To Paul Krugman: Thou Art the Man

Paul Krugman, in denouncing the excessive market power of Amazon (“Amazon’s Monopsony is Not OK,” New York Times, October 19), proclaims that the Robber Baron Era ended when “we as a nation” put an end to it.

There’s a powerful story in the book of 2 Samuel about the prophet Nathan confronting King David after he arranged the death of Uriah the Hittite and took his wife Bathsheba for himself. Nathan told David of a rich man, with enormous herds, who had a guest to feed. The man, to spare himself killing one of his own many livestock, instead stole and slaughtered the pet lamb of the poor man next door (which, the Bible says, he fed from his own plate and loved like a daughter). Upon hearing this David became outraged and swore “As the LORD liveth, the man who hath done this thing shall surely die.” And Nathan replied: “Thou art the man.”

Not only did the rule of Robber Barons in fact never end, but in denouncing them Krugman reveals himself as one of their foremost apologists.

Far from bringing Robber Baron rule to an end, the Progressive Era stabilized it in a web of government protections and subsidies. For example, the FTC’s treatment of below-cost dumping as a “unfair trade” practice, by outlawing price wars, made stable oligopoly markets possible for the first time.

Let me state up front that, while Amazon doesn’t actually qualify as a monopsonist (that is, a market actor with monopoly buying power that can unilaterally set terms for sellers) it is at least an oligopsonist (in this case the largest of a relatively small number of major buyers/distributors). As an anarchist who viscerally hates large corporations, and hates perhaps even more all kinds of proprietary, walled garden platforms, I’d much prefer to see an open-source or cooperatively owned platform taking over Amazon’s current role.

But that being said, if Krugman wants to fight Amazon, he’s picked a mighty peculiar hill to die on. Specifically, he objects to Amazon’s use of its market power as a buyer to force down the prices of traditional publishers like Hachette. But those prices are themselves enormously bloated to begin with, because of the monopoly premiums attendant on copyright. Amazon’s use of its purchasing power to shave off that monopoly premium is analogous to, say, Medicare D using its market power as a large-scale purchaser to negotiate down the price of prescription drugs under patent. (Of course we know Medicare doesn’t actually do this, or hardly does it, because of the drug companies’ lobbying power.)

Support for draconian “intellectual property” laws, like the WIPO Copyright Treaty, the Uruguay Round TRIPS accord, the Digital Millennium Copyright Act, and the “intellectual property” components of all the so-called “Free Trade Agreements” proposed over the past decade or so, are strongly supported by both Republicans and Democrats. But the Democrats have an especially close relationship with proprietary content industries — the RIAA, MPAA and Microsoft are at the core of the Democratic coalition.

To repeat, the Robber Baron Era never ended. And far from being the Robber Barons’ enemy, the US government has been their chief tool for survival to this day. And perhaps the single most important function of the US government in upholding corporate power is enforcing “intellectual property,” so central to the business models of the proprietary content industries in the Democratic coalition. The most profitable industries in the global economy — entertainment, software, biotech, pharma, electronics — all depend on “intellectual property.” “Intellectual property” is central to the dominant industrial model by which Western corporations outsource all actual production to independent shops working on contract, but use patents or trademarks to retain monopoly rights over disposal of the product.

And perhaps more importantly “intellectual property” is at the heart of the business model of the new “green capitalism” or “progressive capitalism” personified by “patriotic billionaires” like Bill Gates, Warren Buffett and their ilk. Their business model depends on using “intellectual property” to enclose new, green technologies as a source of monopoly rents, or — as in Buffett’s case — using heavily subsidized “smart grid” infrastructure to make his wind farms profitable.

The Robber Barons are with us just as much as ever, their power depends entirely on the capitalist state, and “progressives” like Paul Krugman — wittingly or unwittingly — are their shills.