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Antitrust and Economic History: The Historic Failure of the Chicago School of Antitrust
Abstract
This article presents an historical analysis of the antitrust laws. Its central contention is that the history of antitrust can only be understood in light of U.S. economic history and the succession of dominant economic policy regimes that punctuated that history. The antitrust laws and a subset of other related policies have historically focused on the negative consequences resulting from the rise, expansion, and dominance of big business. Antitrust specifically uses competition as its tool to address these problems. The article traces the evolution of the emergence, growth, and expansion of big business over six economic eras: the Gilded Age, the Progressive Era, the New Deal, the post–World War II Era, the 1970s, and the era of neoliberalism. It considers three policy regimes: laissez-faire during the Gilded Age and the Progressive Era, the New Deal, policy regime from the Depression through the early 1970s, and the neoliberal policy regime that dominates today and includes the Chicago School of antitrust. The principal conclusion of the article is that the activist antitrust associated with the New Deal that existed from the late 1930s to the 1960s resulted in far stronger economic performance than have the policies of the Chicago School that have dominated antitrust policy since the 1980s.
... Overall, a disguised industrial policy in the US was indispensable for allowing and spurring the monetization of public science by private firms. Additionally, these firms grew under the shelter of a favourable antitrust policy and (known) loopholes in the taxing system (Clausing, 2020;Glick, 2019;Glick & Ruetschlin, 2019). ...
... The Chicago School's overall recommendation was to reduce antitrust policy to a minimum, only aimed at guaranteeing "consumer welfare", which meant to prevent price increases due to excessive market power. The US courts adopted this antitrust program since the crisis of the 1970s (Glick, 2019). ...
... Since the 1980s, the different versions of the Horizontal Merger Guidelines of the US Department of Justice and the Federal Trade Commission require increasingly higher proofs of an anticompetitive scenario to stop mergers and acquisitions (M&A). Furthermore, even if an anticompetitive M&A is proven, the deal could still be authorized if it lacks significant entry barriers to the corresponding market, or if the M&A can lead to efficiency gains (Glick, 2019). ...
Beyond the US-China watershed and supposedly polar state ideologies (liberal and pro-free-market in the US and led by state planning in China), this chapter delves into the shared traits of the world's two most powerful states. The US -at least since the Second World War- and China since 1978 share a systematic and highly oriented industrial policy directed to spur innovation in chosen sectors. In both cases, policies have been entangled with corporate interests and contribute to explaining the emergence of intellectual monopolies, precisely dominating each state's privileged industries and technologies. Furthermore, each state's geopolitical power relies on its respective intellectual monopolies. However, besides the support of each state, intellectual monopolies control global production and innovation networks constituting their own republics, which formally overlap with portions of different states. Intellectual monopolies also minimize their paid taxes while increasing wealth concentration. Contemporary capitalism is always on the brink of a global collapse as core states and intellectual monopolies are simultaneously friends and foes. This chapter ends with a preliminary analysis of these complexities.
... Overall, a disguised industrial policy in the US was indispensable for enabling and spurring the monetization of public science by private firms. Additionally, these firms grew under the shelter of a favourable antitrust policy and (known) loopholes in the taxing system (Clausing, 2020;Glick, 2019;Glick & Ruetschlin, 2019). Given the US global hegemon position, its bundle of policies spread -sometimes with no delay-around the world, either by imitator states or by the US influence in international organizations. ...
... The Chicago School's overall recommendation was to reduce antitrust policy to a minimum, only aimed at guaranteeing "consumer welfare", which meant to prevent price increases due to excessive market power. The US courts adopted this antitrust program after the crisis of the 1970s (Glick, 2019). ...
... Since the 1980s, the different versions of the Horizontal Merger Guidelines of the US Department of Justice and the Federal Trade Commission require increasingly higher proofs of an anticompetitive scenario to stop mergers and acquisitions (M&A). Furthermore, even if an anticompetitive M&A is proven, the deal could still be authorized if it lacks significant entry barriers to the corresponding market, or if the M&A can lead to efficiency gains (Glick, 2019). ...
This final chapter reflects on the paths and ways to overcome intellectual monopoly capitalism. At the global level, we argue that a new (common) knowledge regime should be created, which also requires to change the now prevailing academic culture that reinforces knowledge assetization. Transformations must be globally coordinated; thus, new institutions ought to be put in place. Another dimension refers to innovation policies for structural change in the peripheries. Non-core states should limit all forms of extractivism and heavily invest in planning new production and innovation networks. Global agreements should be put in place to strengthen labour market regulation forbidding new and old forms of informality. Finally, to counterbalance intellectual monopoly capitalism, grassroots social movements and workers' unions play a key role. The chapter ends with a special call for action addressed to social scientists and scientists in general.
... Footnote 14 (continued) addressed to GAFAM corporations which receive favorable tax regimes and lax antitrust policies (Rikap and Lundvall 2021; see also Glick 2019;Kahn 2017) and which also benefit from "colossal public investments in R&D and the strengthening and broadening of Intellectual Property Rights (IPRs) 17 " (Rikap and Lundvall 2021, p. 10). This means that the regulation activity itself is involved in the multi-agent process in which the capitalist, since he possesses the means to preserve the collective and public interest, uses them as a bargaining chip to regulate himself. ...
This paper examines the role and power of the state in modernity and its transformation throughout it and into the present. First, it recognizes the centrality of the role of information control for the modern state constitution, which allows sovereign power to extend to the national level. Secondly, it discusses the shift of state power from a purely informational power to an informational and bargaining power, as well as the gradual transformation of sovereignty into governmentality. Finally, it analyzes the transformations that have led to a critical loss of both powers by the state and have enabled their acquisition by tech corporations. It examines the implications of this shift in power and the consequent disempowerment of the state, defining the mode of operation of the power embodied by tech corporations as a regime of performativity, rephrasing the Foucauldian regime of truth, which presided over the ways in which governmental power was performed. Such a regime bases its power not on the ability to order discourse and knowledge, but on the ability to automate it, and to predict and manipulate human behaviors. In this way, it has disintermediated not only the state in its role as the primary informational agent, but also, to some extent, the ability of individuals to assert rights through their actions.
... Nonetheless, reading authors like Menke also affirms the soundness of the direction Pashukanis had taken the inquiry of modern legal form, in particular, the centrality of the relationship between commodity and legal form for understanding the basic logic of capitalist system. 4 For an overview of the recent debates on the character of monopolies in contemporary platform capitalism and for an emerging new legal doctrine on monopoly see Khan (2016); Glick (2019). ...
As outrage over the socially damaging practices of technology companies intensifies, this book asks what it actually means to hold a 'monopoly' in the tech world and offers an in-depth analysis of how these corporate giants are produced, financialized, and regulated.
... Other quite well-known policies that have favoured the accumulation of knowledge and profits by large multinational corporations from core countries included the weakening of antitrust controls (Glick, 2019) and the overlooking of tax loopholes between jurisdictions. This resulted, among other things, in a regressive corporate tax structure where the top 10% of US-listed corporations (defined as those with the highest ratio of net profit to sales) pay a lower worldwide effective income tax rate than all other US-listed corporations (Hager & Baines, 2020). ...
This article argues that contemporary leading global corporations are intellectual monopolies that base their power on the systematic concentration (and predation) of knowledge which they turn into intangible assets. By monopolizing access to portions of society’s knowledge, these companies’ capacity to plan portions of capitalism exceeds their legally owned assets. The article defines each intellectual monopoly’s sphere of planning as a corporate production and innovation system that may include several substructures, from global value chains to platforms. Inside corporate production and innovation systems, value and knowledge production are organized and controlled by the intellectual monopoly. Moreover, among intellectual monopolies, those centralizing big data and the machine learning algorithms required to process them will develop greater planning capacities and a further self-expansion of their intellectual monopoly. The emergence of intellectual monopolies has implications for every level within capitalism, including global capital accumulation, effects on labour and peripheries. By briefly referring to these dimensions, the article finishes by presenting a depiction of the geographies of digital capitalism as an era dominated by intellectual monopolies.
... As several experts noted, nondiscrimination has been a mainstay principle for governing network intermediaries, especially those that play essential roles in facilitating transportation and communications. The "New Paradigm" is actually a return, to "originalism" (Glick, 2019). But this originalism is the industrial policy and planning of the Progressive reforms of the late 19th century, charging antitrust regulators with a an ambitious and sometimes contradictory checklist of discretionary social goals. ...
Traditional antitrust policy was formulated to control pricing and output decisions that were not disciplined by competitive forces, either because of monopoly power or agreements in restraint of trade. Because there is no single criterion for evaluating political policy outcomes, antitrust regulators eventually settled on the “consumer welfare standard,” correctly recognizing that any other standard was incoherent. Recently “platforms” (defined here as firms or apps that solve the key transaction costs problems of triangulation, transfer, and trust) have tended toward giantism. This had led to calls for a new approach to antitrust, restoring the old multiple set of goals. But every platform by definition defines an industry, and is a monopoly within that industry. Such network economies or advantages in managing trust are the reasons platforms exist in the first place. This paper reviews the history of antitrust, defines platforms and the problems of “giantism,” and suggests some policies that certainly won't work and should be abandoned. The problem is power, not monopoly. So power is what the “new paradigm” needs to address.
... This era is frequently contrasted with the period after 1980, when the growing influence of Chicago School ideas inhibited antitrust action. 89 In the 1960s and 1970s, only two firms dominated bond rating, but DoJ lawyers did not even propose antitrust action against them. 90 Moreover, neither the staff of the SEC nor officials in any other government department expressed concern that the design of the net capital rule regulation might discourage healthy competition. ...
Since 2008, academics and policymakers have frequently debated why bond rating agencies such as Moody's, S&P, and Fitch enjoy considerable power and influence. The 2008 financial crisis focused our attention on the bond rating agencies that had previously categorized mortgage-backed securities as investment grade. Scholars have attributed the power enjoyed by the rating agencies to regulations that confer a privileged status on those agencies that are designated as nationally recognized statistical rating organizations (NRSROs) by the U.S. Securities and Exchange Commission (SEC). While these authors mention in passing that the relevant regulation went into effect in 1975, none has conducted archival research to examine why this regulation was introduced at that time. This article is the first historical investigation of the creation of this crucial regulation, which entrenched the concept of the NRSRO in federal securities law. It shows that the SEC mandated the use of NRSRO-created ratings even though SEC officials vigorously debated whether it was wise for the commission to endorse ratings produced by agencies that operate on the basis of the controversial issuer-pay model. This article contributes to our understanding of the SEC's role in the development of the distinctive features of American capitalism.
... According to Buch-Hansen and Wigger (2010), neoliberalism strengthens its decades-long project of aggressively lifting market barriers. By contrast, others stress that the neoliberal project promotes a more restricted role for anti-trust agencies (Glick, 2019). This 'more economic approach' is more lenient towards market concentration, which is believed to yield efficiencies for the consumer. ...
Since 1989, no major European merger has been able to go through without EU approval. The introduction of a centralized merger control procedure was another increase in the powers of the Commission's Directorate-General for Competition (DG COMP). While some see it playing a neo-mercantilist role in a positive European integration, others underline its neoliberal ideological roots. Through our analysis of all merger decisions made between 1990 and 2016 (6,161 cases), we instead find evidence for market-centred negative integration: DG COMP is particularly harsh towards coordinated market economies and targets sectors that have high levels of state intervention , thus thwarting the rise of 'European champions'. Our interviews with merger experts and the decision citation data further suggest that this market-centred logic of enforcement is not necessarily driven by ideology, but by the silent logic of bureaucratic autonomy. We thus contribute to the debate on the EU as a supranational force of economic liberalization.
... The recognition of the presumption of good faith as a competitive law is important, since the establishment of the boundaries for the exercise of the right to fair competition is directly related to the possibility for competition entities to go beyond these limits, i.e., to commit an abuse of the law (Glick 2019). Going beyond the limits when exercising the right to fair competition, as a rule, is associated with the need to assess the competitive behaviour of a business entity as such, which contradicts the requirements of good morals, good conscience, good faith, reasonableness and justice. ...
Competition allows business entities to implement projects that can subsequently ensure the development of the socio-public system and the country as a whole. At the same time, an opportunity for personal development is also achieved for a business entity. At the same time, any activity aimed at increasing profitability and market share leads to the emergence of new market participants that can help destabilise the industry or bring innovations to it. This allows the implementation of scientific and technological progress due to the competition mechanism. The novelty of the study lies in the fact that unfair competition is understood only as an element of violation of economically sound norms for entrepreneurial activity. The authors consider the competition of bona fide type as an element of the formation of saturation of the commodity market. Moreover, the state is considered not only as a source of antimonopoly legislation, but also as a factor in the implementation of the principles of competition in the interests of society as a whole. The practical significance of the study is determined by the possibility of structuring the requirements for competition law on the basis of independent regulation and the additional use of judicial and restrictive measures to spread the practice of competition in any sector of the national economy.
El efecto "derrame" (spillover) de la participación en el lugar de trabajo a la vida pública (Pateman, 1970) ha suscitado una nueva investigación predominantemente empírica, desprovista de resultados significativos, desvirtuando los elementos normativos fundamentales sin considerar la evolución del contexto histórico e institucional del trabajo. Una reinterpretación explorada del efecto reverso puede revelar cómo las transformaciones de las grandes empresas desde los años setenta, impulsadas por la contraofensiva neoliberal, han minado la participación democrática de los trabajadores. La obra de Pateman se inscribe en un período de agotamiento del capitalismo de posguerra al calor de las protestas de los sesenta y setenta. La desintegración vertical y la financiación de la empresa capitalista posteriormente ha alterado el contexto original de la propuesta de Pateman, adquiriendo un vigoroso papel exclusor de la participación popular y una inigualable maquinaria de asedio al interés público.
Building on Schumpeter Mark I and Mark II, I propose an additional pattern of innovation and technological regime called the intellectual monopoly (IM) to explain the co-habitation of large incumbent firms with high entry and exit rates and provide evidence for pharmaceuticals and information technologies. I associate the IM pattern and technological regime with corporate innovation systems and illustrate that patterns not only evolve after changes in technological regimes but also due to economic, political, and institutional transformations.
In a quest for economies of scale, access to technologies, and, most importantly, expansion of market share, Chinese public companies have been engaged in several consecutive waves of mergers and acquisitions (M&As) involving mostly domestically domiciled non-listed targets from the same or adjacent industries. Relying on a comprehensive panel dataset of 7,998 transactions completed between 1993 and 2020 by 2,842 publicly listed acquirers domiciled in China, the paper attempts to establish whether M&A deals allow acquirers to improve their market share and, consequently, their relative market position. We use dynamic panel regression and ordered logit models to establish and quantify the link between deal characteristics and the post-deal market share of the combined entities. Our empirical findings demonstrate that corporate consolidations exercise no significant impact on the relative competitive positioning of firms. Only acquisitions by industry leaders produce a sizeable increase in the latter’s market share and lead to higher industry concentration. Most consolidations occur among outsiders exhibiting a high degree of similarity, relatively lower profitability, and stagnant market shares within the more competitive industries with higher rates of firm creation. These consolidations, often in the form of mergers, are not effective in advancing the combined entities’ competitive positioning. Despite the fact that the bulk of corporate consolidations appears unlikely to constitute a threat to competition in the medium term, careful regulatory oversight may be warranted within the currently fragmented and highly commoditized industries, which appear likely to consolidate at the fastest pace.
JEL Classification: G30, G32.
In this final chapter, we introduce alternative scenarios concerning tech giants, the US and Chinese states, data governance and innovation under the current governance regime. On this basis, we advance policy recommendations and calls for activism aiming at a less polarized future where technology is guided towards collectively solving societal, ecological and health challenges. We elaborate on why there is a need for new forms of governance that take into account the growing importance of global digital public goods as well as the need for new forms of public access to science and technology. We end by applying a global perspective pointing to major dilemmas between what can be done under existing governance regimes and what should be done in the long term.
This chapter focuses on the role of the state and its interaction with tech giants in the US–China race for AI global dominance. In the previous chapter, we elaborated on the role of the Chinese state in China’s AI catching-up. In response, the US government has combined measures to promote AI with technology embargos with the aim to protect its AI lead. We use the concepts techno-globalism and techno-nationalism to capture fundamental changes in state involvement and international relations. Simultaneously, the chapter elaborates on the co-evolution between state policy and corporate strategy, characterized by elements of consonance and discord. Tech giants operate globally and their interplay with their home states is at the core of the current transformations of the global innovation system.
This book conceptualizes the global innovation race between nation states and corporations in the second phase of a technological revolution characterized by Artificial Intelligence and explosive growth in digital services. Each chapter elaborates on an existing or new conceptual framing to analyse empirical dimensions of the economics and politics of innovation in the context of digital capitalism. In this introductory chapter, we set the scene by presenting the main actors and highlight the crucial role of Artificial Intelligence. We end it by introducing the structure of the book.
Scott Joplin was an African American composer and pianist of singular merit and influence. This article is the final entry in a three-part series considering the biographical, artistic, and cultural contexts of Joplin’s life and work and their use in K–12 general music education. “Ragtime Spaces” focuses on cultural globalization and the modernist entertainment aesthetic which supported Joplin’s work. Scott Joplin’s creative and entrepreneurial activities embodied humanism, racial uplift, and craftsmanship at a time when society became increasingly racially segregated and dehumanized. The discussion is followed by suggested student activities written in accordance with National Association for Music Education’s 2014 National Music Standards.
The fundamental originating principle of law and economics (L&E) is that legal decisions should be (and are) based on maximizing efficiency. But L&E proponents do not define “efficiency” in the way agreed to by most economists, as Pareto Efficiency. A Pareto optimal condition is obtained when no one can be made better off without making someone worse off. Pareto Improvements are win-win changes where no losers exist. In the judicial system, however, there are always winners and losers, because under Article III § 2 of the Constitution a legal case does not exist unless there is a justiciable “case or controversy” in need of resolution. Unable to use Pareto Efficiency, L&E scholars have been forced to adopt alternative definitions of efficiency. Most L&E scholars claim to define “efficiency” based on the work of Kaldor and Hicks, but (perhaps unwittingly) instead use a definition of “efficiency” derived from the 19th century idea of consumer surplus, which encompasses L&E notions such as “wealth maximization,” and “consumer welfare” in antitrust. Neither of these alternative definitions is viable, however. Outside of L&E, the Kaldor-Hicks approach has long been recognized to be riddled with logical inconsistencies and ethical failures, and the surplus approach is even more deficient. Remarkably, virtually none of the numerous L&E textbooks even hint at such problems. Critically, all definitions of efficiency improvements in economics are biased in favor of wealthy individuals or firms, either because they are dependent on the status quo ante distribution of assets, or because they bestow large advantages on parties with political influence or who can afford to bring lawsuits quickly. Many L&E practitioners treat efficiency improvements instead as being objectively good, an error revealing that L&E is primarily motivated by its neoliberal policy agenda.
In contemporary global capitalism, the most powerful corporations are innovation or intellectual monopolies. The book’s unique perspective focuses on how private ownership and control of knowledge and data have become a major source of rent and power. The author explains how at the one pole, these corporations concentrate income, property and power in the United States, China, and in a handful of intellectual monopolies, particularly from digital and pharmaceutical industries, while at the other pole developing countries are left further behind.
The book includes detailed empirical mappings of how intellectual monopolies develop and transform knowledge from universities and open-source collaborations into intangible assets. The result is a strategy that combines undermining the commons through privatization with harvesting from the same commons. The book ends with provoking reflections to tilt the scale against intellectual monopoly capitalism and arguing that desired changes require democratic mobilization of workers and citizens at large.
This book represents one of the first attempts to capture the contours of an emerging new era where old perspectives lead us astray, and the old policy toolbox is hopelessly inadequate. This is true for the idea that the best, or only, way to promote innovation is to transform knowledge into private property. It is also true for anti-trust policies focusing exclusively on consumer prices. The formation of global infrastructures that lead to natural monopolies calls for public rather than private ownership.
Scholars and professionals from the social sciences and humanities (in particular economics, sociology, political science, geography, educational science and science and technology studies) will enjoy a clear and all-embracing depiction of innovation dynamics in contemporary capitalism, with a particular focus on asymmetries between actors, regions and topics. In fact, its topical issue broadens the book’s scope to those curious about how innovation networks shape our world.
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