The Myth of Capitalism: Monopolies and the Death of Competition
by Jonathan Tepper and Denise Hearn.
Wiley, 2018.
Hardcover, 320 pages, $28.

Reviewed by Ryan Shinkel

South Park is an underrated resource of American political science. One particular episode shows our fluctuating attitudes towards monopolies. When “Wall Mart” opens, oniomanic citizens, initially enjoying cheaper products, later destroy it and reopen hometown “Jim’s Drugs.” As local support creates another megastore, townsfolk incinerate it, sing Kumbaya, vow to patron “Price Value,” and repeat the market cycle of boom and burn. Consumers desire neighborhood businesses and efficient products, thus providers beat smaller competitors to ignite political ire. As historical cycles of public sentiment show, people love the benefits of monopoly yet spurn its costs.

This is how American antitrust policy began. After industrial capitalists displaced old family businesses, Congress passed the Sherman and Clayton Antitrust Acts, enforced in breakups under TR, Taft, Wilson, and FDR. Senator John Sherman called his legislation a “bill of rights” and “charter of liberty,” purposed for consumer choice, entrepreneurship, and dispersed production. This separation of powers was political and economic. For decades, U.S. antitrust prevented corporate agglomeration. The road to monopoly got blocked, supposedly, since the “opprobrium” of monopoly, as Joseph Schumpeter complains, arouses public “hostility against any interest so labeled.”

Antimonopoly, that republican passion against robber barons, is when townspeople rage against the Wall Mart. Ideally, antitrust law keeps markets competitive. Markets, for financial stability, offer alternative wagers upon future economies. However, this variety tends towards over-concentration: competition breeds monopoly. Innovators bar entry as businesses ruin competitors. Since David’s profit motive is not just to beat, but become, Goliath, nervous democracies prefer battles persist so none become king. As concentrated power means a few rule the many, antitrust is a bulwark against giant-slayers getting crowned.

So, midcentury Americans reasoned, government should protect competitive marketplaces for the general welfare. As Harlan Blake and William Jones voiced, antitrust enables a “uniquely American” economy of limited government forestalling industrial concentrations. But dissent arose. To improve consumer welfare, legal scholars Ward Bowman and Robert Bork proposed that antitrust law should only consider maintaining strict adherence to market price and output. Antitrust law soon got “Borked.”

“Antitrust is a subcategory of ideology,” yet “connects with” our “central political and social concerns,” Bork wrote. Public concerns transcended mere economic theory, yet antitrust rationale was “loose rhetoric” and “flabby thinking.” With sharp rhetoric, Bork critiqued unelected judges, praised economic freedom, and offered coherent legal process through “consumer welfare prescription.” This standard reduced multiple antitrust goals into a single focus on economic efficiency. Afraid socialists would overtake America by state regulation, Bork defanged antitrust law. The Supreme Court adopted his standard, as did many scholars, lawyers, judges, and economists. Government supervision was deemed backwards. As Alan Greenspan then remarked, “The world of antitrust is reminiscent of Alice’s Wonderland.” Yet was it happily ever after?

In this fairytale, bipartisan scholars wagered that consolidations could bear better fruit for buyers. Modern competition-law has intellectual DNA in Chicago and Harvard. The Chicago School—Richard Posner, Ward Bowman, and Frank Easterbrook—accepted oligopoly theory, which proposes that in markets demand is competitive, but supply is neither full monopoly nor full competition. The Harvard School—Phil Areida, Herbert Hovenkamp, and Donald Turner—conceded consumer welfare. Both articulated a legal consensus still heard in oral arguments. “We’re not here to protect competitors,” Justice Gorsuch says, “or necessarily even merchants. The antitrust laws are aimed at protecting consumers,” specifically “evidence of restricted output” and “deadweight loss.” Bork had overturned Sherman.

But every consensus has critics. From Maurice Stucke to Lena Khan, a “hipster antitrust movement,” favoring rules and presumptions, targets technological giants with moral argument. Others target monopolies more generally. Philosopher Elizabeth Anderson critiques dictatorial labor markets in appeals to democratic equality. Senator Elizabeth Warren prescribes early progressive lessons to improve market competition. Most liberal critics praise competition. Tim Wu, author of The Curse of Bigness, says, “Restraint of monopoly, faith in competition, room for entrepreneurs, is the true source for American wealth and wellbeing, and every suggestion to the contrary is a pack of lies.”

The capitalist ethos is extensive. Even Matt Stoller, author of Goliath: The 100-Year War Between Monopoly Power and Democracy, is research director at The American Economic Liberties Project. And this hipster dissent has kindred spirits. Before, conservatives broached antitrust. One National Affairs essay favored dismantling Comcast to prevent broadband consolidation. Yet prior consensus maintained: “U.S. antitrust doctrine is perhaps the greatest conservative philosophical victory.” But as Trumpism disrupts Reaganism, conservative intellectuals “are working to bring a plausible intellectual order to this new reality,” Thomas Frank notes, including in antitrust policy.

Among American political fevers is, left and right, a general suspicion of big businesses. Good reasons support that unease. The conservative nationalist response is still discerning policy specifics to handle oligopolies and technological giants. Consider The Myth of Capitalism, by financial analysts Jonathan Tepper and Denise Hearn, who give “the conservative case for antitrust” with exhaustive economic analysis and cultural critique, linking wealth and income inequality to spiking monopolies, duopolies, and oligopolies. Economic fiefdoms stagnate wages and hurt consumer choice. Inequality is a symptom of monopoly, which plagues our body politic.

Competition is dead, allegedly. Coming not to bury but praise it, the authors cite Chesterton: “Too much capitalism does not mean too many capitalists, but too few capitalists.” Apparent free choice in consumer goods veils American worker pay stagnating and corporate profits spiking. Their partly persuasive account answers why this is so, yet its rough rhetoric and hasty prognosis showcase how nationalist conservatives respond to true social crises, yet have an insufficiently coherent governing agenda.

Tepper and Hearn target monopoly evangelists. Warren Buffett prefers buying companies with little competition, which Peter Thiel preaches “is for losers.” Books Monopoly Rules and Big Is Beautiful praise monopolies as enlightened capitalism. Each supposed capitalist functionally fulfills neo-Marxist predictions. “Monopoly appears to be deeply rooted in the nature of the capitalist system: free competition, as an assumption, may be useful in the first stage of certain investigations,” Michal Kalecki writes, “but as a description of the normal stage of capitalist economy it is merely a myth.” Tepper and Hearn add: “Today’s oligopolists are our oligarchs,” inhabiting most industries.

Mergers and acquisitions increased while antitrust cases declined. Now, oligopolies are daily toll-roads extracting money from citizens, with tacit collusion in tit-for-tat industries. Because the federal government was AWOL, American companies split territory as mob families divide turf. This lesson is old: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices,” Adam Smith writes.

But technological giants are hungry. Over ten years, Google, Amazon, Apple, Facebook, and Microsoft bought over 436 companies, and in 2017 spent over $30 billion in acquisitions. Tepper and Hearn liken Silicon Valley to a triple canopy, the deepest part of a jungle where tall trees block sunlight so nothing can grow on the ground. Little sunlight reaches startups. Thus, outside our federal tax laws while foreign countries compete as better havens, Silicon Valley platforms dictate the rules governing the world we inhabit. With some precedent, the authors claim that better antitrust action would aid innovation: “small is often beautiful.”

They also target social divisions, specifically economic serfdom in California. Tech “lords of the manor live behind walls,” while most Californians fare worse than their priors in this “class-bound medieval society” of “the most unequal state.” Likewise, all Americans approach “the Soviet stage” whereby monopolistic industries rapidly accelerate in high profits of offshore production and artificial scarcity held by private hands. All evinces a tarnished social fabric.

Here, Tepper and Hearn use economic arguments for conservative populism. They even broach the new class culture war. Before, businessmen invested in employee towns, contributing to arts, libraries, schools, and hospitals, because they lived there, but now they live elsewhere. Here is cited Lasch—“The new elites are in revolt against ‘Middle America’”—and Disraeli—“two nations” cohabitate with “no intercourse and no sympathy.” But politics can, allegedly, prevent this road to serfdom if townspeople rebuff Wall Mart.

This painstakingly detailed study of monopolies has some difficulties. The authors use homogenous brush strokes to describe heterogenous kinds of monopolies, and recommend actions that already exist on paper. Also, as concentrated business power distorts labor, product, and service markets, so do government laws and regulations, which they target insufficiently. Their multipronged solution includes deregulation and simplifying rules, yet important things that distort financial markets go underdiscussed in an unwieldy history of Bork the brilliant sophist and Gordon Gecko the archetypical Reaganite. When they quote the entire Wall Street monologue—“Greed … is good. Greed works”—their clichés aim low.

What about beneficial mergers and acquisitions? Is there such a thing? Consider end games and turnarounds. Many new business formations, especially family ones, intend passing a business onto the next generation or selling to a competitor. Others purchase an underperforming business to fix and sell. Both types can be beneficial consolidations. Even larger companies create new businesses in divestitures and spin-offs. Capitalism can tend towards concentrations, some bad and some good.

Also, the authors use the U.S. to illustrate a global problem of oligopolies. They mention digital totalitarianism in China, for example, but omit any implications. Chinese conglomerates steal intellectual property and invest in Western industries to further Beijing’s ambitions. Should not lawmakers ensure that technological giants serve the national interest rather than break them up? Might Silicon Valley be needed in a new cold war? This question should be considered. Yet here and elsewhere, this book—intended for lawmakers—leaves concrete answers mostly to the imagination.

Monopolies inhabit a larger context of community breakdown. What Tyler Cowen labels “the great stagnation” extends beyond mistakes by mediocre elites and stagnant growth and innovation and into declining family formation and class divides in social capital and education status, not to mention fractured mediating institutions. The latter is the generative fact of postwar America. By citing Lasch and Disraeli, Tepper and Hearn gesture in this direction. But antitrust policy, to aid a successful conservative governing agenda, needs a larger philosophy wedded to this context. Is antitrust the alleged silver bullet? It might seem so, if their prognosis was longer than the final eight pages of their last chapter. Competition, presumed an intrinsic good, seems a buzzword needing to be restored, somehow.

The biggest elephants in the room are the technology giants. They cite Frank Pascquale to argue that the higher powers of Silicon Valley are “market makers” whose platforms exert “regulatory control” to “displace more government roles over time,” while functioning as “private governments.” With offshore tax havens and vast data collection, technological behemoths have “far more power as regulators and market arbiters than government. Yet no governments are exercising their power to rein them in. No one is guarding the guardians,” Tepper and Hearn write. Is this actually true? Technology giants lobby the government, but governments can mandate sweeping changes in return. They cannot merely hide in whatever country gives them the best offer. Rather, they must court the favor of the governments of their largest markets. And how should we tame these giants? It goes unsaid. This subject is a missed opportunity.

When mediating institutions decline, corporations, like political tribalism, fill the void as our “last association standing.” But this corporate power shows little sense of civic duty or humility. Their power is woke but exercised sans any old baggage of communal responsibility. “We used to be kind of rebels,” Jarod Lanier observes, “And we had to create our own world,” yet having “put ourselves in the middle of everything, we’ve absolutely won. But we don’t act like it. We have no sense of balance or modesty or graciousness having won.” Indeed, there is no grace to this power. They have the victory, but have not earned the laurel, yet. Constituting a meritocracy—or an aristocracy that dares not speak its name—they deem their privilege earned by intelligence and grit as rebels who think, wrongly, that they have rightly won everything. In reality, they have spawned a “surveillance capitalism” whose problems register too little with Silicon Valley leaders.

Alexis de Tocqueville foresaw such obtuse thinking from “industrial aristocrats.” As Benjamin Storey notes, “The mobile, self-righteous aristocracy of industry can be less directly domineering but more distant and inhuman than its old-world counterpart.” Old-school landed gentry had particular virtues instilled through embracing their entitled, unearned roles. Our nouveau aristocrats have not attained these patrician qualities (yet?). Older monopolists at least took notice of their civic, philanthropic, and religious obligations. Our new monopolists should appreciate the duties afforded by the privilege in their precarious standing as the latest Wall Mart.

Yet maybe this “Aristopopulism” also needs reconsideration. For example, Shadi Hamid argues that “The Coronavirus Killed the Revolution.” Leftwing populists “wanted to remake American politics, but the pandemic radically scaled back what’s possible.” With the riots, he notes later, “the psychic energies” smoldering “for months have clearly found expression in both new anger” and “resentments.” These protests are not against financial capital or technological data-sharing. The issue is not about class. Thus, what is the plan forward for the political right, whether a form of conservative nationalism or otherwise, that might favor such initiatives as antitrust? The future is hard to predict, especially now. As Yuval Levin suggests, Trumpism in this era may be not so much the prelude to our political future as it is a concluding chapter to the post-1989 America.

Many desire to return to the pre-corona normal, without death and disease, unemployment and isolation. In this longing for stability, people might not actually mind big business as they did before. If anything, the massive desire to return to work would clash with most attempts for a political battle against the economic giants capable of surviving the shutdown. Public sentiment could tilt towards the premise that big business, as Cowen puts it, “deserves more love and less hate.” It would be ironic if new slogans and recycled ideas only solidify economic divides in our country.

Probably, the new politics will continue much of the old problems. Those who can work from home and those who cannot are still educationally divided in our credentialled economy. The underlying causes of populism across the Atlantic still remain, causes that Michael Lind describes as “long-smoldering rage by non-college-educated workers against damage done to their economic bargaining power, political influence, and cultural dignity during the half-century revolution from above of technocratic neoliberalism.” Even Lind says one “establishment response to populism,” in policies like antitrust initiatives, means “co-opting alienated populist voters and reconciling them to a more or less unchanged neoliberal economic order.” Even change might still need Wall Mart.  

Ryan Shinkel is a historical researcher for American Bible Society and a graduate student at St. John’s College in Annapolis, Maryland.