Editor's Choice

The Curse of Bigness: Antitrust in the New Gilded Age

November 16, 2018


Tim Wu dusts off the tradition of antitrust laws and enforcement in American history, and examines how they can help us end the inequities of our new Gilded Age.

The Curse of Bigness: Antitrust in the New Gilded Age by Tim Wu, Columbia Global Reports, 154 pages, Paperback, November 2018, ISBN 9780999745465

The latest release from Columbia Global Reports comes from Tim Wu, author of The Master Switch and The Attention Merchants, and it continues the small press’s great run of offering books on the greatest issues of the day in an accessible, even exciting, form.

Wu’s topic is how the concentration of personal wealth, and the market concentration of fewer, larger companies has created a fraught political and economic state in which private interests hold as much, if not more, political power as our public institutions and publicly elected officials. What Wu offers is the knowledge that we have been here before as a society, and how we made the changes that created competition and a more equitable economy. One of the biggest tools toward doing so was found in our antitrust laws.

The Curse of Bigness offers historical context by looking at the conditions of the (original) Gilded Age at the turn of the twentieth century, and showing how it mirrors our own political and economic climate. Then, it was Standard Oil, U.S. Steel, and AT&T who monopolized industry through a series of mergers. Today it is Google, Facebook, Amazon, and Apple. But it has always been as much an economic outlook and philosophy as a market practice:

In the same way that Silicon Valley’s Peter Thiel today argues that monopoly “drives progress” and that “competition is for losers,” adherents to the Trust Movement thought Adam Smith’s fierce competition had no place in a modern, industrialized economy.

Then, as today, “Monopolists like to portray themselves as part of a progressive movement, striving toward a better age.” But their idea of progress was often dystopian, and the “charitable” organizations of the day, institutions like the Carnegie Institution and Rockefeller Foundation, funded the American eugenics movement, and John D. Rockefeller Jr. “would personally fund an initiative to sterilize some 15 million Americans” he saw as unfit for society.

Wu resurrects Louis Brandeis, from whom he borrows the phrase “the curse of bigness,” to offer a vision of economic decentralization that provided competition in the economy and powered American progress for almost a century. Brandeis was a business lawyer, so he was hardly anti-business. But at a time when monopolists claimed theirs was the work of progress (which echoes today’s tech giants), he saw while defending his small-business owning clients in a legal battle with J.P. Morgan and the New Haven Railroad that “New Haven was building its monopoly by lying to investors, bribing politicians and professors, and buying off any competition.” Buying off competition is today a basic business model of big tech, and Silicon Valley startups actively court their own cannibalization in the hope of a big payday, but it has created a similar concentration of power, and a similar political and economic problem.

Brandeis argued that rather than increase efficiency, “a corporation may well be too large to be the most efficient instrument of production and distribution,” and beyond that, even if efficient, may become “too large to be tolerated among the people who desire to be free.”

The thinking of Brandeis, writes Wu, “is distinctive for linking his vision of the economy to the very conditions of democracy and even the goals of human existence.” Brandeis doesn’t fit neatly into any contemporary ideology, but is in general disdainful of large institutions of any sort—public or private:

If he had a unifying principle, politically and economically, it is … that concentrated power in any form is dangerous, that institutions should be built to human scale, and people should seek to pursue human ends. Every institution, public and private, runs the risks of taking on a life of its own, putting its own interests above those of the humans it was supposedly created to serve.

It was in the person of Theodore Roosevelt that the antitrust legislation of the Sherman Act, passed in 1890 and largely ignored until he came to power, found its teeth. It began a tradition of trust-busting in American politics and jurisprudence that lasted for generations—until our own.

Writing of the “outrageous divide between the rich and the poor” today, Tim Wu writes:

We have managed to recreate both the economics and politics of a century ago—the first Gilded Age—and remain in grave danger of repeating more of the signature errors of the twentieth century.

It is increasingly true across industrialized world, but…

This trend is most stark in the United States, where the top 1 percent today earn 23.8 percent of the national income and control an astonishing 38.6 percent of national wealth. The 0.1 percent alone earn 12 percent of the nation’s income.

But it is not simply a problem of personal wealth. The more concentrated an industry is, the fewer companies there are, the more likely their interests are to be aligned to affect policy in their favor even when it is against the will and interests of the majority of the population. In the enforcement of antitrust laws, then, we see one of our only checks on private power.

As Justice William Douglas would later put it, “power that controls the economy should be in the hands of elected representatives of the people, not in the hands of an industrial oligarchy.”

Wu goes deep in just 154 pages, explaining the role of journalists like Ida Tarbell in exposing monopolistic practices and their deleterious effect, and how it influences not only the thinking of the population at large, but the actions of a president, and set precedent for action.

It is also an examination of the very notion of economies of scale, and a history lesson in the real world effects of breaking up a company as large as Standard Oil—which created what remain some of the world’s largest corporations in Exxon, Mobil, and Chevron, and doubled the value of what had been one company in a single year, and increased it five-fold over the course of the several years that followed. The breakup of AT&T had a similar effect, as well as acting as a spark for breakthroughs in telecommunications and computing.

Wu looks to Nazi Germany and Imperial Japan where monopolies were not only allowed, but encouraged, for counterexamples. He examines the intellectual opposition to antitrust here in the United States that came out of the University of Chicago, founded by John D. Rockefeller, and how successful it has been over the past four decades. He explains how most checks on industry concentration were largely dismantled under George W. Bush, leading “a full 75 percent of industries [toward] increased concentration for the years 1997 to 2012.” AT&T, in fact, has basically recombined through mergers over that time. He concludes with an examination of the rise of today’s tech titans, and the buying spree they’ve been on to acquire competitors and startups that is now embedded in the economics of Silicon Valley.

But the antitrust laws, like the Sherman Act of 1890, and the Anti-Merger Act of 1950, are still there on the books, and breakups of the past have proven to “transform a stagnant industry into a dynamic one.” Applying those lessons to today, he considers what it would look like if a breakup of Facebook spun off Instagram and WhatsApp. But, rather than being case specific, The Curse of Bigness is more fundamentally, following the language of antitrust, a broad declaration of economic and democratic values—about striving for a political climate and process that “ultimately attunes economic structure to a democratic society.”

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