Editor’s note: Reasons why the St. Louis economy lost momentum vary, but Brian S. Feldman makes a case in the latest edition of The Washington Monthly that federal policy decisions deserve much of the blame. An edited excerpt of Feldman’s cover story follows.

Relative to big metro areas on the coasts, St. Louis has lost ground in recent years. Job growth since the recession has slowed. The city’s population growth has stagnated. Downtown St. Louis sits eerily quiet on most days, despite millions of taxpayer dollars spent on upgrades. The per capita income of the St. Louis metro area today has fallen to 77 percent that of metro New York, down from 89 percent in 1979. And while St. Louis’ nine Fortune 500 corporate headquarters are a lot for a metro area of 2.8 million people, that’s down from 12 in 2000 and (correcting for the way Fortune changed its methodology in 1994) 23 in 1980.

Experts often point to a manufacturing decline, offshoring and racial strife to explain the relative economic weakness of St. Louis and other Rust Belt cities. But these ills hardly have afflicted St. Louis more than they have Chicago, New York, Boston and Los Angeles — which all have mounted much stronger comebacks in recent decades. Yes, those other cities made the transition from manufacturing to services and technology. But a quarter-century ago, St. Louis was already (and, to some extent, still is) a hub of many of the postindustrial industries that have gone on to experience the fastest growth, from pharmaceuticals to finance to food processing.

Moreover, St. Louis had an abundance of what regional economic growth theorists such as Richard Florida, Edward Glaeser and Enrico Moretti argue is the most important ingredient of success for postindustrial America: a large population of educated, professional, creative types who dream up the innovations that drive growth and profits. In 1980, 23 percent of adults living in the St. Louis area had completed four years of college or higher — double the national average and greater than that of economically “hot” cities such as Dallas, Charlotte and San Diego. Even more important, one out of every five residents worked in fields such as finance, insurance, real estate, business, health, law or medicine.

Indeed, St. Louis contained enough human capital to sustain one of the defining “creative class” industries: advertising. Though perhaps not quite as high-flying as their “Mad Men” counterparts, St. Louis firms rivaled the biggest New York, Los Angeles and Chicago ad agencies in terms of revenue and creativity during the industry’s heyday from the 1970s to the 1980s.

The relative decline of St. Louis is therefore not simply, or even primarily, a story of deindustrialization. The larger explanation involves how presidents and lawmakers in both parties, influenced by a handful of economists and legal scholars, quietly altered federal competition policies, antitrust laws and enforcement measures over a period of 30 years. These changes also robbed the metro area of a vibrant economy, and of hundreds of locally based companies.

This economic uprooting, still all but unaddressed by today’s politicians or presidential candidates, accounts for much of the relative stagnation of other middle American communities, and for much of the anger roiling voters this election cycle.

THE 'TRUST' ERA

As all students of high school history will recall, in the late 19th and 20th centuries powerful “trusts” run by financiers such as J.P. Morgan and Jay Gould grabbed monopoly control of railroads, steel production, meatpacking, electrical utilities and other industries. Their actions often thwarted local economies — St. Louis a prime example. In 1881, for instance, Gould won control of the Eads Bridge, a major crossing point for rail over the Mississippi. The high tariffs Gould charged led rail companies to reroute through Chicago, leading the Windy City to emerge as the Midwest’s dominant industrial center.

The behavior of the trusts ignited the Populist and Progressive movements, which in turn led to a series of laws that safeguarded independent businesses in cities such as St. Louis from the predations of monopolists, and encouraged regional equity.

The Interstate Commerce Act of 1887 applied common carriage rules to railways, and sapped their industrialist owners of the power to pick winners and losers. The Sherman Antitrust Act of 1890 addressed the anti-competitive practices of monopolists. Years later, Mercantile National Bank of St. Louis President Festus J. Wade celebrated these laws, especially a 1912 decision based on them to break up a railroad monopoly that was choking off commerce from entering the city. “Railroad managers,” he said, “can no longer combine against an industry and crush it out of existence because of a disagreement with the head of a manufacturing establishment.”

The Federal Reserve Act of 1913 created a central banking system in which decisions over national monetary policy were made by 12 regional Federal Reserve banks, including one in St. Louis. The McFadden Act of 1927 likewise dispersed lending activity by confining national banks to their headquartered states. This rule preserved the flow of capital within local communities, made bankers attuned to their community’s needs, and prevented New York financiers from gobbling up St. Louis banks. It also addressed the public’s concern that if large banking organizations operated in multiple regions, they would evade adequate supervision.

The Packers and Stockyards Act of 1921 broke up the “Big Five” meatpacking cartel that previously had manipulated prices across the nation, giving undue preference to certain businesses and localities, and controlling non-meat production in the warehousing, wholesale and retail industries. That move gave smaller companies the opportunity to compete fairly.

The Wheeler-Rayburn Act of 1935 prohibited electricity, gas and water utilities from speculating in unregulated businesses with ratepayers’ money and ensured that companies such as Union Electric would remain locally headquartered and focused. The Robinson-Patman Act of 1936 protected small retailers by prohibiting manufacturers from giving larger discounts to chain stores, and the Miller-Tydings Act of 1937 did the same by permitting manufacturers to set a minimum price at which their goods could be sold.

These laws safeguarded local retailers such as Central Hardware and Bettendorf-Rapp supermarkets, as well as neighborhood pharmacies, bakeries, restaurants, clothing stores and grocers — including those servicing the city’s predominantly minority and African-American communities.

LEGISLATIVE LANDSCAPE

By the late 1970s and early 1980s, however, changes were afoot in Washington, as politicians quietly overturned many of the anti-monopoly laws that had for so long protected the citizens of the Gateway City from distant economic predators. These legislative changes — inspired by an unlikely alliance of both conservative and liberal legal scholars and economists, including Robert Bork and Lester Thurow — spoiled the very ecosystem that had birthed St. Louis’ diversified economy and powerful industrial presence.

In 1978, President Jimmy Carter signed the Airline Deregulation Act, which swept away the Civil Aeronautics Board and paved the way for massive industry restructuring. St. Louis eventually would lose both of its local airlines, Ozark Airlines and TWA. Under the administration of President Ronald Reagan, the Justice Department wrote new guidelines that rejected regional equity or local control as considerations in deciding whether to block mergers or prosecute monopolies. Reagan’s administration also cut the budgets of the Federal Trade Commission and the Justice Department, leaving both agencies with limited resources for enforcement.

Between 1980 and 1985, 62 Fortune 500 companies were subject to corporate takeovers, and the single greatest increase in corporate acquisitions in U.S. history took place between 1984 and 1985. This relaxed enforcement philosophy, compounded by other legislative action, quickened the consolidation of specific industries.

Throughout the 1980s, politicians chiseled away at restrictions on interstate banking, and in 1994, President Bill Clinton’s administration followed suit with passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act. Since 1984, the number of independent banks has fallen by more than half, from 15,663 to 6,799 in 2011. Of those now-defunct banks, more than 8,352 merged or were consolidated.

In St. Louis, Boatmen’s, the oldest bank west of the Mississippi, merged with Kansas City-based Chartercorp in 1985, and in 1997 its ownership shifted to Charlotte, N.C.-based NationsBank, which was later purchased by then-San Francisco-based Bank of America. Mercantile, St. Louis’ biggest locally owned bank, was gobbled up in 1999 by Milwaukee-based Firstar, which later changed its name to U.S. Bancorp. The number of community banks in Missouri dropped from 637 in 1980 to 262 in 2014.

These changes in anti-monopoly policy also affected local retailers. The Consumer Goods Pricing Act of 1975 overturned the Miller-Tydings Act of 1937, and led to the end of most “fair trade” laws. In the early 1980s, the Reagan administration’s Justice Department and FTC stopped enforcing the Robinson-Patman Act. Together, these changes led to consolidation among retailers and gave the new megaretailers tremendous power over their suppliers.

In St. Louis, this played out in Dillard’s purchase of St. Louis flagship department store Stix Baer & Fuller in 1984, and Chicago-based Handy Andy Home Improvement Centers’ acquisition of Central Hardware in 1993.

In the 1990s, St. Louisans continued to witness the flight of corporate headquarters that either were acquired by outside companies or moved out of town completely. In 1993, company executives moved Southwestern Bell, then the 29th-largest U.S. company, to Texas. And in 1997, Boeing absorbed McDonnell Douglas.

That same year, Omnicom purchased Fleishman-Hillard. In 2001, Swiss food giant Nestlé bought Ralston Purina. In 2005, Federated Department Stores, whose chains include Macy’s and Bloomingdale’s, acquired St. Louis-based May Department Stores, whose banners included Lord & Taylor and Filene’s. That year, too, Lee Enterprises bought Pulitzer Inc., owner of the 127-year-old Post-Dispatch. In 2007, Wachovia (later acquired by Wells Fargo) snatched up 120-year-old A.G. Edwards. And in 2008 came the most devastating of deals for St. Louisans when Anheuser-Busch, a company that in many ways had defined the city’s very identity, was bought by Belgium-based InBev.

While some new out-of-town owners kept large operations in St. Louis, the city lost entire layers of expertise.

INFLUENCED BY WASHINGTON?

St. Louisans, like Americans generally, take pride in their self-reliance. When things turn sour, they don’t blame others, but instead channel their energy to make their city better.

But when the citizens of St. Louis — and of other small- and medium-size cities across the country — look at the decline of their local economies, they may conclude that the economic fates of their communities may not be the result of their own failings, or of an inability to lure educated “creative class” types, or of offshoring or deindustrialization, or of the workings of a mysterious and immutable free market. Rather, their fates may be the result of decisions in Washington, influenced by a small group of legal scholars and economists, to overturn antitrust laws passed by elected officials of both parties over the course of the 20th century, quietly changing the rules of America’s economy.

Brian S. Feldman is a researcher-reporter with the Open Markets Program at New America, a Washington-based nonprofit, nonpartisan public policy institute, and a graduate of Washington University.

Feldman’s full report, including sidebars on minority lending and local media, is available at bit.ly/1Rdcawx

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