Lina Khan is a policy analyst for the Markets, Enterprise and Resiliency Initiative at the New America Foundation. Sandeep Vaheesan is special counsel at the American Antitrust Institute.

Since the early 1980s, executives and financiers have consolidated control over dozens of industries across the U.S. economy. From cable companies and hospitals to airlines, grocery stores and meatpackers, where once many small and mid-size businesses competed, today we see a few giants dominate. They use their power to raise prices, drive down wages and foreclose opportunity. Wealth is transferred from consumers, workers and entrepreneurs to affluent executives and shareholders.

The ongoing debate in America over economic inequality — as seen, for instance, in the Occupy movement and the success of Thomas Piketty’s “Capital in the Twenty-First Century” — is a vital one. But it is incomplete. The challenge is not limited to the decline of organized labor, tax cuts for the well-off and the increased power of Wall Street. The lack of competition in many sectors of the U.S. economy is also a powerful driver of economic disparity.

Take the $2.5 trillion health-care industry, where rising costs are fueled in good part by consolidation. A frenzy of mergers starting in the 1990s has meant that most Americans today live in areas where there is little competition among hospitals. Studies show that after merging, hospitals routinely raise prices . As detailed in Time last year, many hospitals now mark up services from a routine blood test to chemotherapy by as much as several hundred percent. In health care alone, market power redistributes hundreds of billions of dollars in wealth upward annually.

The same is true in other sectors. Meager competition among cable providers and the growing market power of large content owners have enabled Comcast, Time Warner Cable and others to raise the price of subscriptions at close to three times the rate of inflation since 2008. High-speed broadband presents a similar picture: Americans now pay more than double what European consumers pay. Merger mania in the airline industry — where eight majors have combined to create four giant carriers over the past decade — has resulted in fare increases of as much as 65 percent on certain routes.

Diminished competition also increases inequality by empowering corporations to drive down the incomes of workers. As the Justice Department uncovered in 2010, top executives at Google, Apple, Intel, Intuit, Pixar and Adobe made secret agreements not to recruit one another’s employees in order to suppress salaries, even as their profits soared. Tech workers who brought an antitrust case against this cartel estimate that the scheme in effect stole $3 billion from more than 60,000 workers.

The same occurs in local job markets. In Detroit, for example, a class of 20,000 nurses claims that collusion by hospitals in the metropolitan area cost them more than $400 million in collective pay from 2002 to 2006.

In agriculture, meanwhile, consolidation among meat processors has left many farmers subject to the whims of individual companies, enabling firms such as Tyson to cut what they pay farmers and raise their own profit margins. The average price a farmer could fetch per hog dropped 31 percent between 1989 and 2008, for example, a period when the top four pork producers increased their national market share from around 45 percent to 63 percent.

Economy-wide consolidation also signals a dramatic shrinking of opportunity for the middle class to compete and build assets. A New America Foundation study shows that the number of job-creating businesses that Americans start every year fell by 53 percent between 1977 and 2010, when measured as a proportion of the U.S. working-age population. The Brookings Institution recently found that this decline in the net growth of new firms persists across most regions and sectors of the economy.

There are probably several causes for this drop-off, but monopolistic and oligopolistic domination of markets is surely a factor. Dominant corporations can use their muscle in a variety of ways to deter new firms and protect their market power.

While dwindling competition hurts the vast majority of Americans, for the well-off it often proves a path to huge payoffs. Indeed, it has even become a basic formula for successful investing. Goldman Sachs in February published a research memo advising investors to seek out “oligopolistic market structure[s]” in which “a smaller set of relevant peers faces lower competitive intensity, greater stickiness and pricing power with customers due to reduced choice, scale cost benefits including stronger leverage over suppliers, and higher barriers to new entrants all at once.” Goldman went on to highlight a few markets, including beer, where dramatic consolidation over the past decade has enabled dominant companies to use their market power to extract more from suppliers and consumers — and thereby enrich investors.

Many factors drive the inequality of wealth and income in America, but decreased competition matters because the concentration of economic power also concentrates political power, which in turn positions dominant companies to reshape economic policies in ways that further favor them. Many of the important policy decisions that have contributed to inequality in recent decades — including financial deregulation and lower corporate taxes — reflect the lobbying of oligopolistic corporations.

Unfortunately, most of the research on the impact of competition on economic performance in America relies on theoretical models, with few empirical studies examining how competition affects outcomes such as innovation and social well-being. There is even less academic work on the links between uncompetitive markets and inequality. The scant research that does exist indicates there is a connection: Multiple studies in the 1970s and 1980s — for example, work by economists William Comanor and Robert Smiley — indicated that oligopoly and monopoly power redistributed income from consumers to more affluent business owners. Concentration has increased vastly since then.

In contrast to today, Americans in the Gilded Age openly recognized the connection between monopoly power and inequality. They enacted the Sherman Antitrust Act in 1890, and the Clayton Antitrust Act and the Federal Trade Commission Act in 1914, to safeguard themselves from concentrated economic power, which they believed posed a threat akin to political autocracy. The administrations of Teddy Roosevelt, William Taft and Woodrow Wilson responded by busting or neutralizing giants such as Standard Oil and the railroads, and by championing landmark antitrust legislation.

The return of plutocracy to America was no accident. The drastic decline in market competition has been a result of conscious political decisions to change our antitrust law radically. Starting in 1981, President Ronald Reagan appointed a number of prominent conservative economic thinkers to executive agencies and federal courts, and they moved swiftly to assert that the only goal of antitrust policy should be “economic efficiency.” The traditional aims of antitrust — open markets, innovation, decentralization of power — were largely thrown out. As Frank Easterbrook, an influential antitrust scholar and Reagan appointee to the U.S. Court of Appeals for the 7th Circuit, wrote, “the antitrust laws should be treated as if they served no goal other than economic efficiency,” regardless of Congress’s intent in enacting them.

In practice, this counterrevolution unleashed a wave of horizontal mega-mergers and transformed competitive markets into ones largely controlled by a few big players. Remarkably, this transformation of the American economy occurred with hardly any input from Congress. In the decades since, every administration — Democratic and Republican — has continued to embrace the goal of “efficiency” foremost, resulting in extremely permissive enforcement.

We can restore a more fair and competitive economy. To do so, we must realize, first, that intense concentration across our markets contributes to inequality. Second, we must recognize that we have the right to use laws to neutralize the power of these corporate giants. Americans in the Gilded Age freed themselves from the clutches of Standard Oil and the railroads because they knew that markets and economic outcomes were theirs to shape. Today, by contrast, we frequently surrender this power by assuming that inequality is a result of impersonal forces — technology, globalization — to be tracked and studied by technocrats, rather than a condition we can change through popular will and political action.

The Justice Department and the Federal Trade Commission could rewrite merger guidelines to make it easier to block deals that would hurt competition and foreclose opportunity. They could also stop outright more anti-competitive mergers, rather than allowing them in exchange for certain conditions. Using its broad legal mandate, the FTC could, in addition, issue stronger rules against anti-competitive tactics that we previously treated more harshly, such as exclusive dealing and predatory pricing.

Most important, Congress could reassert that U.S. antitrust laws serve, in the words of the Supreme Court in Northern Pacific Railway v. United States (1958), as a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade” while also “providing an environment conducive to the preservation of our democratic political and social institutions.”

Though signs abound, the relationship between uncompetitive markets and inequality is largely ignored. Let’s not forget that earlier generations overcame the concentrated wealth and power of the Gilded Age by restoring competitive markets, a pillar of economic and political democracy. We can do it again.

khanl@newamerica.org

svaheesan@antitrustinstitute.org

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