This morning, NY Times reporters Neil Irwin and Weiyi Cai noted that "The central, befuddling economic reality of the United States at the close of 2020 is that everything is terrible in the world, while everything is wonderful in the financial markets. It’s a macabre spectacle. Asset prices keep reaching new, extraordinary highs, when around 3,000 people a day are dying of coronavirus and 800,000 people a week are filing new unemployment claims. Even an enthusiast of modern capitalism might wonder if something is deeply broken in how the economy works." They set out to explain why markets boomed in the midst of human misery and economic despair. On aggregate, salaries and wages fell less than anyone would have guessed-- but that is because "the millions of people no longer working because of the pandemic were disproportionately in lower-paying service jobs. Higher-paying professional jobs were more likely to be unaffected, and a handful of other sectors have been booming, such as warehousing and grocery stores." We have experienced mass unemployment but, statistically, just a small drop in total compensation, especially after you factor in the CARES Act that Congress passed in March, which pumped something over $600 billion into Americans’ pockets from late March 'til November.
At the same time, personal consumption plummeted-- "a decline in spending on services: All those restaurant reservations never made, flights not taken, sports and concert tickets not bought added up to serious money-- hundreds of billions of dollars worth. That money was spent on durable (a new bike, a better chair to work in from home) and non-durable (booze and food to cook, for example) goods. "But," they reported, "the extra spending on stuff did not exceed the drop in spending on services. And thanks to lower rates, households’ personal interest payments and other miscellaneous outlays dropped by $59 billion... This combination of soaring personal income and falling spending pushed Americans’ savings rate through the roof. From March through November, personal savings was $1.56 trillion higher than in 2019, a rise of 173 percent. Normally the savings rate bounces around in a narrow range, around 7 percent just before the pandemic. It spiked to 33.7 percent in April, its highest level on record dating to 1959. Even as millions of individuals faced great financial hardship this year, Americans in the aggregate were building savings at a startling rate. It had to go somewhere... [And that] helps explain the 16 percent rise in the S&P 500 for the year... [T]he rise in savings among the people who have avoided major economic damage from the pandemic is creating a tide lifting the values of nearly all financial assets."
They concluded that the Federal Reserve played a big role. "The central bank has lowered interest rates to near zero; promised to keep them there for years; bought government debt; and supported corporate bond markets. But the surge in asset prices has made its way into many sectors far from any form of Fed support, like stocks and Bitcoin. And the surge has, if anything, accelerated this fall despite a lack of additional stimulative action from the Fed." They also warn that the economic story of the pandemic is unpredictable and still unfolding. Racial injustice was not part of their analysis.
Deeper still-- and more consequential-- is the essay Foreign Affairs published in its new issue by Zephyr Teachout, Monopoly Versus Democracy-- How To End The Gilded Age. She traced how, during the Gilded Age at all levels of government and in every part of the country, the robber barons used their overwhelming wealth "to stop or avoid regulations and subvert the democratic process... But throughout the Gilded Age, American society was beginning to change in ways that would eventually challenge the robber barons and the political class they controlled. Massive shifts were underway in the country’s labor force and demographics"-- women in the work force, an expansion of labor unions, an explosion of immigration, rapid industrialization, urbanization.
As the robber barons decorated their palaces and mused about their public responsibilities, slums and tenements were rife with disease, farmers struggled under crushing debts, and factory workers and miners risked death and dismemberment to eke out a living. Meanwhile, the chorus of dissent that had been rising since the 1870s grew louder, as farmers, factory workers, antitrust leagues, labor unions, and local-level politicians joined forces. Three groups emerged as the main opponents of the status quo: the populists, the progressives, and the socialists. What all three realized, to varying degrees, was that the root of the inequalities of the Gilded Age was the extreme concentration of market share, wealth, and political power. American socialism fell short as a political force, but the Populist and Progressive movements-- which overlapped and merged in important ways-- became powerful vectors of change.
The parallels with the present day are obvious, and it has become commonplace to hear the current era described as a new Gilded Age. As the journalist Barry Lynn points out in his book Liberty From All Masters, the robber barons shared with today’s high-tech monopolists a strategy of encouraging people to see immense inequality as a tragic but unavoidable consequence of capitalism and technological change. But as Lynn shows, one of the main differences between then and now is that, compared to today, fewer Americans accepted such rationalizations during the Gilded Age. Today, Americans tend to see grotesque accumulations of wealth and power as normal. Back then, a critical mass of Americans refused to do so, and they waged a decades-long fight for a fair and democratic society. On the other hand, today’s antimonopoly movements are intentionally interracial and thus avoid a massive failure of the populists and progressives of the late Gilded Age, who abandoned Black Americans even though they had played a crucial role in fostering both movements.
Over time, the ultrarich and the many well-compensated professionals who are always available to do their bidding chipped away at the progress that the Populist and Progressive movements achieved. Today’s populists and progressives would do well to remember what are perhaps the most important lessons of those limited victories: the struggle against inequality is primarily a fight against monopoly power in its many guises, and because monopoly power is never race-neutral, that fight cannot truly succeed unless it does so in an inclusive way.
Teachout points to the election of 1912 as "the most clarifying political moment of the era," giving populist-leaning New Jersey Governor Woodrow Wilson a landslide win over the status quo candidate, William Taft (R) and a now "full-throated corporatist" Teddy Roosevelt, as well as Socialist Eugene Debs.
Wilson- 6,296,284 (41.8%)- 435 electoral votes, 40 states
Roosevelt- 4,122,721 (27.4%)- 88 electoral votes, 6 states
Taft- 3,486,242 (23.2%)- 8 electoral votes, 2 states
Debs- 901,551 (6.0%)- 0 electoral votes, 0 states
Once Wilson moved into the White House, "he quickly moved to put his antimonopoly vision into action. Among the most consequential steps he took was to sign into law the Clayton Act of 1914, which toughened antitrust regulations. As Lynn relates in his book, Wilson sent the pen that he had used to sign the bill into law to Samuel Gompers, the head of the American Federation of Labor, the most important labor union in the country. Both men understood that labor policy and antitrust policy were two sides of the same coin: pro-labor laws made it easier for workers to unionize, and antitrust laws made it harder for capitalists to collude with one another and abuse workers. Gompers called the Clayton Act 'Labor’s Magna Carta.'" Wilson' racism-- not as pronounced as Roosevelt's, but pronounced enough-- guaranteed an incomplete victory (i.e., a failure) that abandoned Black citizens. Teachout wrote that "when confronted with the challenge of building a multiracial coalition, populists and progressives shrank from the task, embracing first helplessness, then racism, and finally segregation-- preferring, in the end, to keep the support of white southern Democrats, in a prelude to the dynamic that, years later, would limit the reach of the New Deal."
Like their forebears in the early twentieth century, today’s Americans have experienced decades of growing inequality and increasing concentrations of wealth and power. The last decade alone witnessed nearly 500,000 corporate mergers worldwide. Ten percent of Americans now control 97 percent of all capital income in the country. Nearly half of the new income generated since the global financial crisis of 2008 has gone to the wealthiest one percent of U.S. citizens. The richest three Americans collectively have more wealth than the poorest 160 million Americans. In most industries, a few companies control the field, dictating terms, squeezing out competitors, and using differential pricing to extract cash and power. Three companies control digital advertising, four companies dominate beef packing, and an ever-shrinking number own the country’s hospitals. To turn back this monopolistic tide, today’s populists and progressives should focus on the priorities that drove their forebears: breaking up companies that have become too big (or reclassifying them as public utilities) and making it harder for wealth to buy political influence by strictly limiting campaign contributions.
Teachout advocates for a new populist-progressive movement built around racial justice, a breakup of monopolies and campaign finance reform and insists that "That prospect seems less far-fetched than it might have just a few years ago. Today, small-business owners and warehouse workers are joining forces in new grassroots groups that are taking on today’s monopolies and putting the plight of nonwhite people front and center. One such organization is Athena, a diverse, multiracial coalition whose nonwhite leaders argue that Amazon has been particularly abusive to Black workers and has had particularly damaging effects on minority-owned businesses. Meanwhile, national political figures such as Senator Bernie Sanders, a Democratic-aligned independent from Vermont, and Senator Elizabeth Warren, Democrat of Massachusetts, regularly rail against abusive monopolists, as do many other Democratic members of Congress and state attorneys general. David Cicilline, a Democratic U.S. representative from Rhode Island and the chair of the House Antitrust Subcommittee, recently wrapped up a remarkable 16-month-long investigation into Big Tech, gathering over a million documents, interviewing hundreds of experts (including me), and calling the chief executives of Amazon, Apple, Facebook, and Google to testify before Congress. The resulting report calls for 'structural separation,' or the breaking up, of Big Tech companies; nondiscrimination regimes for companies that have big network effects (a form of public-utility regulation); the overturning of harmful court decisions; and the enforcement of existing laws against abusive behavior-- a regulatory agenda that could easily be extended beyond Big Tech. Also important is the way in which the report frames monopoly power as the root of inequality and a threat to democracy. 'American democracy has always been at war against monopoly power,' Cicilline said at a committee hearing last July. He noted that Big Tech platforms, like the trusts of the Gilded Age, 'enjoy the power to pick winners and losers, shake down small businesses, and enrich themselves while choking off competitors. Their ability to dictate terms, call the shots, upend entire sectors, and inspire fear represent the powers of a private government.' Antitrust has the potential to bridge the partisan divide that has paralyzed U.S. politics in the past decade. Recent polls have shown high levels of support for trustbusting among Republicans. And a number of GOP members of Congress enthusiastically participated in Cicilline’s investigation. In the end, they issued a separate report, mostly agreeing with the Democratic majority report’s diagnoses but stopping short of endorsing its prescriptions. Most Republican leaders have done little more than use populist language; none has stepped up to support antitrust actions. That could change, however, if their voters become more focused on the issue."
So what's standing in the way of a new populist-progressive antimonopoly movement? Teachout point to "elite politicians and their deep-pocketed corporate backers. Another impediment will be an incrementalist tendency among contemporary progressives. Excessive concentration of wealth and power is not an isolated issue that can be dealt with via modest reform; it is the operating system of the contemporary United States, and it needs to be fully overwritten. Bottom-up anger and a thirst for more democracy could overcome these obstacles-- but only if today’s activists avoid the errors of the Gilded Age reformers who abandoned their Black allies. Today’s populist-progressives should not minimize the connection between concentrated wealth and racial injustice-- they should highlight it, and foster a broad, multiracial coalition. If they fail to do so, any victories they win against today’s robber barons will prove hollow, and the cause of democracy will be set back once again."