While the media has been obsessed with Elizabeth Warren acting as the new heavy in the Clinton campaign against Donald Trump, it has curiously neglected a front she and other progressives are opening against powerful companies that are strong backers of the Clinton presidential bid. She has called out some of the most powerful companies in America as having too much economic power and has called for them to reined in.
At a minimum, this suggests that Warren has not fallen into Clinton’s orbit, nor is operating under a delusion as far as the likelihood of her becoming Vice President is concerned, despite some unseemly behavior, like at one point stating her willingness to take the job. Warren and Trump have a strong mutual antipathy. Warren will be able to play a more influential role in a Clinton administration than in a Trump administration whether she is offered a post or not. And as we’ve pointed out, reading some of the Clinton e-mails that Wikipedia has posted online, Clinton surrounds herself with sycophants. It may be that Warren has decided she needs to play up to Clinton for a bit, particularly after having held out from endorsing her for what the narcissistic Clinton team no doubt deemed to be an unacceptably long amount of time. So while we can’t be sure, Warren’s recent fawning behavior may simply be playing up to Clinton’s ego so as to secure some bargaining chips for later use.
The text of the speech is at the end of the post. You can see it is mass audience friendly but hit hard on the central issue of concentration of power in multiple fields, including drug stores, airlines, technology, and publishing, and the damage that does.
The reason this matters is that firms like Google and Amazon have become so powerful that they are distorting markets to the degree that even good neoliberals are becoming critics. From the Economist in March:
America’s airlines used to be famous for two things: terrible service and worse finances. Today flyers still endure hidden fees, late flights, bruised knees, clapped-out fittings and sub-par food. The profit bit of the picture, though, has changed a lot. Last year America’s airlines made $24 billion—more than Alphabet, the parent company of Google. Even as the price of fuel, one of airlines’ main expenses, collapsed alongside the oil price, little of that benefit was passed on to consumers through lower prices, with revenues remaining fairly flat. After a bout of consolidation in the past decade the industry is dominated by four firms with tight financial discipline and many shareholders in common. And the return on capital is similar to that seen in Silicon Valley.
What is true of the airline industry is increasingly true of America’s economy as a whole. Profits have risen in most rich countries over the past ten years but the increase has been biggest for American firms. Coupled with an increasing concentration of ownership, this means the fruits of economic growth are being hoarded. This is probably part of the reason that two-thirds of Americans, including a majority of Republicans, have come to believe that the economy “unfairly favours powerful interests”, according to polling by Pew, a research outfit. It means that when Hillary Clinton and Bernie Sanders, the Democratic contenders for president, say that the economy is “rigged”, they have a point…
Profits are an essential part of capitalism….But high profits across a whole economy can be a sign of sickness. They can signal the existence of firms more adept at siphoning wealth off than creating it afresh, such as those that exploit monopolies. If companies capture more profits than they can spend, it can lead to a shortfall of demand. This has been a pressing problem in America. It is not that firms are underinvesting by historical standards. Relative to assets, sales and GDP, the level of investment is pretty normal. But domestic cash flows are so high that they still have pots of cash left over after investment: about $800 billion a year.
High profits can deepen inequality in various ways. The pool of income to be split among employees could be squeezed. Consumers might pay too much for goods. In a market the size of America’s prices should be lower than in other industrialised economies. By and large, they are not. Though American companies now make a fifth of their profits abroad, their naughty secret is that their return-on-equity is 40% higher at home.
This isn’t just a matter of paying way too much for your cable bill or cell phone. Monopolies and oligopolies limit choice. For instance, despite long-standing rules against predatory pricing, Amazon has managed to crush competitors in the book business by selling below cost. They’ve then used their dominant position to squeeze publisher margins. The result is that they’ve killed what used to be the bread and butter of the book business, the so-called “mid-list” offering where the publisher would do OK if a book sold 5000 copies and the trick was selecting authors and their ideas so that the average book did better than that and some wound up being best sellers. Now the game revolves solely around trying to find big hits. They result is that writers of books in the former “mid-list” category have seen advances collapse. I can’t afford to write a book because I won’t get an advance big enough to make it worth the trouble.
And please don’t tout self-publishing as a better or even good alternative. It means the author fronts all the costs and risks (layout, proofreading, legal review, indexing, and yes, you do need a professional indexer). You will not sell as many copies. A publisher does add value in getting you into bookstores, getting academic sales, getting book reviews, and if you sell to a mass market publisher, advertising. From a consumer perspective, self-publishing results in what verges on adverse selection: people with money and egos get their books out, irrespective of whether they are any good, while publishers do exercise some quality control in their proposal review and editing process.
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.”
The article contends that Warren’s speech “could change the course of the campaign”. That is wishful thinking at best. If Sanders with over 40% of the primary votes can’t get any concessions from Clinton as far as the Democratic party platform is concerned, mere speechifying Warren certainly won’t move Clinton.
But Warren is continuing to be a thorn in the side of powerful interests. And even though bona fide progressives are disappointed on her support of our misadventures in the Middle East, and her general fealty to feckless Team Dem positions outside her particularly interests, the concentration of economic power and the resulting high corporate profit share of GDP is a big part of why capitalists are partying while workers struggle. Warren is taking on a central topic that is starting to mainstream traction. Even if Warren falls well short of being the Great Progressive Hope, it’s a mistake to disregard how she uses her bully pulpit to undermine a key justification for the rise of inequality in our society: that the operation of markets is always and ever virtuous and therefore outsized pay and profits are justly earned. The more monopolist wannabes are seen as parasites, the better off we will be.