Sunday, July 3, 2016

Elizabeth Warren's speech on consolidation, concentration, and competition in the American economy

The speech is reprinted in the Washington Monthly. (h/t Jana Eaton)

Following are, first, snippets from the editor's introduction, and, second, snippets from Warren's speech. (The Washington Monthly has the link to the video of the speech.)

Yesterday [June 29], straight off her high-profile campaign appearance Monday with Hillary Clinton, Sen. Elizabeth Warren gave a keynote address about industry consolidation in the American economy at a conference at the Capitol put on by New America’s Open Markets program. Though the speech has so far gotten only a modicum of attention—the press being more interested in litigating Donald Trump’s Pocahontas taunts—it has the potential to change the course of the presidential contest.

Warren is, of course, famous for her attacks on too-big-to-fail banks. But in her address yesterday, entitled “Reigniting Competition in the American Economy,” she extended her critique to the entire economy, noting that, as a result of three decades of weakened federal antitrust regulation, virtually every industrial sector today—from airlines to telecom to agriculture to retail to social media—is under the control of a handful of oligopolistic corporations. This widespread consolidation is “hiding in plain sight all across the American economy,” she said, and “threatens our markets, threatens our economy, and threatens our democracy.”

What amazed me yesterday was how Warren synthesized the main points of virtually everything we’ve published into a single speech that, while long and wonky, was Bill Clintonesque in its vernacular exposition. You can imagine average Americans all over the country listening, nodding, understanding.

Though many in the press didn’t notice the speech, you can best believe Hillary Clinton’s campaign operatives were paying attention (Trump’s too, I’ll bet). That’s why I think the speech has the possibility of changing the course of the campaign. The candidate who can successfully incorporate the consolidation message into their campaign rhetoric will an huge, perhaps decisive advantage. Hillary has already signaled, in an op-ed she published last fall, that she gets the larger argument. Yesterday, Elizabeth Warren showed her how to run on it.

Selections from "Reigniting Competition in the American Economy"

Warren begins: "... Strong, healthy markets are the key to a strong, healthy America."

That’s the reason I am here today. Because anyone who loves markets knows that for markets to work, there has to be competition. But today, in America, competition is dying. Consolidation and concentration are on the rise in sector after sector. Concentration threatens our markets, threatens our economy, and threatens our democracy.

Evidence of the problem is everywhere. Just look at banking. For years, banks have been in a feeding frenzy, swallowing up smaller competitors to become more powerful and, eventually, too big to fail. The combination of their size, their risky practices, and the hands-off policies of their regulators created a perfect storm, resulting in the worst financial crisis in 80 years. We know that excessive size and interconnectedness promotes risky behavior that can take down our economy – and yet, today, eight years after that financial crisis, three out of the four biggest banks in America are even bigger than they were before the crisis and two months ago five were designated by both the Fed and the FDIC as “too big to fail.”

Warren goes on to list other examples.

In the last decade, the number of major U.S. airlines has dropped from nine to four. The four that are left standing—American, Delta, United, and Southwest—control over 80% of all domestic airline seats in the country. And man, are they are hitting the jackpot now. Last year those four big airlines raked in a record $22 billion in profits.. Eighteen billion alone came from fees for baggage and legroom and pay toilets. Ok, the last one was a joke, but what have passengers received in return for their higher costs? Fewer flights and worse service. Airline complaints rose 30 percent just from 2014 to 2015.

And there are more still: health insurance, drug stores, beef and chicken markets.

What, we worry?

Warren lists five reasons why we - conservatives included - should be worried about concentration closing out competition.

The first problem is that less competition means less consumer choice. ... while big telecom giants have been consuming each other, consumers have been left out in the cold—facing little or no choice in service providers and paying through the nose for cable and internet service. ... And the data are clear: Americans pay much more for cable and internet than their counterparts in other advanced countries and, in return, we get worse service.

The second reason the decline in competition should cause concern is that big guys can lock out smaller guys and newer guys... Google, Apple, and Amazon provide platforms that lots of other companies depend on for survival. But Google, Apple, and Amazon also, in many cases, compete with those same small companies, so that the platform can become a tool to snuff out competition.

The third problem created by less competition is that when competition declines, small businesses can be wiped out – and our whole economy can suffer. ... Wal-Mart’s gigantic size gives it a competitive advantage over small businesses. And often, when Wal-Mart moves into town, small businesses collapse because they can’t compete with the price leverage Wal-Mart has built with its suppliers.

The fourth problem is that concentrated markets create concentrated political power. ... This is a big one – and it should terrify every conservative who hates government intervention. ... Government intervention in concentrated markets inevitably becomes more and more complex and technocratic, as it attempts to impose complicated regulations in an effort to recreate the benefits of competitive markets.

Finally, concentration has contributed to the decline of what was once a strong, robust middle class in this country. ... In 2014, the top 500 largest firms pocketed 45 percent of the global profits of ALL American businesses. And the vast majority of those profits went to the wealthiest of the wealthy. As of 2013, the wealthiest 1 percent of Americans held nearly half of all the stock and mutual fund assets held by all Americans.

That last point forms a nexus with economic/income/wealth inequality - a problem that President Obama called "the defining challenge of our time". What used to be the middle class, it appears, are those disaffected economically displaced workers who are so attracted to Donald Trump. Evidence of opulence is everywhere, especially as flaunted by highly paid CEOs of the largest banks and other companies. At one time such wealth was a goal of the American dream. But now few people are able to travel along an avenue of opportunity to reach that goal. They are over-worked and under-paid and are stymied in their attempts to break that pattern.

With respect to this nexus of concentration of wealth and power and economic inequality, the key Democratic players are of the same mind. For example, see Sanders' op-ed. Now they need to come together to campaign on the problems and their solutions. Warren makes a start.

Now the country needs more competition – and more competitors – to accelerate economic growth, more competition to promote innovation, and more competition to reduce the ability of giant corporations to use their money and power to bend government policy and regulation to benefit themselves.

So how do we get more competition? And how do we do it without new legislation that would require cooperation from a Congress awash in campaign contributions and influence peddling?

We can start with a President and an Executive Branch willing to once again enforce our laws in the way Congress originally intended them to be enforced. We have the tools—right now—to reinvigorate antitrust law. Here are three ways to do it:

First: Hold the line on anticompetitive mergers. ... Number Two: Closely scrutinize vertical mergers. ... Number Three: Require ALL agencies to promote market competition and appoint agency heads who will do so.

Warren closes with a plea for a renewed movement that fights back "against dominant market power and overwhelming political power."

Strong Executive leadership could revive antitrust enforcement in this country and begin, once again, to fight back against dominant market power and overwhelming political power.

But we need something else too – and that’s a revival of the movement that created the antitrust laws in the first place.

For much of our history, Americans organized and protested against the forces of consolidation. As a people, we understood that concentrated power anywhere was a threat to liberty everywhere. It was one of the basic founding principles of our nation. And it threatens us now.

Competition in America is essential to liberty in America, but the markets that have given us so much will become corrupt and die if we do not keep the spirit of competition strong. America is a country where everyone should have a fighting chance to succeed—and that happens only when we demand it.

Now we need to get Warren's message firmly implanted in the Democratic campaign. America does not need an outsider with zero experience at the helm. We need a "strong executive" leader willing to use the levers of power to take on the fight against concentrated wealth and in favor of a strong middle class buoyed by competitive markets.

Think about this for campaign messaging. How about making the Democratic party the party of free market capitalism? Wrap us in the flag of free markets and competition. Anyone think the Repugs could do better? Would they like to defend breaking apart "too big to fail"? Trump lashing out at his fellow billionaires?

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