The Bush administration loved bigness. Big Gas (Exxon), Enron, Halliburton, Big Banks, AIG, JP Morgan Chase, and a host of other Bigs. Enron should have been the canary in the coal mine, but it was treated as a solitary aberration.
And then came the financial meltdown last fall, chronicled by Frontline in their February program, "Inside the Meltdown," examined how, in just six months, the U.S. financial system unraveled. For FRONTLINE’s season finale, they’ve produced "Breaking the Bank," an inside story of the government’s massive, ongoing intervention to save the financial system.
But bigness was allowed to get out of hand elsewhere, too. STEPHEN LABATON wrote in the New York Times on July 25, 2009 that
President Obama’s top antitrust official and some senior Democratic lawmakers are preparing to rein in a host of major industries, including airline and railroad giants, moving so aggressively that they are finding some resistance from officials within the administration.
[Antitrust Chief Hits Resistance in Crackdown]
According to Labaton,
It is a major policy reversal from the Bush administration, which did not prosecute cases in which some dominant companies engaged in potentially anticompetitive behavior, often because those officials maintained such behavior was not harmful to consumers.
But it is no surprise that these antitrust efforts are encountering pushback from some "officials":
Other officials embrace the Bush administration’s view that larger companies and industry alliances can provide consumer benefits by making their businesses more efficient.
Is there any actual evidence for this, or is it another one of those allegations that is supposed to be self-evidently true?
Furthermore, some have argued that the middle of a recession is not the best time to be pulling big companies apart.
This is not just a Republican hobby horse. Since Terry McAuliffe led the Democratic Leadership Council down the road to K-street, Democrats have been wooing, and have been wooed by, Big Business, and lobbying money has poured in.
In a third area, a White House effort to overhaul financial regulation, officials weighed but rejected a significant antitrust role as a way to reduce the size of large companies considered too big to be allowed to fail.
This is the part that really bugs me. Geithner & Summers seem to think that Big isn’t Bad if you regulate it enough.
The antitrust efforts are being led by Christine A. Varney, who is the head of the Justice Department’s antitrust division. This is one part of the DOJ that really does not look or sound like the Bush admninstration.
Bob in HI
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Bigger is more efficient at only one thing: funneling more and more money to fewer and fewer people.
Good morning! I was relieved to see this major story meaning that I might not have to read AdNags’s musings at all. After about 5:00 I might have comments.
One of the major reasons for consolidation is the Red Queen’s Race that Reagan-Thatcher set off. At each step along the path, consolidation has been required to keep more of US assets in control of a small US elite. The two dangers to the RQR were being overtaken by the creditors, or being taken over by the public.
Well, if the Wall Street institutions like AIG,Citigroup,etc,were scaled down,maybe Bernanke would have an easier time finding out JUST whom we gave the trillions of dollars in TARP money to!
A BIG TARP can cover up a LOT of sins and indiscretions….
Like most of these sorts of news documentaries, it will preach to the choir.
There are economies of scale, however, as we are seeing, there are also economies of Fail. Larger industries become too concentrated on a few ways of doing business. Right now the US financial industry is larger than the NEG size.
Larger businesses drive out competition and concentrate markets in fewer hands, depriving customers and suppliers alike of better value by keeping it for themselves by way of higher prices for less quality, and by defining that as “optimum” for themselves, for customers and for shareholders. Getting one out of three right is about the going rate.
Big business is good for one thing: generating bigger donations for politicians who sponsor what’s good for them. Because that defines what’s “good” for America or so big business would have you believe. Right, GM?
Stirling,
Thanks for your comments. However, I’m mystified by the Red Queen’s Race. What is that?
Bob in HI
That’s where you have to keep going as fast as you can, just to stay where you are.
Otherwise known as being a member of the American middle class. It’s what you do every day, bob.
The available evidence actually indicates that industry consolidation leads to decreasing efficiency and rising prices.
new post
America needs to slim down these giant corps and monopolies. Start with Verizon.
But Obama must be careful though, I think he is learning that the corporations control America at this time. And the war machine demands constant feeding sources.
Just look at the ads on the right hand side of FDL…even if we slim down through cutting them off from the feeding troughs, and treating the illness, the face stays the same! We must avoid this at all cost.
Congratulations for being on the front page
Corporations too big to be … regulated … taxed … allowed to fail are parasites that threaten the entire economic ecosystem.
Hi egregious!
Thanks! And thanks for all the comments here.
Bob in HI
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”
- H. L. Mencken
The Puppet Masters create “disorder” so the people will demand “order”. The price of “order” always entails a handing over of control and loss of freedom on the part of the citizenry. Out of “chaos” comes “order” – THEIR order – their new WORLD order.
The trick of creating chaos and then seizing power under the pretense of putting things back in order is a tried and true method of deception and manipulation. It’s the meaning behind the Latin motto: ORDO AB CHAO meaning ORDER OUT OF CHAOS.
This is the Hegelian Dialectic in Action.!!!! ……..THESIS — ANTI-THESIS — SYN-THESIS.
Or, PROBLEM — REACTION — SOLUTION …in that firstly you create the problem; then secondly you fan the flames to get a reaction; then thirdly (like Johnny-on-the-spot) you provide a solution. The solution is what you were wanting to achieve in the first place, but wouldn’t have been able to achieve under normal circumstances. The ROTHSCHILDS perfected this.!!!!!!!
What you are seeing now is the __R E A C T I O N __ phase!!!!
I gather the USDOT has been favoring the domestic airlines, negotiating advantages that benefit the domestic flights and leave foreign flights at a substantial disadvantage. It appears that the DOT is still under the control of the Bushlerites. The Bureau of Land Management, the NRC, the SEC, the Office of Surface Mining regulatory agencies seem also to be under the control of muggle wingnutters.
I was struck that railroads and antitrust are still involved over the course of 100 years where their power in the larger economy has essentially gone down. But railroads were a huge villain for the original Populists.
People around the world breath a sigh of relief knowing that the U.S. is not too big to fail.
This link was good. The story mentioned antitrust immunity for a nine-airline alliance which would fly to countries with an “open-skies” agreement. Since Secretary LaHood seems to have been appointed as a token Republican in the cabinet, I would not be surprised if he was captured by the career members of the agency.
Thursday’s hearing of the Senate Banking Committee on Regulating Large Financial Firms must have been very important to the subject of my diary:
The panel had some important assessments of “Too Big to Fail”, one of which was that “too big to fail” is not the right way to frame the issue. Other criteria were suggested.
See also other hearings of the committee, which includes hearings coming up.
Bob in HI
To me the notion of “too big to fail” is an obscenity.
The “bigness equals efficiency” argument seems to rest on the supposed benefits of mergers. The idea is that the mega corporation uses one accounting department, one set of manufacturing workers, etc. instead of two sets of each, while, supposedly, doing the same work.
The problem with this idea is twofold.
First, merged companies are anything but efficient, as anyone that has been through a merger knows. Typically, productive, line workers are disproportionately subject to layoff while middle managers are retained. The organization gets more top-heavy. Processes are never replaced one for one–they are merged. So bureaucracy doubles. The sheer size of the monster makes governing it ever harder, particularly with all those managers and tangled chains of command.
Secondly and more importantly, the claimed “efficiency” of a merger, to the extent that it does exist, is not real efficiency at all. It is just higher profit. Monopolies make a higher profit and have lower costs per unit because they do NOT do the same work as the predecessor, competing firms once did. They don’t have to. They can develop fewer new products, produce fewer units, let quality slip, etc.
Competition is the only force that can demonstrably drive improved efficiency. Its absence does the opposite.