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The Myth of Capitalism: Monopolies and the Death of Competition Hardcover – Illustrated, November 29, 2018
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The Myth of Capitalism tells the story of how America has gone from an open, competitive marketplace to an economy where a few very powerful companies dominate key industries that affect our daily lives. Digital monopolies like Google, Facebook and Amazon act as gatekeepers to the digital world. Amazon is capturing almost all online shopping dollars. We have the illusion of choice, but for most critical decisions, we have only one or two companies, when it comes to high speed Internet, health insurance, medical care, mortgage title insurance, social networks, Internet searches, or even consumer goods like toothpaste. Every day, the average American transfers a little of their pay check to monopolists and oligopolists. The solution is vigorous anti-trust enforcement to return America to a period where competition created higher economic growth, more jobs, higher wages and a level playing field for all. The Myth of Capitalism is the story of industrial concentration, but it matters to everyone, because the stakes could not be higher. It tackles the big questions of: why is the US becoming a more unequal society, why is economic growth anemic despite trillions of dollars of federal debt and money printing, why the number of start-ups has declined, and why are workers losing out.
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Financial Times Best Books of 2018: Economics
“I think the book is too hard on some companies and CEOs. There is no way I could endorse the book.”
-Anonymous, billionaire hedge fund manager
"’Capitalism without competition is not capitalism,’ writes Jonathan Tepper in The Myth of Capitalism. He is right. After decades when most economists dismissed antitrust actions as superfluous so long as consumers were not the victims of price-gouging, we are slowly waking up to the reality that monopoly capitalism is back -- and it can be harmful even if its core products (as in the case of Google and Facebook) are free. But it's not just Big Tech that's killing competition. As Tepper shows in this engagingly written polemic, there's also excessive concentration in air travel, banking, beef, beer, health insurance, Internet access, and even the funeral industry. If you want to understand the real cause of rising inequality, discard Piketty and read Tepper instead. This is a tract for the times with a rare bipartisan appeal. “
-Niall Ferguson, Milbank Family Senior Fellow, the Hoover Institution, Stanford, and author of The Ascent of Money
"Tepper and Hearn have written an impressive and important book, documenting via their own research and that of many scholars, the very substantial increase in concentration on the supply side of US industry, leading to a decline in competition and a substantial shift in market and political power away from consumers and labor and toward the owners of capital. The consequences extend to rising inequality, slowing productivity growth, and shifts in the pattern of regulation in favor of corporations. Pieces of these growth patterns have been described before. But this book uniquely pulls it altogether. One hopes that it will have the impact that it clearly deserves."
-Michael Spence, Economics professor at Stern School of Business NYU, Nobel Prize in Economics (2001)
“What’s wrong with American capitalism today? Why is it so good for the elite, and so bad for everyone else? Is inequality the problem? Tepper and Hearn make the case that inequality is the symptom, not the disease. The problem is too little competition, not too much. They provide an immensely readable and persuasive account, superbly well-informed by a mass of recent data and research.”
-Sir Angus Deaton, Princeton University, Nobel Prize in Economics (2015)
“A broad-ranging and deeply-researched analysis of the inexorable growth of monopolies and oligopolies over the past four decades. Tepper makes a compelling case that the government’s failure to rein in tech titans and other corporate behemoths is at the root of perhaps the most troubling macroeconomic trends of our time, including rising inequality and slowing productivity. Clear and highly accessible, the book takes no prisoners, arguing that monopolists’ funding and sloppy thinking has corrupted every aspect of the system, from politicians to regulators to academics.”
-Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University, author of the bestselling book This Time is Different
"Slowing growth and rising inequality have become a toxic combination in western economies, notably including the US. This combination now threatens the survival of liberal democracy itself. Why has this happened? Some blame an excess of free-market capitalism. In this well-researched and clearly-written book, the authors demonstrate that the precise opposite is the case. What has emerged over the past forty years is not free-market capitalism, but a predatory form of monopoly capitalism. Capitalists will, alas, always prefer monopoly. Only the state can restore the competition we need, but it will do so only under the direction of an informed public. This, then, is a truly important book. Read, learn and act."
-Martin Wolf, Chief Economics Commentator, Financial Times
“Tepper and Hearn make a compelling case that the United States economy is straying increasingly far from capitalism, a process that is having deleterious consequences for both productivity growth and inequality. The villain in their story is the growth of monopolies and oligopolies, abetted in many cases by government policies that either turned a blind eye to increasing concentration or actively abetted it by creating rules to entrench incumbents. Their case is animated by passion but delivered in a detailed, analytical and factual manner that is still enjoyable to read. More importantly, it is not an excuse for despair but a specific set of policy recommendations for action.”
-Jason Furman, Harvard Kennedy School, Chairman of the Council of Economic Advisers (2013-17)
“Whatever happened to antitrust? In the US, it has for many years been effectively dormant as a tool to limit monopoly and monopsony power. Internet shopping isn’t much help to a firm buying an input made by only one supplier, nor a consumer choosing between different brands all made by the same giant company, and workers can’t easily switch to new locations and employers. The indisputable trend of rising concentration in American industry may be a major factor in the trend fall in labor’s share of national income. This engagingly written book concludes with a powerful set of proposals to reverse the trend and make the capitalist market economy function as it should. Important – a must read.”
-Richard Portes CBE, Professor of Economics, London Business School, Founder and Honorary President, Centre for Economic Policy Research
"In a compelling and deeply researched polemic, Tepper and Hearn describe a market that is broken. Increasingly, instead of delivering the benefits of competition to all, it is driving monopoly profits to the few. Regulatory and policy capitulation in the face of market concentration has put a dead weight on productivity and fostered inequality not just in the United States but globally. Their call to free markets from private monopolists and oligopolists should unite both left and right the world over."
-Charles Kenny, Senior Fellow, The Center for Global Development, Author of Getting Better
“This is an extremely important, timely and well researched book. Jonathan Tepper is himself a successful entrepreneur and he knows what “good” capitalism looks like. The current system, suborned by market abuse, corporatism, cronyism and regulatory capture and resulting in increasing inequality and anger amongst the wider population is badly in need of reform. If it is not reformed by people who believe in markets it will be reformed by people who don’t and that would be bad news for everyone. Jonathan Tepper understands this well and I recommend his book to every member of the US Congress.”
-Sir Paul Marshall, Chairman of Marshall Wace Hedge Fund Group
“Tepper and Hearn point out that, if current trends are left unchecked, the light at the end of the tunnel is a train driven by monopolists and oligopolists that a privileged few can afford a ticket on. This narrative of monopoly profits translating into lobbying and influence-peddling affects all of us in the price of drugs, airplane tickets, cable bills, banks, and even smartphones. The Myth of Capitalism should be required reading by regulators, students, and anyone with a stake in America's future.”
-J. Kyle Bass, Chief Investment Officer, Hayman Capital Management
“If you care about the future of American capitalism, you should read The Myth of Capitalism. Every member of Congress ― heck every voter ― should read this to know how our economy has changed and how monopolies and oligopolies are shaping our lives.“
–John Mauldin, co-author with Jonathan Tepper of best sellers Endgame and Code Red
“Whether you toe a Schumpeterian line, that capitalism is and must remain a Darwinian survival game between gargantuan monopolies and upstarts, or are terrified that the empire of monopolies all around us is destroying the foundations of democracy, Jonathan Tepper’s new book is an essential source of empirical evidence regarding the power and reach of monopolies in modern society.”
-Yanis Varoufakis, former Greek Finance Minister, DiEM25 co-founder, Professor of Economics, University of Athens
"As we face concerns about the power of companies like Amazon, Facebook, and Google, we would be wise to arm ourselves with a knowledge of history. This breezy, readable account of the theory and practice of monopoly, duopoly, and oligopoly provides a solid foundation for the argument that many of the ills of today's economy can be traced to the concentration of power in fewer and fewer large firms."
-Tim O'Reilly, founder and CEO of O'Reilly Media
“A sweeping and thought-provoking treatise on the past, present and future of competition. The forces at play in fairness, inequality, consolidation and dispersion shape the great game as it shapes us from markets to geopolitics.”
-Josh Wolfe, Founding Partner & Managing Director, Lux Capital
“We are barreling towards an economy with few lords and millions of serfs. Tepper’s The Myth of Capitalism fiercely articulates the raw, hard truth behind the monopolistic behaviors of today’s corporations driving inequality, endangering the consumer, and eroding what American Capitalism used to mean.”
-Scott Galloway, Professor of Marketing and Serial Entrepreneur
"A takedown of what we now call 'capitalism' - by and for people who are true believers in it. Tepper and Hearn have written a love letter for a (free market) romance, scorned. As a person who has the word ‘capitalist’ in his job title, I believe we need to reverse the many-decades trend of falling entrepreneurship if we want to provide more opportunity for more people and better products and services for all of us. This book may give you a way to rekindle your love for markets, by proposing fixes for all the ways they've broken us."
-Roy Bahat, Venture capitalist, head of Bloomberg Beta
“Tepper and Hearn’s sharp analysis reveals fresh insights into the realities, contradictions and myths of modern capitalism. They also propose a number of compelling policy measures to improve competition that will resonate right across the political spectrum, and across societies. This book deserves the attention of policymakers and global citizens with a deep interest in how to reform our economic system―for the many, not the few.”
-Kevin Rudd, 26th Prime Minister of Australia and President, Asia Society Policy Institute
“Jonathan Tepper and Denise Hearn have stated, 'While many books have been written on capitalism and inequality, the left and right don't even read the same books. Researchers have analyzed book purchases, and there is almost no political or economic books that both sides pick up and read.' They hope that The Myth of Capitalism will bridge the divide and find common ground between the left and right. I strongly endorse that goal. At a time of extraordinary partisanship in the U.S. Congress and legislative bodies all over our country, the need for some common grounds of public policy is imperative to create new jobs, new industries, new standards of economic and political freedom, and new leaders who will provide a more stable base for American and world peace and justice. I salute the wisdom and vigor with which the authors have supplied thoughtful critiques of past economic policies and excellent prescriptions for the future."
-Senator Richard Lugar (retired)
"This is a brilliant, clear work of political economy in the classical sense: a rigorous analysis of how government action benefited monopolistic firms, which have used their profits to procure even more governmental favors, which in turn entrench their position at the top of the economic food chain. Even more importantly, Tepper connects his expertise to our everyday experience. If you have ever been strong-armed by an airline, ignored by a cable company, or cheated by a bank, you'll see the roots of your misfortune in the dynamics of lax antitrust enforcement and absentee regulators so capably chronicled here. This book should be required reading in introductory economics courses, to understand the true nature of the contemporary economy."
-Frank Pasquale, Professor of Law, University of Maryland
“If you want to start a business in America today, or just want to know what's gone wrong with our country, The Myth of Capitalism is a great place to start. Tepper and Hearn provide a highly readable and very useful guide to America's monopoly problem, and to the many great and growing harms of economic concentration. Inequality, political disfunction, the choking off of opportunity, the rise of too-big-to-fail, the book shows how all stem largely or mainly from monopolization. Best of all, the authors make clear this concentration is not the inevitable result of any natural force within capitalism, but of political decisions that we can begin to reverse today.”
-Barry C. Lynn, director of Open Markets Institute, author of Cornered: The New Monopoly Capitalism and the Economics of Destruction
“A deeply insightful analysis of the rapidly creeping tentacles of the corporatocracy and the devastating impacts of a predatory form of capitalism. By discouraging competition, empowering the very few ― the very rich oligarchs ― and demolishing the very resources upon which it depends, predatory capitalism has created a failed global economic system, a Death Economy. This book helps us understand the importance of replacing it with a system that is itself a renewable resource, a Life Economy.”
-John Perkins, former chief economist and author of New York Times best-selling books including Confessions of an Economic Hitman and The Secret History of the American Empire
From the Inside Flap
Capitalism is the greatest economic system in history. It has lifted people from poverty and created widespread wealth for billions of people. Unfortunately, the so-called capitalism that exists in today's United States is the antithesis of a competitive marketplace. Monopolies and oligopolies dominate the economy, with a few winners and millions of losers. The Myth of Capitalism explains how we got to this state and clearly points the way back to open markets that work for everyone.
Capitalism without competition is not capitalism, but in industry after industry, competition is dying. Consider these facts:
- Four airlines dominate airline traffic, often enjoying local monopolies or duopolies in their regional hubs
- Two corporations control 90% of the beer Americans drink
- Five banks control over half of the country's banking assets
- More than 75% of households with high-speed Internet access are serviced by a single provider
- Many states have health insurance markets where the top two insurers have an 80-90% market share
- Many hospitals are local monopolies, and drug companies have monopolies through patents that are endlessly extended
Without competition, everyone suffers. Giant corporations squeeze workers' wages. Companies grow fat with record profits, sending trillions to the wealthiest. Unjust inequality rises. Dominant monopolies choke startups and manipulate markets to their advantage. Voters feel that markets are rigged, and populist politicians triumph. A truly competitive system prevents unjust inequality, averts price gouging, fosters economic growth, and encourages startups.
The Myth of Capitalism bridges the gap between the left and the right. The authors are unabashedly pro-competition, not pro-big business. Big business is not bad, but too often size has come through mergers that have subverted capitalism. The proposed solutions offer a path back to higher economic growth, more jobs, higher wages, and a level playing field for all.
- Publisher : Wiley; 1st edition (November 29, 2018)
- Language : English
- Hardcover : 320 pages
- ISBN-10 : 1119548195
- ISBN-13 : 978-1119548195
- Item Weight : 1.1 pounds
- Dimensions : 6.2 x 0.8 x 9.1 inches
- Best Sellers Rank: #268,296 in Books (See Top 100 in Books)
- Customer Reviews:
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There are literally dozens of books floating the marketplace written by business people with a story to tell or an ax to grind, all of which are seeking our attention, our trust, and with the hope that either individually, or collectively, they will have a positive impact on the way we conduct business. I would guess that Mr. Tepper's and Ms. Hearn's target audience are business leaders and so-called 'influencers' in the corporate and business worlds.
What attracted me to this book, and which prompted me to want to pay attention to what the authors have to say, was actually their publisher, John Wiley & Sons, whose numerous books on law practice found their way onto my professional bookshelves during the 45 years I was actively practicing law. Other than what I read from the information about the authors at the tail end of the book and promotional material on the dust cover, I know next to nothing about them; but, that said, I do have a great deal of confidence in the Wiley imprimatur.
The authors make a provable case that the economic system that we live under is not capitalism, but oligopoly; and they also make the case that the cure for whatever ails the American economy can be found in fostering and enforcing competition by vigorous prosecution of the antitrust laws; prohibiting (and prosecuting) predatory pricing and other unfair trade practices, and subjecting tech giants like Amazon and social media to the rules we commonly apply to common carriers and public utilities, because that is what they actually are.
The authors make a good case that monopolies, and those that behave like monopolies, i.e., markets in which there are may be fewer than five dominant players either selling goods and services, or purchasing goods and services (monopsolies), where the sheer agglomeration of economic wealth and power deprive the market itself of any meaningful competitive character. They conclude, and I would certainly agree, that concentrations of such economic power are inherently illegitimate, and harmful to everyone else concerned.
Each chapter of this book concludes with a series of short statements that summarize the basic ideas that the economic events discussed in that chapter is meant to convey. It would be as if those bullet points were essay examination questions in a college-level course in macroeconomics with a focus on the negative underside of the American political-economic system as objects for future reform. The sum total of what the authors have to say is that the American economy is being sucked dry by wrongheaded policies that put the interests of corporations first, and those of the American people last. And the evidence is everywhere you look.
By implication, the authors contend that Milton Friedman and the Chicago School of economists get it wrong with their dogmatic assertion of shareholder value as the single most important feature of our economic system. On this score, I think they get it right, because business corporations are not creatures of a capitalist economic system; i.e., capitalism can be practiced by anyone, natural born or in association with others, without the necessity of a fictitious entity that exists in law, but not in Nature, called a 'corporation'. In other words, it is the law, not the nature of the enterprise, that is the force multiplier in business. As individuals, business tycoons can be wealthy during their lifetimes, but that ceases when death occurs, and that happens to all of us. It certainly impairs business relationships that may extend beyond the life of single individuals. Partnerships, joint ventures, stock corporations and business trusts are ways in which the lives of individuals become unnecessary to the conduct of business affairs. And thus, business corporations ought to be subject to social controls because they are created by legislatures who are elected to set policy for the entire body politic, not simply businessmen and their investors. Economic efficiency may be a highly sought after value, but it is not the only one. I think Mr. Tepper and Ms. Hearn would agree that outside of government itself, there are very, very few social institutions that are as cohesive and well-organized as business corporations; and that imbalance has done great harm to us all by giving businessmen undeserved leverage over our economic life and political life as a society. Corporations, and the activities that they generate, are scalable, whereas other natural things are not simply by virtue of the way in which things tend to fall apart the larger they become.
That aside, the recommendations that the authors make are intended to make business entities less able to abuse their inherent economic power. Tepper and Hearn focus on the business end of creating wealth with the idea of leveling the playing field for all of those who choose to partake in economic activity. Needless to say, there recommendations leave out many other considerations. One of the principal considerations that gets left out is the so-called 'Commons', that which belongs to all of us in common, and remains undivided because it is held in common. Several states of our national Union style themselves as 'Commonwealths', specifically Massachusetts, Virginia, and Pennsylvania. That we on much in common we inherited largely from our English forebears who understood that human society holds much in common that cannot be monetized directly by each of us were members of that society. I think that the Friedmanites tend to forget that, so focus as they are on shareholder value and the duty a corporation owes to those shareholders. Those shareholders did not create the corporations in which they claim to have value invested; the state created the mechanism whereby a fictitious entity called a corporation allowed those shareholders to place their money and hopes of future wealth, something in which those shareholders may claim an ownership equity interest, but whose control is vested in others.
Our political system was specifically designed to avoid the evil effects of monarchy and its feudal heritage in which King and Church conspired against the people's ability to improve their lives through their own productivity and efforts. The Hamiltonian view of the Republic that the Founders intended to create was that the Government would support the advancement of commerce, and of the sciences, but to do so in a way that would not allow those institutional interests to usurp political power. Hamilton and his brethren were no fools; but their collective life experiences, however broadly-experienced and well-educated they might have been, could not have included an ability to imagine a situation in which business corporations would be able to usurp political power to the extent that they have done so from the post-Civil War era to the modern day, all in the name of economic efficiency, based upon the naivete and self-interest of economic philosophers, most of whom were mathematicians. As theoreticians and advocates, they had no understanding that a theoretical model that works well in the short run, using hypothetical examples at the lower levels of scalability implicitly includes hidden force multipliers that we have seen to have serious and uncontrollable adverse consequences when allowed to operate at their logical conclusions. Nowadays, we see these phenomena as the products of so-called 'power laws' having effects such as we saw at the time of the 2008 economic meltdown that nearly destroyed the American economy, and indeed, economies worldwide. That these economic innovations over the past century have been celebrated as being more 'efficient' has sufficiently come to mean that when economic conditions go south, they do so much more rapidly and with less ability to fend off disaster than their proponents could ever imagine. This is the effect of a nuclear reactor going critical with catastrophic consequences.
That they did so willingly, albeit with some dispute amongst themselves over whether the Jeffersonian imagery of the independent yeoman farmer should be the centerpiece of the American political system, and with no ability to even guess at how the Industrial Revolution just then beginning would work itself out. Their common sense reasoning gave them a firm grounding at the beginning of their venture into the political future of our country, and their emphasis on the short-term fixes for the problems they saw could not imagine the future problems those measures would create down the road. Given the bounded rationality of the human mind, were we to do this today, we might come up with different answers as to how to control the economic dynamo that is capitalism. But Alexander Hamilton and his cohort would certainly understand the resistance that unaccountable wealth-backed economic interests would used to protect themselves. And, as we have discovered, economic tyranny can be as brutal and oppressive as absolute monarchy.
Regrettably, Mr. Tepper and Ms. Hearn make no mention of corporate influence in political affairs other than to mention (in considerable detail) corporate efforts at lobbying Congress and the executive branch in regulatory matters that affect competition. In this respect, their failure to discuss the effects of the Citizens United case decided by the Supreme Court is an omission of monumental proportions, because in the competition for ideas, the loudest voice in the public square is able to drown out all other competitors. Corporate wealth coupled with social media is the decisive political problem of our time, where disinformation and outright fabrication are the weapons of choice. Where money and access are force multipliers, there needs to be away of protecting the public square from overuse and abuse by those who have both the intent and the resources to drown out all other messages. This is the message of mass dictatorships that occurred during the 20th century, where propaganda was monopolized by the state for its own purposes.
Back when I was younger, and when broadcast bandwidth was limited, use of the airways for political purposes was had been by the so-called "equal time" rule that required broadcasters to provide equal amounts of time for competing political messages. That had the effect of limiting the amount of time the most wealthy and well-connected advocates could obtain for their political messages to the electorate. Back then too, there were no social media to target and influence potential voters by bombarding them with unending streams of political advertising and messages intended to influence their political views and votes. Sensory overload has had a deleterious and highly divisive effect on our politics, and our ability to hear and understand what others have to say. That should have been afforded a few pages of discussion and analysis in this book.
The American state was intended to be representative, albeit in different ways, and hosting different constituencies depending upon the offices and interests to be represented, but always in the name of the people. At bottom, the people of the United States were supposed to be in control ultimately Infecting that political system with the idea that imaginary voters in the form corporations, because they exist in the contemplation the law only, was not with the Constitution was intended to create. From the very beginning, only natural born individuals acting in their capacity as citizens were afforded the right to vote, even as the franchise was restricted to property holders; but inanimate property itself had no vote. The idea that a single man could incorporate himself, and transfer his property to that imagined entity, reserving to himself the right to control the corporation for his personal benefit, would have been seen as an absurdity bordering on madness. Nonetheless, in today's business world, that is what businessmen do to insulate themselves from personal liability arising from the conduct of their business.
There is a move afoot that would effectively give business corporations and others that exist only in the contemplation of the law the same political rights as individuals, including the right to vote. The idea is not entirely new. A century ago, in England, a man owning a business in one election district, while residing in another, have the right to vote in both the district in which he resided and in which he maintained his business. That has since been changed; but the idea of a multiplicity of voting opportunities based upon localized business interests has not gone away.
In matters of corporate governance, votes are counted on the basis of the number of shares voted in favor or against management's wishes; whereas, in the political world, it is still 'one person, one vote'. In contrast with corporations, we do not permit weighted voting based upon the wealth of the voter, i.e., the number of shares a voter as personal shareholder may have. In the political sphere voters are stakeholders, not shareholders, meaning that voters have a political interest in the outcome of any election on a wide range of issues not restricted to the health of a business corporation or the prerogatives of that corporation's management. Individual voters acting in their capacity as citizens of a state, district, county, or community have no direct pecuniary interest in the outcome of a political election. Corporations are excluded from voting because they are persons in the eyes of the law only, and only because by judicial decision, corporations and unincorporated associations are now treated as juridical entities for purposes of litigation and other matters of law. Political entities as subdivisions of the state in which they exist have no general right to vote; such votes as they may cast in an election are permissible only where the state legislature has provided a mechanism for voting on particular issues, and within the carefully circumscribed provisions of the state enabling statute in matters affecting those incorporated entities specifically.
Back before 1913, when members of the United States Senate were appointed by the respective state legislatures of the states they represented, the states themselves were the voters representing their local constituents, not the citizens of those states directly. With the adoption of the 17th Amendment, proposed by Congress in 1912 and declared to be ratified by 36 of the van 48 states of the Union on May 31, 1913, Senators became popularly elected to the same extent as members of the House of Representatives. With that, the philosophical construct of a state legislature representing a governmental branch of a state under the Constitution was officially abandoned. However, the idea that business, economic, and social groups of citizens could use their financial material resources to achieve the same objectives that the 17th Amendment was intended to reject, by reinstituting indirect election, not by politically responsive state legislatures, but by investment-backed economic interests in the form of corporations, supposedly representing their shareholders, which shareholders might also be incorporate business interests, rather than real people. Although corporations could not yet cast a legal vote in an election, the door was open to what amounted to a monopoly of messaging in terms of ability to drown out competing voices of the public square. Monopoly in the public sphere begets monopoly in the political sphere, resulting in skewed priorities and mismanagement of public offices at all levels of government.
Therefore, the state, representing all of us who are not shareholders, and including those who are, is entitled to the final say. Under a democratic, republican form of government, that would seem to be the logical and equitable thing to do. Each of us has a stake in the outcome, Milton Friedman notwithstanding.
In sum, there will always be inequality in economic affairs, but the way that things are organized now have effectuated too large a departure from human scale, taking a useful economic tool and allowing it to become the enemy and oppressor of human society. As Mr. Tepper and Ms. Hearn suggest, reducing the power of monopolies and promoting competition would be an effective way of bringing corporate economics back to scale by preventing business corporations from unfairly leveraging their economic power exclusively for their own benefit and for the benefit of their investors and managers.
Tepper fails to mention Dr. Dao suffered a broken nose, loss of two front teeth and more. He was removed not to make way for another paying passenger but for a United employee trying to get to another location. Dr. Dao missed scheduled hospital consultations.
That graphic story sets the stage for what happens under lack of competition. In a more competitive airline environment United stock value and ticket sales would plummet. Since airlines have near monopolies, customers have no choice. The incident had no substantive financial impact on the company.
"There are fewer winners and many losers when there is less competition. Rising market power by dominant firms has created less competition, lower investment in the real economy, lower productivity, less economic dynamism with fewer startups, higher prices for dominant firms, lower wages and more wealth inequality. The evidence from economic studies is pouring in like a flood."
Tepper goes on to cite a substantial body of evidence to support those statements. As antitrust cases drop, mergers soar. 75% of industries have experienced increased concentration levels and higher profit margins.
As S&P companies have grown older and larger, initial public offerings have dropped dramatically.
The decline of unions, rise of noncompete clauses, stock buybacks and many other factors explain what went wrong. Just as companies monopolized industries, the wealthy monopolized ownership.
"According to Gallup, only 54% of Americans own stocks either in brokerage accounts or through retirement savings plans. This is a decline from 62% prior to the 2008 financial crisis. And less than 14% of households directly own corporate stock… The wealthiest 1% own nearly 50% of stock and the top 10% own more than 81%. In contrast, the middle class owns only 8% of all stock."
The rise of market concentration and death of competition have led to increased inequality and decreased productivity. Product markups have increased from 18% to nearly 70% in 2014. Owners are getting rich but workers can afford to buy less, even as productivity continues to rise.
Tepper concludes with several pages of guiding principles for reform. I see many of them appealing to both the right and the left but especially the middle of the political spectrum. A few in abbreviated form follow:
* The essential role of capitalism is not maximizing efficiency. Instead it is innovation and solving human problems.
* Monopolies are the enemy of competition. Natural monopolies are limited and should be regulated to serve the public interest.
* Competition promotes the diffusion of economic power and political freedom.
* Capitalism must favor equal opportunity, but not equal outcomes.
* Markets only work with clear rules set by governments and societies.
* Mergers that materially reduce competition should be reversed and prevented, including vertical integration by dominant firms.
* Standards for rejecting mergers must be based on simple rules grounded in human values, not by economists.
* Regulations must serve society, not erect barriers to entry.
* Regulatory capture and revolving doors should be avoided.
* Net neutrality.
* Patents and copyright periods should be shortened.
* Workers must be granted shares and become owners of capital (I hope they also share in corporate governance)
* Share buybacks should be severely limited
* Managers should be forced to hold shares earned through options for a longer period.
Tepper calls on readers to become politically active. Encourage elected officials to restore competition.
"Reforming markets is not a left or right issue. It is a human issue to get more freedom and promote a healthier economy. If you’re left leaning, competitive markets will help reduce unjust inequality. If you’re right leaning, restoring competition will promote entrepreneurial activity."
I hope Tepper’s ideas are discussed widely, especially during Presidential candidate debates and beyond.
Top reviews from other countries
They lay out a compelling case that the increasing creep of monopolisation is the underlying cause for many of the economic and political ills we see today, most notably from rising inequality and declining economic mobility. They explain how this extreme concentration came to be prevalent, both in the industries we all know treat us like monopolies (think of the last time you called your cable provider), to ones that are perhaps less obvious (beer, despite myriad brands, is essentially a duopoly). And they illustrate how the dual forces of economics (stock markets demanding ever-higher margins) and politics (election funding and a revolving door to higher paid private sector jobs) continue to pressurise further monopolisation. Finally, it brings us to the present day, where the frustrations from lower wages, higher costs, and decreased choice boil over into populist anger.
Tepper and Hearn also lay out some useful thoughts on how to fix the system, though they all boil down to a simple point - capitalism, when allowed to operate freely, encourages wealth creation and economic justice - a rare non-partisan but rather common sense conclusion.
The book is written simply. Many of the illustrations are anecdotes which we can all see and relate to, to illustrate points which are then backed up by data. I found it easy going and read it in two sittings. For anyone who has (or claims to have) read Piketty, this book comes a refreshing counterpoint, as in a stroke it is both easier to read and more incisive on the problems underlying weak growth and rising inequality.
Highly recommended to anybody who cares about politics, economics, growth, or justice.
This is what Tepper and Hearn do in the Myth of Capitalism - a book that is a pleasure to read but at the same time a thorough research across oligopolies across the US and the world, in many sectors of the economy. The authors explain with compelling evidence how capitalism has turned into a game of pie-sharing across a few corporates, which have squeezed profits from consumers and wages from workers to maximise profits, at the same time lobbying the government to stay out of their business. Few authors have exposed this evidence, which is undeniable: think of airlines, beverages, toothpaste products, and Amazon itself - all these sectors are monopolies or oligopolies, where consumers have only the illusion of choice.
Reviewed in the United Kingdom 🇬🇧 on January 8, 2019
Tepper and Hearn pull no punches in making the case that US antitrust has utterly failed since Reagan with a fascinating look back at the historical context of how antitrust policy has waxed and waned throughout the 20th century and the consequent impact thereof. The links between monopoly/oligopoly and totalitarianism are particularly thought-provoking.
At a time when policymakers everywhere can't seem to pin down why there is so much discontent across much of the Western world, Tepper leaves you with a sense that a more active approach to antitrust could have led to very different outcomes.
I read this in a couple of sittings. Absolute page-turner.