A Government of Corporate Monopolies

The pandemic has revealed and amplified a crisis of concentration.

By Matt Stoller and cross-posted from his blog, BIG.

Societies reveal their core values at moments of crisis, first by clarifying and then through a political reaction to what that crisis revealed. The clarification usually takes a few years, because we have to let the illusions drop before we can assess our real situation clearly and build new political options.

In 1929, the stock market crash and banking freeze revealed an America uncomfortable with having democratic institutions take care of its people. Over the next few years, hundreds of thousands went hungry as relief agencies ran out of supplies even as farmers over-produced food. (Note the parallels today, as food banks run short while meatpackers engage in mass culling of chickens). From 1930-1932, Herbert Hoover worked 18 hour days and exhorted big business to engage in hiring, but he was absolutely unwilling to reorient power away from Wall Street.

At first leaders, including Democratic leaders who took a Congressional majority in1931, sought to out-Hoover Hoover. John Nance Garner, the House Democratic Speaker, avoided conflict with big business, and sought as his response to the depression a sales tax increase. But eventually the public bought into a radical new philosophy, and elected Franklin Delano Roosevelt in 1932. In his inaugural address, FDR did what Hoover would not. He attacked the social order, saying “practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.” FDR, with the New Deal, took power from monopolists and financiers, and replaced them with public institutions, redistributing power, shrinking private finance, and structuring competitive markets where there had been monopolies.

After 9/11, there was a similar clarification in the face of a crisis, as the American and Western “End of History” conception of a financier-led order as invulnerable and forever dominant was challenged. The political reaction, however, went the opposite way to the New Deal, narrowing democracy instead of expanding it. We lashed out, angrily and violently with poorly conceived wars in the Middle East, justified in a haze of self-righteousness. Domestically the reaction was just as bad, with George W. Bush pushing an aggressive capital gains tax cut in 2003. The most telling illustration of how we responded was uncovered by the Wall Street Journal, perhaps the most cynical story I think I’ve ever seen about corporate leadership.

On Sept. 21, 2001, rescuers dug through the smoldering remains of the World Trade Center. Across town, families buried two firefighters found a week earlier. At Fort Drum, on the edge of New York’s Adirondacks, soldiers readied for deployment halfway across the world.

Boards of directors of scores of American companies were also busy that day. They handed out millions of bargain-priced stock options to their top executives….

A Wall Street Journal analysis shows how some companies rushed, amid the post-9/11 stock-market decline, to give executives especially valuable options. A review of Standard & Poor’s ExecuComp data for 1,800 leading companies indicates that from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants. The number who received grants was 2.6 times as many as in the same stretch of September in 2000, and more than twice as many as in the like period in any other year between 1999 and 2003.

These companies included Home Depot, Black & Decker, UnitedHealth, and Merrill Lynch. The reaction by the top brands in corporate America, in other words, was to loot. Just a few years later came the Enron scandal, a more obvious signpost of flagrant corporate misbehavior. A corporate crime spree and the war in Iraq were the reaction to 9/11, a doubling down on the insecure foundations of 1990s globalism.

In the next crisis, of 2008-2010, first there was a clarification that our financial order was fragile. The political reaction was yet more mass looting through a foreclosure wave and open bailout, aided and abetted by a Democratic President who used the language of left-wing social justice and tolerance. The reaction against Bush and Obama led to the election of a bumbling crude nationalist, Donald Trump, who sounds like he’s always trying to sell you a time share or vitamin supplements.

Which brings us to the Coronavirus.

Right now, we’re in the clarifying stage. After decades of assuming that stuff just shows up on shelves, we are now seeing how production really works, and why we are having such a tough time producing and distributing the things we need, or having such trouble with basic institutional competence, things like testing and tracing or distributing protective equipment

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