Monopoly Monotony

We’ve lost track in the post-Reagan years of what antitrust laws are meant to protect. Yes, they’re intended to protect consumers from overly-inflated prices. But they’re also intended to protect manufacturers and workers.

In the July Harper’s, Barry C. Lynn lays out in clear and powerful terms the case for breaking up Wal-Mart by supplimenting existing antitrust law and enforcing them. Our biggest complaint should not be that Wal-Mart is a monopoly, limiting consumer choice, but rather that it is a monopsony—a market situation in which manufacturers and distributors are subjected to the whims of a single dominant buyer. Setting up a monopsony is exactly what Wal-Mart has done. Even such manufacturing and producing giants as Procter & Gamble (P&G), Coca-Cola, Kraft Foods, and Levi Strauss & Co. are in a majority of respects today micromanaged by Wal-Mart.

Such control in the economic marketplace takes power out of the hands of citizens and puts it in the artificial hands of a mega-corporation. Such political consequences are the most obvious danger, but so is the very existence of a true monopsony:

Even if the American people did choose to bear the extreme political costs of monopoly, the particular type of power wielded by Wal-Mart and its emulators makes no economic sense in the long run. On the surface, it may seem to matter little who wins the great battles between such goliaths as Wal-Mart and Kraft, or between Wal-Mart and P&G. Yet which firm prevails can have a huge effect on the welfare of our society over time. The difference between a system dominated by firms built to produce and a system dominated by firms built to exercise monopsony power over producers is extreme. The producers that dominated the American economy for most of the twentieth century were geared to build more and to introduce new, to protect their capital investments against overly predatory investors, to raise price faster than cost, to show some degree of loyalty to workers and outside suppliers and communities. Wal-Mart and a growing number of today's dominant firms, by contrast, are programmed to cut cost faster than price, to slow the introduction of new technologies and techniques, to dictate downward the wages and profits of the millions of people and smaller firms who make and grow what they sell, to break down entire lines of production in the name of efficiency. The effects of this change are clear: We see them in the collapsing profit margins of the firms caught in Wal-Mart’s system. We see them in the fact that of Wal-Mart’s top ten suppliers in 1994, four have sought bankruptcy protection. [Harper’s Magazine, July 2006, pp 34-35]

What’s more, Lynn cautions against some of the traditional civic responses to Wal-Mart’s abuse of power, including:

• encouraging “yet more mergers among its suppliers and competitors” to increase their bargaining power in proportion to Wal-Mart’s


• micromanaging Wal-Mart via state and local governments—“requiring it, as Maryland recently did, to devote 8 percent of its payroll to health insurance”


• making it “easier for its workers to unionize”

These actions could spell disaster for the antitrust cause against Wal-Mart: “super-consolidated suppliers” will have the same political and economic interests as Wal-Mart itself, labor unions will suddenly be interested in Wal-Mart’s success rather than its end, and government agencies that regulate Wal-Mart will be likely to allow the corporation to continue to exist now that it is being regulated.

If we agree that the consequences of such actions would be bad for our democractic republic and for our way of life, Lynn posits that we have only one remaining choice—“We must restore antitrust law to its central role in protecting the economic rights, properties, and liberties of the American citizen, and first of all use that power to break Wal-Mart into pieces.” I heartily agree.