Monopoly is not any sport to Sens. Klobuchar and Hawley – Twin Cities

The truth in the old adage that politics makes strange bedfellows is demonstrated from time to time. This is a sign of a healthy democracy. This is especially true now in our nation after a quarter of a century of the erosion of bipartisanism. Few contemporary issues put members of Congress in the same intellectual space, let alone in bed.

Edward Lotterman

It is therefore very much to be welcomed that her Missouri GOP colleague Josh Hawley expresses similar concerns and makes additional suggestions, while Amy Klobuchar, Democratic US Senator from Minnesota, promotes her concerns about monopoly power and its economic damage. One can only hope that useful action will be taken.

There are certainly differences between the centrist, traditionally Democratic Klobuchar and the philosophically conservative Republican Hawley, who now opts for populist appeals. But there are similarities. Both are lawyers. Both held local public office. Klobuchar was a district attorney for eight years. Hawley had a brief two years as the Missouri Attorney General.

Both of them come from comfortable middle-class backgrounds and attended elite colleges and law schools, Klobuchar to Yale for her undergraduate and law degrees from the University of Chicago, Hawley to Stanford for his undergraduate degrees, and then to Yale for a law degree.

There are also some differences. Klobuchar is nearly 20 years older and grew up in the 1960s and 1970s when liberal political thinking was on the rise, particularly in Minnesota. Her father came from a union-promoting mining town and was a journalist.

Hawley grew up the son of a banker in the 1990s and 2000s, first in conservative Arkansas, where the Senator was born, and then in Missouri.

Klobuchar switched from Roman Catholicism to the United Church of Christ in her youth. Hawley was raised a Methodist, attended Jesuit college, and is now a member of a small, conservative Presbyterian denomination. Hawley is very open about links between his religious beliefs and politics. These are muted for Klobuchar.

In the present case, both see the concentrated economic power in large corporations as detrimental. Both can rightly claim that curbing monopoly is a tradition in their respective parties, though it has consistently been the case for Democrats for a much longer period than for Republicans.

Indeed, at the beginning of the last century, it was a rift in the GOP between “trust buster” Theodore Roosevelt and the alleged spinelessness of his protégé William Howard Taft on this issue that split the party in the 1912 election and split the White House Democrat Woodrow handed over to Wilson. While Hawley is a religious and social conservative, he appears ready to scrap the GOP’s usual close ties with Wall Street and big corporations and its libertarian stance of doing business without government interference. Will he be a new TR?

Let’s take a quick look back at economic history to understand the antimonopoly problems:

Prior to Adam Smith’s writings in 1776, the prevailing belief was that detailed government direction of economic activity was the key to prosperity. This included governments promoting monopoly business, from Dutch and British East Indian companies to St. Gobain glass to myriad other government-sponsored industries in pre-revolutionary France.

Smith turned this on its head, arguing that the spontaneous interactions between individuals and companies in free markets could best serve societies’ needs. Smith was not an abstract theorist. His book contains detailed descriptions of real life. This includes many comments about the damage to monopoly power and the inevitable efforts of business people to band together to restrict competition and thereby raise prices.

Forty-five years later, David Ricardo wrote more abstractly, explaining why the free markets’ results were optimal for society. Government intervention would inevitably make people worse off, he argued. His intellectual successors went a step further and created what is known as social Darwinism, the idea that economic inequality and the imbalance between the powerful and the impoverished were necessary – and natural – parts of “progress” and economic growth.

These ideas dominated conservative political thought well into the 20th century and were used to argue against any “progressive” initiative – from regulating railroad charges to child labor laws to social security and anti-discrimination laws. One still often hears Social Darwinian themes from libertarians. A recent drip voiced by Warren Buffett’s pal Charlie Munger dripped on them.

Within the economy, however, as early as the late 19th century, situations in which unimpeded free markets “were unable to achieve optimal results” became apparent with the rise of the Golden Age. It combined extreme concentration of wealth with lavish consumption by the few in the face of mass poverty. The new graphical expressions of economic theory could clearly show how a monopoly, which gave a company or cartel the power to set the price, produced outcomes that were inefficient – wasted resources – and unfair.

Eventually, explanations came for other factors that refuted the assumption that government action was always bad. The monopoly power in hiring and buying inputs was also detrimental, and not just in selling products. Understanding “external costs” such as pollution and “spillover benefits” of public goods such as health and education made the analysis more realistic and highlighted the need for government action.

Ironically, some economists moved to libertarian ideas when some economists found more gaps in blanket assumptions about the absolute superiority of economies without government intervention. Over time, so did the general public. The standard answer was that while markets may indeed “fail”, there is no guarantee that government action will improve things. It could and would make it worse.

Antitrust law had been government policy since 1890, but it was often silliness in the 1960s. The Justice Department once challenged a merger that would have given a company 4 percent of a market!

The globalization of trade from the 1960s onwards made many questions about proportions of domestic production irrelevant. Ford and GM could dominate auto production, but that didn’t matter if Volkswagen, Datsuns, and Toyotas could flow through docks in Baltimore or Long Beach, California. The same goes for televisions, shoes, and countless other products.

Political pendulums, however, swing back and forth. With the IT revolution of the nineties, the development of smartphones, the internet, social media, etc., we saw the rise of new, enormous companies out of nowhere. We are again seeing sectors with little regulation and with individuals of enormous personal wealth leading to corporate and political power. The market they dominate involves buying and selling information, the dissemination or withholding of which has the tremendous ability to generate or ruin wealth, both politically and personally.

Finances have grown faster than production, and financial corporations have regained enormous power. Income is becoming increasingly unequal and the display of wealth is widespread. Many in the public find the economic status quo unacceptable and are willing to question conventional political positions. This takes bigger philosophical leaps for most Republicans than it does for Democrats, but it opened up a lot of room for former President Donald Trump, whose only consistent philosophy seemed to be to promote his own brand.

Republican Hawley walks into this room and others may follow. And while his agenda for achieving his desired goal might differ from Klobuchar’s, the Minnesota Democrat would be wise to work with him.

St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.

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