Monopolies


Breaking up Big Tech can’t save American democracy by itself. Jan. 31, 2021

Redefining public and private goods is key to preserving democracy

From left, Twitter chief executive Jack Dorsey, Google chief executive Sundar Pichai and Facebook chief executive Mark Zuckerberg. (Jose Luis Magana, LM Otero, Jens Meyer/AP)

As President Biden settles into the White House and moves beyond the most pressing crises, his administration will have to decide what to do with Big Tech.

Political tensions between Washington and Silicon Valley are of course not new. But the drama entered a new phase after Twitter and Facebook banned Donald Trump while he was still president of the United States. The reactions were predictably partisan. While Republicans cried censorship, Democrats urged Silicon Valley to go even further to prevent future incitements of violence.

Despite these divisions, there is a growing bipartisan consensus that antitrust law could save American democracy from Big Tech. Sen. Josh Hawley (R-Mo.) has led the charge from the right, accusing it of censoring conservatives, squelching competition and dissolving the American family. On the left, Sen. Elizabeth Warren (D-Mass.) has argued that Big Tech needs to be broken up because it has “too much power over our economy, our society, and our democracy.” Are Hawley and Warren right?

A look at a prominent case of corporate regulation during the New Deal reminds us that antitrust is no panacea. In 1937, the Justice Department began antitrust action against Alcoa, a firm that one labor activist called a “masterpiece in monopoly.” Without a single competitor, Alcoa was the only game in town for aluminum production. While the antitrust case against Alcoa was initially dismissed, the government won its appeal in 1945, providing legislators with the power to bust the trust. Yet antitrust was only one of the tools New Dealers deployed to curb Alcoa’s power. What mattered more than antitrust was the idea of public utility, which stood at the heart of the New Deal regulatory state.

Why did this concept of public utility matter? The case against Alcoa was never just about aluminum. For New Dealers like Interior Secretary Harold Ickes, who called Alcoa “one of the worst monopolies that has ever been able to fasten itself upon American life,” it was about rivers. Per pound, aluminum production demanded roughly 10 times the energy as steel production. Since profits depended on cheap power, Alcoa built six dams on the Little Tennessee River during the first three decades of the 20th century to power its smelters at Baldwin, N.C., and Alcoa, Tenn. Alcoa had entered the hydropower business.

By the 1930s, however, many Americans believed river development was too important to be handed over to private interests. New Dealers promoted the re-engineering of the nation’s rivers as a means to stimulate the economy, tame private enterprise and shore up democracy. As William J. Novak has argued, this vision drew on a broad conception of public utility that legal scholars had developed during the Progressive Era. The Tennessee Valley Authority (TVA), launched in 1933, was a paradigmatic example. But the idea of public utility never resonated with Alcoa’s executives, who saw the TVA as a cheap imitation of itself.

The outbreak of war in Europe in 1939 accelerated the tensions between Alcoa and the American state, as demand for aluminum to build warplanes promised to turn Alcoa into a veritable behemoth. During the war, no firm received more government funds to build factories than Alcoa.

New Dealers saw the explosion of demand for aluminum as an opportunity to bend the industry to their needs. During the war, planners at the Bonneville Power Administration (BPA) and the TVA ensured that federal funds turned into factories that would fit their vision for regional economic development. Above all, this meant wartime aluminum plants had to consume publicly generated hydroelectricity. Private aluminum production became a critical source of revenue for the TVA and BPA.

Wartime planners at regional power agencies — especially the BPA — believed the future of public power depended on a competitive aluminum industry. Samuel Moment, the economist who wrote the blueprint for the aluminum industry’s postwar reconstruction, had worked as a planner at the BPA in Portland since 1940. In 1945, the conclusion of the antitrust suit against Alcoa empowered the Surplus Property Board (SPB) — the agency in charge of selling off government-financed war production facilities — to implement Moment’s plan. The SPB sold government-funded smelters and refineries that had been operated by Alcoa to two new competitors — Reynolds Metals and Kaiser Aluminum.

But a competitive aluminum industry was never an end in itself for New Dealers. It was a means to ensure public control of the nation’s rivers, which they believed would preserve democracy and spark regional economic development.

It is important to reckon with the flaws in this vision of public utility. In the Northwest, dam building during the New Deal inundated the homes, fishing sites and lands of many Indigenous peoples, including the Spokane, Wasco and Colville Nations. Consider the Spokane Nation, whose land and fishing sites were submerged by the Grand Coulee Dam in the 1940s. Only in 2020, after eight decades of activism, did the Spokane Nation receive federal compensation. All too often, Americans have mobilized the concept of the public good to dispossess Indigenous peoples of their land and water.

Even so, the interplay between public utility and antitrust during the New Deal contains lessons for the digital age. After the attack on the Capitol, many have applauded Trump’s excommunication from social media. But if democracy is to survive, a coterie of corporate elites cannot make such consequential political decisions. A more competitive tech industry — the solution offered by antitrust — will simply enlarge the number of elites making these decisions, without solving the fundamental problem.

Antitrust worked against Alcoa because there was a political consensus that certain economic and social domains — like river development — were too important to society to be outsourced to private business. This vision is worth remembering. If antitrust enables the state to create competition, the concept of public utility allows the state to redraw the line between public and private. While it has become commonplace to think of data as the oil of the 21st century, democracy would be better served by thinking of it more like a river. Until our digital communications sphere belongs to the public, Big Tech will remain a threat to democracy.

Corporate Crimes


"Since 2001 corporate profits are up 70 percent, and CEOs are diverting America's investment capital into buying out their competitors, shrinking both jobs and consumer choice" (Ed. by Jim Hightower and Phillip Frazer. "More Brand Names Behind the Bush Agenda." Hightower Lowdown, Feb., 2005: 3).


Antitrust Laws

"One area where Europe is particularly determined to stand on par with Washington is in business regulation--as Jack Welch learned the hard way. Brussels has no intention to step aside and let the US Justice Department set the global antitrust agenda...

"Welch sought approval for his merger. By the time the GE-Honeywell deal arrived in Brussels for consideration, the Directorate-General for Competition had already squelched business plans proposed by such titans of American business as Microsoft, Intel, and Coca-Cola" (90)...

"...Europe's antitrust czar, Mario Monti...

"...he hit the German giant DaimlerChrysler with a €70 millin fine for charging different prices in different European countries for the same auto model...

"There was a strong clique of Monti fans in academia... "The notion of a European regulator in Brussels who can make the Americans tremble in their boots is fairly attractive to us," Davies said with a chuckle. "It used to be the Americans who were telling everybody what to do. Now the tables are turning"" (Reid, T.R. The United States of Europe: The New Superpower and the End of American Supremacy: 109)...

email from Rodrigo, OpenMedia, 11-25-18: The Oligopoly

If the mega-merger between Sprint and T-Mobile is approved, 98 percent of the U.S. cell phone market will be controlled by just three companies.

That means higher cell phone bills, worse service, and limited data. The potential for abuse is off the charts, especially after the repeal of Net Neutrality.

But because of the election, there's been very attention little paid to this merger, which will have such a big impact on everyday Americans.

The FCC public comment period on the merger closes on December 4.

The proposed Sprint/T-Mobile merger will mean nothing but trouble for U.S. consumers.

The merger would reduce the kind of competition that led to consumer-friendly services like Wi-Fi calling and the end of two-year contracts with hefty termination fees.1 It will raise costs for everyone and cause pre-paid and wholesale cell prices to rise, hitting low-income consumers the hardest and widening the digital divide.

But this merger is not a done deal—far from it. The Department of Justice has blocked similar mergers in the past because of impacts on prices, innovation, and consumer choice.

Americans need more choice of wireless carriers, not less.


Send comments to co@dadbyrn.com, Professor Colby Glass, PhDc,MLIS, MAc, Professor Emeritus