, or they’re going to be made by corporations acting in their own interest. The airline example is a perfect part of that. Amazon too.

Q: You devote an entire chapter to Amazon and its Marketplace, portraying it as a Kafkaesque nightmare where both consumers and small business owners often find themselves at the whim of an imperial overlord. One couple had to write Jeff Bezos to get their account restored after they moved in together.

Yeah, I’ll tell that story. It’s unbelievable.

There are 2.5 million third-party sellers on Amazon, 800,000 of which use it as their primary occupation. Naturally, a sort of ecosystem builds up around that, and there are conventions where third-party sellers go to learn more about how to build their businesses.

Human nature being what it is, people sometimes become couples. That’s what happened with this one couple who were both third-party sellers. They met at a convention, and they decided at one point to move in together. The day after they move in, Amazon cuts and suspends both of their accounts, and they’re trying frantically to find out why.

What they come to discover is that Amazon saw two accounts on the same IP address and decided unilaterally, maybe algorithmically, that these were phony accounts, that somebody had created multiple accounts and was one individual. They had to remedy this situation by literally asking permission from Amazon to live together.

The idea that you have to beg Amazon to keep your livelihood going is endemic to the way that they structured the Marketplace. People can get suspended on the slightest of whims. They don’t even understand why they’re suspended. They have to go through this very Byzantine process of appealing, where they have to confess to all of these things that they did wrong for the consumer, for the customer, and throw themselves upon the mercy of the Amazon court.

These appeals processes are all outsourced to call center workers in other countries that have a quota and have to get through each request for appeal within three minutes. Sometimes, they just say, “Well, I need more information” because they’re trying to catch up. They say they need more information, even if that information has already been attached and given to them.

The levels just go up and up. You keep going through these appeals. The last level is called a “Jeff letter.” It’s literally an email to Jeff Bezos.

Here are these third-party sellers who are desperate—when you’re suspended, you lose access to your inventory, you don’t get past sales that Amazon should have remitted to you, you can’t make any new sales—and they have to write an email to the richest person in the world to try to get their small business back together. That is control. That is power. It’s unaccountable.

“Here are these third-party sellers who are desperate…and they have to write an email to the richest person in the world to try to get their small business back together.”

Q: Another area that you focus on is how consolidation has escalated the dysfunctionality of the American health care system, especially in terms of medical supply shortages. These supply chain issues have since been highlighted by Covid-19, but they precede the pandemic. One striking story you tell is that of a cancer patient in California who couldn’t get an IV because there was a shortage of IV solution.

It was almost fortuitous that I told this story, and then a month later, here we are dealing with medical supply chains.

This guy in San Diego, California, brings his wife in for cancer treatment. It’s the day after Christmas, a busy day. They’re out of IV bags. The location here is important: He’s in San Diego, in La Jolla, on a cliff overlooking the Pacific Ocean. He’s in this room with this giant bank of windows. He’s looking out into the Pacific Ocean, which is salt and water, and being told that there’s a shortage of salt and water in a bag. It’s absolutely absurd.

Those who take economics courses, at least in the US, are told market systems can never have shortages because there’s always someone who’s willing to provide. The invisible hand will provide the supplier for any need within society.

But that’s not the case with medical supplies. The reason is that there’s a set of middlemen called group purchasing organizations that sit between the hospitals and the medical suppliers. There are four of them that service about 98 percent of all hospitals. They take enough of a cut that it’s difficult, when it comes to low-margin products like IV bags, for any company to survive unless they have a large share of the market and can make it up in volume.

Q: Another thing that really comes across from the book is the impunity with which monopolies and oligopolies are able to operate today in America. Impunity not just from antitrust enforcement, but all regulation.

Absolutely. That level of impunity is something I covered in my first book Chain of Title, which was about the foreclosure crisis and how the various amounts of fraud that were encountered in the middle of that were not really dealt with in any meaningful way.

It’s true across all levels of these very large and powerful corporations, for a variety of reasons. One is the fact that so many people who are in positions of power at the various antitrust agencies and also across the federal government come from industry and worked for industry.

Another issue is the power of money in politics. Another is just the lack of institutional knowledge, memory, or will. We’re 40 years into this experiment with a laissez-faire attitude towards concentration and it’s almost like there isn’t anybody left in a position of power that knows what it’s like to deal with a situation like this. They see it as beyond the realm of government intervention, in a way.

Q: Regulatory capture, in addition to monopolization, is a theme that runs through the book. Without regulatory capture, monopoly power wouldn’t be able to entrench and sustain itself.

You’re right. At every stage, monopolists attempt to secure and entrench their power by working the political system using the economic influence that they have. We see this time and again.

Q: You devote a chapter to the revolving door between the FTC and DOJ and the big law firms. There’s a sense that it’s not just a problem of regulatory capture, that intellectual capture is also a big part of this story.

Absolutely. You see not just the same people come up again and again but the same institutions. One law firm, Arnold & Porter, produced almost all of the major officials at the Federal Trade Commission and the antitrust division of the Justice Department. Two consulting firms produced almost all the chief economists.

This is a very cloistered group. They learn the same things, they share the same experiences. You cannot step outside that very narrow range that has been set for the last 40 years without taking scorn from your colleagues and associates. If you want to advance and gain more power, better jobs, and more access, you’re going to go along with the dominant paradigm. Intellectual capture is a great way of describing that.

Warren Buffett [Public domain, via Flickr]

Q: One figure that keeps popping up throughout the book is Warren Buffett, who appears almost in every chapter. Why did you decide to put so much focus on Buffett?

If you look at Buffett’s philosophy, he says that what you have to do to be strong in business is to build a moat around you. If you are able to build that economic moat and have pricing power, then the management of the corporation operates on autopilot.

He told the Financial Crisis Inquiry Commission that if you have a monopoly newspaper or a network television station, then “your idiot nephew could run it”. That’s a direct quote.

I became intrigued by Buffett as this avatar of monopoly, this cheerleader for monopoly capitalism, who has a lot of influence. Anytime Buffett moves his portfolio around and puts his money into a particular sector, you see that sector just absolutely take off.

For example, the trailer park industry: Buffett’s Berkshire Hathaway, through a company called Vanderbilt Mortgage, is the number one supplier of mortgages for trailer homes. There’s a lot of predatory behavior that those companies engage in, under the aegis of the Buffett umbrella.

Buffett is not just a bystander. He is driving a lot of the trends around our economy.

Q: Buffett is often depicted as a paragon of American capitalism. He’s not usually associated with monopoly power in the media.

There have only been two real exposés about his philosophy and strategy and how it’s harmful. They both came from business outlets outside the United States: The Economist was one, the Financial Times was another.

In the United States, he’s viewed as a folk hero. They call his annual meeting Woodstock for Capitalists. CNBC has a Warren Buffett tracker like he’s a Kardashian.

This is a longstanding issue with Buffett over 45, 50 years. His first non-insurance purchase was a newspaper in Buffalo called The Buffalo Evening News that then knocked out its competition and became a monopoly newspaper. Only outside the glow of the US business press do you actually see it.

Q: How do you explain this?

I run an organization called The American Prospect, and we do try to report on this stuff. You’re seeing more and more outlets on the right, like The American Conservative and American Compass, starting to talk about monopoly power in a greater way.

There’s still that hurdle within the business press. They see monopoly as just a function of success.

There’s so much pre-existing intellectual capture, as you put it, around these issues that it’s going to take a substantial amount of reprogramming to look at these things in a different light.

“The landscape for media right now in the US is very hazardous and very dangerous. I say this from the perspective of a journalist but also a media owner.”

Q: What has been the effect of monopolization on the American press?

It’s been catastrophic. Facebook and Google have locked down the digital advertising market. They have effectively stolen the work and toil of so many journalists and given very little back in exchange.

We see the fruits of this in hundreds, if not thousands, of communities across the country that lost their daily newspaper. We see all of these new digital outlets that have sprung up seemingly writing simply to get Facebook clicks and to cater to Facebook.

Facebook decides on a whim that today it wants to move into video, and these outlets fire all their writers and hire a bunch of video makers. Then Facebook gets caught lying about their video stats to advertisers. They say, “We don’t want to do video anymore. We want to do local news.” These digital outlets are completely caught short. Many of them went out of business.

Interestingly, when Facebook said, “Now we want to get local. We want to highlight and lift up local news,” there wasn’t enough local news to lift up because of the harms that Facebook and Google have already placed upon local media.

The landscape for media right now in the US is very hazardous and very dangerous. I say this from the perspective of a journalist but also a media owner. I’m the co-CEO of our very small, 12-member staff. We don’t really have a core advertising strategy because we know it’s useless to have an advertising strategy. It just can’t make you any kind of money that would be a return on the investment that you have to make to find advertisers.

We use Google tools at the Prospect. We don’t really have a choice, especially in the situation right now with the pandemic where we’re all working remotely. You become, as Josh Marshall puts it in the book, “a serf on Google’s farm,” subject to their whims and control.

Q: Covid-19 is going to have a lot of repercussions for the way power is distributed throughout the economy. Shaoul Sussman, for instance, argues that Amazon’s going to come out of this even stronger. How do you see the pandemic affecting the US economy?

In the immediate term, the pandemic is accelerating changes that we’ve seen in the economy over the last four decades. We see small businesses going under, which can’t help but aggregate market share to larger incumbents that are able to survive.

We see an economic rescue system that’s disproportionately given to larger companies, larger corporations. The dichotomy between the stock market and the state and the economy, I think, just shows you that very well. There is a resettlement of concentration.

We see changes in behavior patterns, whether it’s working from home or more delivery and retail, that will benefit larger incumbents, like Amazon and Google.

At a secondary level, I do think that the pandemic has created a recognition of the need for more local systems, whether that is local food, more local supply chains.

There’s an opportunity for local businesses to be better at convenience than Amazon: inevitably, the corner store is always going to be closer than an Amazon warehouse. Once you have that, you have the opportunity to really cut into Amazon’s dollars.

I see a lot of near-term peril but some long-term hope.