Whatever Happened to Antitrust?

By Dave Lindorff

Now here’s a word you’re not hearing in America these days: anti-trust.

The country is being dragged down by monstrous businesses, all of
which, we’re told, are just “too big to fail.” As a consequence of
this, the nation’s taxpayers, and their progeny born and yet unborn,
are having trillions of dollars sucked away to prop up these giant
rotting corporate corpses.

Zombie banks, zombie automakers, zombie insurance companies, all bigger than nation states, and all on life-support.

There is a simple answer to this problem. Bust them up.

Looking at the nation’s largest banks—Bank of America, Citicorp, JP
Morgan Chase, Wells Fargo and others—it’s clear that some parts of them
are functional. They have, for example, massive deposits. They also
have massive debts, many of these toxic and pretty much worthless.
Instead of bailing these failed institutions out, which is not going to
work anyhow, and which only delays and makes more costly the final day
of reckoning, the answer is to have the government carve out the
profitable banking parts of these financial institutions, and set them
up as free-standing banks, and then let the rest of the carcass of each
bank go down the tubes, taking gullible shareholders and bondholders
with them.

Then the remaining banks left from this process should be broken up by anti-trust actions into regional or even state entities.

There is simply no need for national banks. Such institutions are a
disaster for smaller companies and individuals, since they are only
really interested in lending to big national or multinational
companies. I remember years ago, back in the early 1980s, when bank
consolidation was just getting underway, how Citibank began adding fees
to its checking services simply because it wanted to drive away small
customers. It was an indication of what was coming. Screw the little
guy.

It doesn’t matter to large companies if there are no national banks.
When they want a big loan, they simply arrange for a syndicate of
smaller regional banks to put a package together. That is the way
things used to be done, and it can be done again.

Insurance companies too should be broken up. It is ridiculous to
have companies the size of AIG or Aetna or Prudential, any of whose
failures can threaten the global economy. Again, there is simply no
rationale for the existence of such mega-corporations. Insurance
companies have ways of sharing risk through reinsurers, so that smaller
companies are no more vulnerable to disaster than larger firms. They
may, in fact, be less vulnerable, since their managers will be closer
to their customers and probably more careful about what they insure and
what they invest in.

Finally, let’s look at what used to be called “Detroit.” In its
heyday, there were many more car companies than simply three. There
were American Motors, Hudson, Packard, and Studebaker, there was Mack
Trucks. Then we had a wave of consolidation and bankruptcy. In the end,
several companies—Ford, GM and Chrysler—won the day, but not because
they had better products. Rather, they were bigger, and had bigger
marketing budgets and more extensive dealership networks. Unable to
compete, good companies went bust.

As the number of car companies dwindled, so did the need to
innovate. With Chrysler just a shadow of its former self, there are
really only two domestic carmakers today, and they have spent much more
time and money using their political clout to block efforts in Congress
to force them to make better, more efficient and more socially
responsible products, than they have devoted to actually competing in
the marketplace. They have become “too big to fail.”

So now we’re being asked to bail them out to the tune of tens of
billions, and ultimately probably hundreds of billions of dollars.

Okay, I’m willing to agree that it is a good idea for the US to
have a domestic car industry, but there is no reason why it should
consist or two or three giant companies.

Let’s break these companies up into smaller enterprises, each
making one nameplate, and let them compete. With smaller, nimbler car
companies, we would see quality electric cars at affordable prices in
no time, and gas mileage would soar.

While we’re at it, let’s not stop there. The Federal Trade
Commission and the Justice Department should conduct a broad study of
the US economy, looking at every industry, with an eye to busting up
every company that is deemed “too big to fail” because of the impact
such a failure could have on the broader economy.

“Too big to fail” should mean “too big to exist.” It’s not just
that giant companies put the economy at risk. Their size makes them way
too powerful economically and politically, too. (Just look at how
Microsoft, a company that has a mediocre product line, has been able to
succeed in killing off its competition not by making a better
mousetrap, but by simply crushing or buying up those firms that do make
better ones.) Politically, breaking up mega companies prevents such
monopolistic behavior. It also creates more diversity of interest
within each industry, thus providing openings for other political
groups—like trade unions, environmentalists, etc.-- to play companies
off against each other on particular issues.

While we're at it, let's also break up the huge companies that dominate three crucial sectors of the economy, to the detriment of the public good: energy, the media and the military. Does anyone doubt that the phenomenal rise in energy prices we have been experiencing is related directly to the mergers that have occurred over the last decade in the energy industry? Or that America's endless wars, and its military budget--now equal in size to that of all other military budgets in the world combined--are a direct result of the dominance of several giant military companies--GE, Westinghouse, Boeing, Northrop-Grumman and Raytheon? Finally, if it weren't for all those media mergers, we wouldn't have newspapers closing down all over the place, and we wouldn't have the homogenized, sanitized network news we're stuck with now, either.

The tools are already at hand to tear all these anti-democratic,
anti-social and uneconomic corporate monstrosities apart. So let’s fire
up the legal chainsaws and start cutting them down to size. Instead of
bailout, we need to start hearing the word anti-trust in Washington.
____________
DAVE LINDORFF is a Philadelphia-based journalist. His latest book
is "The Case for Impeachment" (St. Martin's Press, 2006 and now
available in paperback). His work is available at www.thiscantbehappening.net