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The Past and Future of Antitrust

The 100-Year War between Monopoly Power and Democracy
by Matt Stoller
Simon and Schuster, 2019, 608 pages

When a reviewer is deeply entangled with a book, readers de­serve a full account. In the case of Matt Stoller’s Goliath, the entanglements are deep and complex on three levels. One concerns Stoller’s treatment of my father, the economist John Kenneth Gal­braith, the intellectual antihero of this work. A second is my personal relationship to Stoller: in political matters we have usually been allies, with a cordial acquaintanceship up to now. The third and most important is the least visible: it is that I was an eyewitness to the central episode of Stoller’s history, namely the Watergate revolution in the U.S. House of Representatives and the replacement of Wright Patman as chair of the House Banking and Currency Committee in early 1975.1

To be precise, I worked during the spring and summer of 1974 on the staff of the International Economics Subcommittee of the Joint Economic Committee, under the chairmanship of Henry S. Reuss (D-Wisc.) who was then the fourth-ranking member of House Banking. When Reuss defeated Patman for the chair of the Banking Committee in January 1975, I was studying economics at Kings College, the University of Cambridge. Within a day or two, Reuss called and invited me back to serve as staff economist for the Banking Committee; I arrived in June, stayed on and off through graduate school, and moved on to the Joint Economic Committee in early 1981. I thus knew the dramatis personae of Stoller’s work firsthand, including Patman and his staff. One figure Stoller names as a mentor, Jane D’Arista, remains to this day a revered friend.

Stoller’s goal in Goliath is to cast the economic history of the United States as an epic struggle between the big and the little, between evil and powerful monopolies and the resistance of a few heroic champions of small business, market competition, and eco­nomic liberty. Among the virtuous are Louis Brandeis, Robert Jack­son, Thurman Arnold, and, especially, Patman. In the grand old man of East Texas populism, who sought to impeach Andrew Mellon in 1932 and Richard Nixon in 1972, Stoller has his leading hero. There is a great deal to be said for an effort to bring Patman out of the shad­ows, and the battles he fought, especially against the big banks and the Federal Reserve, were great and real. But the crafty old man, who like most people had both virtues and flaws, was in any event at the end of his tether when the Watergate election of 1974 rejuvenated the Democratic House.

The Fall of Wright Patman

Stoller begins Goliath with this description of the seventy-five new Democratic members of Congress in January 1975: “They were long-haired, young, aggressive, and progressive, determined to clean up government, and stop the war in Vietnam.”

My memory is otherwise. For the most part, the new members were clean-cut, fresh-faced, suburban, and less progressive on eco­nomic matters than the postwar generation then still dominant in the House. Many were from swing districts and therefore insecure and cautious. And of course the Vietnam War was over for Americans by then; the fall of Saigon would occur in April, just a few months later.

It is true that the new wave targeted four elderly committee chairs who were southern Democrats, three of them forgotten mossbacks and one, Wright Patman of Texas, a figure of historical stature so far as members of the House can go. It is, however, not true that in 1975 Patman was still on top of his game. That he was not was visible to everyone in the committee room and in the Democratic Caucus; he required the constant support and attention of a kind and devoted staff man, Jake Lewis, deeply admired by all who knew him. In any event, Patman had only a year to live; he would die of pneumonia in March 1976, at the age of eighty-three.

Stoller would like us to believe that Patman’s defeat was a victory for the bank lobby and a capitulation to their agenda. He dismisses Henry Reuss with just a few words, as “genial but weak,” and other­wise ignores him. But Reuss poses a major problem for this view.

Henry Reuss was a Wisconsin progressive and social democrat, a Kennedy-Johnson liberal, a veteran of the Office of Price Administration (OPA) and a former administrator of price controls in occupied Germany. He was widely considered to be Congress’s leading expert on international economic and monetary issues. And as I witnessed personally, he enjoyed in those years respect and deference from many of his congressional colleagues, which Patman did not.

Reuss retained all of Patman’s staff, including his irascible staff director, Paul Nelson, and D’Arista, both of whom welcomed me. So did Patman personally, with a kind word and a generous comment on my father—a fellow agrarian and longtime ally on many matters, though not on antitrust. As Stoller himself writes, Patman “counted Galbraith among his favorite economists.” This comment alone hints at the fact that relationships among these figures were not as oppositional as Stoller relates. When Stoller writes that the new Congress “released the beast of monopoly on the land,” he is just making things up.

For the first years of his tenure, Reuss pursued a program similar to Patman’s. This was especially true with respect to low interest rates, to monetary policy, and to the accountability of the Federal Reserve, a key Patman issue. Among other things, the Reuss Banking Committee initiated regular hearings on the Conduct of Monetary Policy, later codified along with the famous “dual mandate” in the Humphrey-Hawkins Full Employment and Balanced Growth Act of 1978 (Hawkins-Reuss in the House). The committee even pursued a legal case (Reuss v. Bolles), on constitutional grounds, against the banker-inflected Federal Open Market Committee, the monetary policy decision-making body at the Fed. It drafted and passed legisla­tion to rescue New York City from its creditors, attempting to make them share in the cost of the city’s restructuring. In short, it pursued a broadly social democratic and Keynesian agenda.

What turned the tide, eventually, was not the committee leadership change in 1975. It was the rot from below, especially among those young, “progressive,” clean-government members who had been first elected in 1974. The banking lobbies flooded the new members with campaign cash,2 and the Democratic leadership in the House began to use the Banking Committee as a cash cow.3 Patman could not have stopped these developments any more than Reuss could. By 1978 the neoliberals had come of age, deregulation was in the air, and after 1980 Reuss moved over to the Joint Economic Committee where he (and I) spent his last term in Congress battling the Reagan Revolution.

John Kenneth Galbraith as Antihero

Stoller’s treatment of my father is curiously mixed, and in many respects not to be complained of. He concedes Galbraith’s merits as a writer, his liberalism, his influence, and indeed his central role in postwar American economic and social thought. He gets some details wrong: my father’s dismissal from the OPA in 1943 did not make him a “liberal martyr”; he was not a “bon vivant” or “paid lavishly” by businessmen to speak—not by modern standards—and he certainly never considered running for president, a post from which, as a born Canadian, he was constitutionally barred. He also didn’t “loathe” the Chicago professors; Milton Friedman appeared cordially in his letters and at least once, quite jovially, at our house. But these are quibbles.

The more serious difficulty is that Stoller approaches his quarry from the standpoint of a polemical ideologue, in a world where everyone else is also to be seen as a polemical ideologue of one stripe or another. But this was not who my father was. He was a farm boy from Southern Ontario, untouched by Marx, only moderately by Keynes, unimpressed by Schumpeter—a practical person around fields and gardens, machinery and organizations. His writing skill brought realities home and that was the source of his success. And the key reality for him was (and is) that large organizations are essential to the management of complex technologies, networks, and social systems. They are by necessity, not choice, the foundation of modern life, of large populations living in great cities in relative comfort, safety, and good health. To pretend otherwise is the mark of a romantic.

The romantic deniers of this reality in my father’s day were the economists of the Chicago School, who pretended that the world still operated on the (always fictional) principles of celestial harmony—supply and demand, perfect competition, rational foresight—adapted from classical Chinese philosophy by the ancien régime physiocrats in eighteenth-century France and taken up from them by Adam Smith. But as Stoller rightly sees, the Chicago framing was a smokescreen for corporate and financial power.4 He therefore constructs a condo­minium of Galbraith-and-Chicago as his great windmill against which to tilt. Stoller then presents himself and the new antitrusters as the heritors of Patman, Jackson, and Arnold, the champions of small business yeomanry in a tradition going back to Thomas Jefferson, and standing against the imperialist, protectionist, industrial- and nation­al‑development program that originated with Alexander Hamilton.

But this muddles matters hopelessly. Galbraith affirmed the necessity of large organizations and therefore the equal necessity of a system of checks and balances. Such a system was by no means “inevitable” as Stoller characterizes it, but the product of a democratic process. What Galbraith called “countervailing power” would com­prise the efforts of trade unions, consumer organizations, and an independent cadre of scientists and engineers, working through effec­tive and autonomous law and regulation, all in organized engagement to keep the abuses of big business and big finance under control, while harvesting the benefits of advanced and complex technologies and social systems. By contrast, the Chicago romantics’ hidden purpose was to oppose democratic checks and balances with the pretense that a competitive market could do the job alone. This agenda became entirely clear in Chile from 1973, in the UK from 1979, and in the United States from at least 1981. We have been living with the consequences ever since.

Antitrust: Myth and Reality

Stoller, along with Barry Lynn and other allies in the new antitrust movement, would have us believe that there really is another way out, by breaking up everything big and returning to a world of true small business competition.5 But such a world never existed, for when businesses were small—servicing the isolated highland or backwoods village, for instance—so were their markets. They were monopolies back then, just as vicious and predatory, however small. When the railroads came, a larger monopoly displaced the smaller ones. Small businesses that survive in the modern world exist, everywhere and always, on the fringes of concentrated power, or are propped up, deliberately, as a matter of social design, by protections and subsidies. This is not inherently a bad thing, and in any event there is no viable alternative for small-scale business operations. We escaped a world of truly independent and self-sufficient small operators—if one ever existed—because economic life in it was nasty, brutish, and short.

Much of Goliath is devoted to a larger sweep of history, going back to Louis Brandeis, to the trusts and the trustbusters, to the New Deal, and to the evisceration of the Antitrust Division of the Department of Justice by Robert Bork and the corporate-state Republicans, as well as to the movement toward growing concentration of the banks from the late 1960s forward. There is much that is interesting here, but it is hard to judge reliability when it is obvious—when you know, from other segments such as those discussed above—just how hard Stoller is trying to make history into the friend of the story he wants to tell.

His treatment of the New Deal, in a chapter entitled, “Trust­busters against Hitler,” illustrates the problem. By all known metrics trust-busting was a very minor part of New Deal policy, which was pro-labor in the North and state-capitalist in the South. Antitrust was also trivial in the war mobilization, which was dominated by the conversion of great corporate factories to the production of tanks, ships, and airplanes, and by the creation of a vast new industrial structure to permit the manufacture of the atomic bomb.

Similarly, in his long treatment of the aluminum antitrust case, Stoller glamorizes a struggle that was an exercise in futility from start to finish, as he is obliged, backhandedly, to concede. He writes, for instance, that “the Wilson administration forced Alcoa to modernize.” Indeed it did. It could do so, however, only because Alcoa was a monopoly in the first place. Forcing the company to modernize was therefore the same thing as forcing the whole industry to modernize; it did not disadvantage the competition because there was none. And Alcoa remained a monopoly, against the flailing of the trustbusters, throughout the New Deal and beyond.

This reality arose from technological advances that allowed for increasing re­turns and declining costs, realities from which Stoller shrinks as they apply especially to the transportation and networked information industries of our own time. He bemoans the deregulation of the airlines in the late 1970s because that policy (allegedly) de­prived smaller cities of needed service, but neglects to observe that the effect of deregulation was to break up a state-backed cartel of four major airlines, ushering in a period of cutthroat competition, fol­lowed by failures and the reorganization of the airlines into a new oligopoly. When he gets around to the case of Penn Central, the botched merger of the Pennsylvania and New York Central railroads that collapsed in 1970, he neglects to note that the way out was a pair of national corporations, Conrail and Amtrak. Railroads cannot be run as small businesses or even as a set of private competing firms, as commuters in post-Thatcher Britain have learned to their regret.

Countervailing Power over Trust-Busting

Where would Stoller take us? Onwards to a new age of trust-busting, targeting Facebook, Amazon, Microsoft, and Google, the Goliaths of this century. But why a world with ten mini-Facebooks would be better than the dreadful one we have, he cannot say. Antitrust policy surely does have its uses—it may be right to block the use of profits by these companies to build unmanageable conglomerate empires and to give untold power and control to a tiny elite of technology oli­garchs. But recreating “competitive” conditions in the core businesses is not a viable goal. However difficult it may be to achieve, there is no alternative to democratic oversight and effective regulation in the public interest.

On banking, Stoller may be on more solid ground. The singular feature of big finance is that it is predatory, speculative, unstable, and a drain on resources to no good social end. And for bankers especially, to quote Adam Smith, “Wealth, as Mr. Hobbes says, is power.”6 Big finance is per se too big. Smaller, regional banks—still plenty big—would be led by smaller bankers; they would be easier to regulate; and they might support a wider range of small- and medium‑sized businesses in those sectors where these are the appropriate economic structure. Decentralizing the banking system is no cure-all, but it can be part of a comprehensive strategy for financial reform. An irony, as Stoller acknowledges in his closing pages, is that banks are not under the antitrust laws, and the realistic approach to them—via a new Glass‑Steagall, Consumer Financial Protection Bureau, and other measures advocated by Bernie Sanders and Elizabeth Warren—is a “throwback” to the New Deal. There is a reason for this. Smart policy rightly rests on successful experience. And not on the glittering promises of prophets, with the glint of zeal in their eyes.

This article originally appeared in American Affairs Volume IV, Number 1 (Spring 2020): 55–62.


1 Now the Committee on Financial Services, it was formerly the Committee on Banking and Currency, the Committee on Banking, Currency and Housing, and the Committee on Banking, Finance and Urban Affairs.

2 A minor personal story already from the summer of 1974 bears on the point. As a bright young economist, I had the idea that the Export-Import Bank should not be financing the sale of the then new Boeing 747, on the ground that it was a superior monopoly product which foreign airlines would have to buy under any circumstances. So I drafted language for the markup barring Ex-Im financing for any product in which the U.S. firm held a “substantial monopoly position.” Reuss introduced the language and got it adopted. Boeing went to work, calling all the members in whose districts its subcontractors had operations, which was, of course, all of them. The next day Reuss was obliged to climb down, explaining that the staff work had been defective. At twenty-two, I thought that my Hill career was over; as I walked to the markup past the security guard at the horseshoe entrance to the Rayburn building, he glanced at my face and said, “It can’t be that bad.”

3 The committee today has more than sixty members, seated in four rows in the committee chambers. At the time the number was in the low thirties, and there were only two rows of seats for members.

4 My book The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too (Free Press, 2008), deals with this phenomenon in detail.

5 Curiously, one of Stoller’s truest forebears, E. F. Schumacher of Small Is Beautiful fame, goes unmentioned in this book.

6 The quotation is from Adam Smith, The Wealth of Nations.

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