As the reaction to the COVID-19 virus has gone from panic to concern to a footnote in many people’s minds, it is time to look at how corporations and businesses responded to the challenges.
A walk around Center City Philadelphia shows that many stores have yet to reopen. The stay-at-home orders given to stop the virus from spreading closed bars, restaurants, theaters, sporting events, and even religious services. Millions of us had our jobs taken, and the impact on families’ finances was only mitigated by the Government programs that helped replace lost income and protected people from mortgage foreclosures, utility shut-offs, and evictions. There is no doubt that small businesses were harmed by the Government’s reactions to the threats of COVID. But what about corporate America? Did the “Fortune 100” suffer the same as people and small businesses?
A recent study published by Mike Konczal and Niko Lusiani of the Roosevelt Institute found “firms increased their markups substantially in 2021, both to their highest level and with the largest single-year increase since 1955. Firm profitability, both before and after taxes, also increased to its highest levels.”
That analysis matched former Labor Secretary Robert Reich’s explanation of why the Federal Reserve was misguided in fighting inflation by raising interest rates. “Powell’s [Chair of the Federal Reserve] medicine has nothing to do with the real reason for inflation: the increasing concentration of the American economy into the hands of a relative few corporate giants with the power to raise prices . . . The underlying problem is not inflation. It’s a lack of competition. Corporations are using the excuse of inflation to raise prices and make fatter profits.”
Since the 1980s, two-thirds of all American industries have become more concentrated. Monsanto now sets the prices for most of the nation’s seed corn. There are only five major banks left after the mergers. The often unacceptable treatment air travelers face coincides with airlines merging from 12 major carriers to four. Those four control 80 percent of domestic seating capacity. After the merger of Boeing and McDonnell Douglas, only one aircraft producer for commercial airplanes exists. In Philadelphia, there were four internet providers in the 80’s. Now, there are only three major broadband providers in the United States. Consolidation in the dairy industry has forced thousands of family farmers to quit. As I write this, the United States Justice Department is allowing two major chicken processing plants to merge, despite the Justice Department alleging the companies had been engaging in price fixing and anti-competitive actions.
According to Matt Stoller, a crictic of monopolies, “Just before the pandemic, in 2019, American non-financial corporations made about a trillion dollars a year in profit, give or take. This amount has remained constant since 2012. Today, these same firms are making about $1.73 trillion a year. That means that for every American man, woman, and child in the U.S., corporate America used to make about $3,081, and today, corporate America makes about $5,207. That’s an increase of $2,126 per person.”
“Taking all of this together, it means that increased profits from corporate America comprise 44.7% of the inflationary increase in costs.” He added.
The corporate monopolies not only allow corporations to raise prices faster and higher than inflation, they also stop consumers from being offered better products at lower prices. The investigation into Google’s anti-trust violations makes the point.
A recent report from the House Judiciary Subcommittee concluded Google has monopoly power in the market for search. The company established its position in several markets through acquisition, snapping up successful technologies that other businesses had developed — buying an estimated 260 companies in 20 years.
The Justice Department has sued Google for abusing its online search and advertising dominance. This is the Government’s most significant attempt to protect competition in the last 20 years.
Consumers lose when Google, or any company with monopoly power, buys up its competition. We lose the ability to choose a better product and lose the strength of competition to keep prices down. That is why there are anti-monopoly laws and a division of the Justice Department that is supposed to be our watchdog, protecting us against the power of a dominant corporation from becoming a monopoly.
There is no guarantee that our Government will stop the anti-trust violations. Unfortunately, the norm for Justice’s anti-trust division is to file a suit, meet with the company’s lawyers, and enter into a “consent agreement” that allows the company to pay a fine and promise never to do it again. Perhaps if it were understood that inflation had been caused by monopoly power and rising corporate powers, we would not accept a justice department that allows corporate violators to pay a fine and keep on violating.
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