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Unchecked Power

How monopolies have flourished—and undermined democracy

Illustration by Daniel Stolle

The last forty years have seen a transformation in American business. Three major airlines dominate the skies. About ten pharmaceutical companies make up the lion’s share of the industry. Three major companies constitute the seed and pesticide industry. And 70 percent of beer is sold to one of two conglomerates. Scholars have shown that this wave of consolidation has depressed wages, increased inequality, and arrested small business formation. The decline in competition is so plain that even centrist organizations like The Economist and the Brookings Institution have called for a reinvigoration of antitrust enforcement.

Antitrust law today is, however, very narrowly construed. The currently reigning paradigm originated in the 1970s with Robert Bork—the same Bork whom the Senate would later block from the Supreme Court. Bork’s book The Antitrust Paradox argued that the only goal of the antitrust laws was consumer welfare. This eagle-eyed focus was not only economically efficient, Bork and his followers pointed out, but easy for courts to administer, because consumer welfare could be measured in terms of prices: If prices are going down, the system is working. To abandon this standard, former FTC Commissioner Joshua Wright, a Republican, has said, “would be a monumental shift,” and “a dangerous one.”

The Curse of Bigness: Antitrust in the New Gilded Age by Tim Wu
Columbia Global Reports, 154 pp., $14.99

Wright’s comments were largely directed at the insurgent neo-Brandeisian school of antitrust—a group of scholars, activists, lawyers, and economists who want to rethink the current approach. The neo-Brandeisians (whom Wright derisively calls the “hipster antitrust movement”) believe that the antitrust laws were written not solely to deal with consumer welfare or purely for economic purposes, but also to ensure competitive markets, break up vast and powerful private entities, and, in the process, preserve democracy. When economic power is concentrated, it destroys not only economic freedom but also political freedom, as the wealthy and powerful use their resources to capture the government and rig it in their favor.

In the midst of this debate over the future of antitrust comes Tim Wu’s The Curse of Bigness: Antitrust in the New Gilded Age. In this concise and accessible history, Wu, a professor at Columbia Law School, takes us from the great merger movement of the late nineteenth century to the antitrust legislation and prosecutions in the Progressive Era to “peak antitrust” in the mid-twentieth century. He judiciously describes how the “Chicago School” of antitrust, with its narrow focus on consumer welfare, came to dominate antitrust law and ushered in our new era of monopoly capitalism. As he briskly narrates the origins and evolution of antitrust law in America, he makes the case that the narrow economic approach is a betrayal of its purposes and historic understanding. The central goals of antitrust law and policy, he argues, have always included preserving the conditions for democracy.


Whether it was Senator John Sherman, author of the Sherman Antitrust Act of 1890, Theodore Roosevelt in his trust-busting prosecutions of Standard Oil and J.P. Morgan’s railroad trust, or Woodrow Wilson, who created the Federal Trade Commission in 1914, the founders of antitrust law saw its work as both political and economic. No problem “is more threatening than the inequality of condition, of wealth, and opportunity,” Sherman said in the debates leading to his eponymous bill. “If the concerted powers of this combination,” he continued, “are entrusted to a single man, it is a kingly prerogative, inconsistent with our form of government.”

What the framers of the antitrust laws understood is that concentrated private power poses a threat to freedom, to our constitutional republic. When a small number of people wield unchecked power, they can oppress their workers and employees, crush the opportunity of any entrepreneur or small business, and even control the government. The result is not a republican form of government, in which representatives of the people rule. The result is an oligarchy or a plutocracy, in which freedom exists only for those with wealth and power. As the celebrated historian Richard Hofstadter once commented of the antitrust movement of the Gilded Age and Progressive Era: “Nothing less was at stake than the entire organization of American business and American politics, the very question of who was to control the country.”

The most famous trustbuster of the era was, of course, Theodore Roosevelt. And here, Wu’s account of the history of antitrust takes a different tack from that of many other neo-Brandeisians. As their name suggests, the neo-Brandeisians tend to be devotees of Supreme Court Justice Louis Brandeis—and implicitly opponents of Roosevelt. Both Brandeis and Roosevelt believed that our constitutional system could not survive if a small number of companies or individuals controlled the government. But whereas Brandeis emphasized breaking up the powerful trusts, Roosevelt thought that bigness might not be a problem if the federal government could prevent big companies from engaging in bad behavior. Both Brandeis and Roosevelt supported public utilities regulation as a way to deal with monopolies, but Brandeis is generally seen as a decentralizer and Roosevelt as a nationalist.

While Wu describes this divide fairly, and firmly sides with Brandeis on the question of nationalism versus decentralization, he gives Roosevelt equal consideration and portrays him as a hero in the saga of antitrust—as the president who used his bully pulpit and the sheer force of his personality to bring antitrust prosecutions into the public conversation. Many of Roosevelt’s detractors point out that his successor William Howard Taft initiated more cases. But it was Roosevelt’s prosecutions of Standard Oil and the Morgan railroad trust that became the marquee fights, featuring the most powerful men in America. It was thus Roosevelt who set an example that has echoed through history, serving to bolster the efforts of Thurman Arnold in the 1930s and early 1940s and Joel Klein (who prosecuted Microsoft) in the 1990s. This reading of Roosevelt is insightful: Because antitrust is not a technical enterprise, it cannot be left to faceless, nameless economists and technocrats. Like politics more broadly, it requires leaders with the courage to take on the powerful and the charisma to build public support for reform.

Antitrust also played an important role in the greatest battle of the twentieth century—between fascism and democracy—though this is largely forgotten today. During the 1930s and 1940s, the New Dealers and their allies recognized that monopolists and cartels had helped bring the authoritarian regimes of Germany and Japan to power and had kept them in power. German monopolies and cartels in a range of industries—railroads, armaments, chemicals—supported Hitler and the Nazis when they had comparatively few backers, and then cooperated with the Nazi regime, sustaining it during the war.

The New Dealers saw that economic power and political power were intrinsically linked. In Germany, an unequal economy had enabled tyranny. “Here was arbitrary power without public control,” Thurman Arnold, head of the Justice Department’s Antitrust Division, wrote in a 1940 book. The country “became [economically] organized to such an extent that it needed a general and Hitler leaped into power; had it not been Hitler it would have been someone else.” After the war, Arnold’s lieutenants joined teams working on the Marshall Plan and pushed Germany to adopt antitrust laws. The aggressive competition laws of today’s European Union thus have the New Dealers as one of their ancestors. Democratizing Europe required democratizing the economy in Europe.

This principle is, however, often overlooked in analysis of crises today: A stream of books and commentary on the return of authoritarianism around the world—Fascism: A Warning; How Democracies Die—largely undervalues the relationship between economics and politics. While their authors fear the breakdown of constitutional norms and a loss of faith in democratic institutions, they have far too little to say about widening inequality and the rising concentration of economic power. In today’s global contest between democracy and nationalist oligarchy, economic power is a critical element and, as a result, antitrust law is an essential tool.


The author of The Attention Merchants and The Master Switch, Wu weaves his considerable knowledge of the technology and communications industries seamlessly into the arc of antitrust history—and to good effect. We learn how the breakup of AT&T in 1984 accelerated the rise of home internet connections: Whereas the telecommunications giant previously had a monopoly on equipment like phones that used its phone jacks, more people now began to buy their own phones, as well as new devices such as answering machines and modems. We see how the case against IBM in the 1970s kept Big Blue from tying its hardware and software together, and so allowed the computer hardware industry of the 1980s to flourish. And we see how prosecuting Microsoft’s practice of bundling its products together facilitated a more open software industry, one that helped foster tech innovation in the late 1990s and early 2000s.

Yet even as these victories were being won, the paradigm was shifting. With the demise of a three-decade liberal era in the 1970s and the rising power of neoliberal ideology, Bork’s book found a ready audience. His approach, which came to be associated with the Chicago School of law and economics, took hold of the entire field over the ensuing decades, though its power derived more from simplicity than accuracy. The Chicago School approach turned theoretical assumptions (there is always a threat of possible competition) into broad assertions about the world (companies never raise prices for fear of this competition). The effect was to reframe monopolists: Rather than being predators and oppressors, these “gentle giants” lived in fear of competition, while seeking only to make the economy more efficient. They thus posed no threat to consumer welfare.

To call the logic questionable would be charitable, as predatory corporate behavior captures the headlines year after year. But the consumer welfare approach was gaining favor. “During the [George W.] Bush years, the anti-monopoly provisions of the Sherman Act went into a deep freeze from which they have never really recovered,” Wu writes. With the Microsoft case settled, the Bush Justice Department didn’t bring any serious anti-monopoly antitrust cases and didn’t block any major mergers. And since Microsoft—some twenty years ago—there have been no big cases “targeting an industry-spanning monopolist or super-monopolist, seeking the goal of breakup.” By 2004, in the case of Verizon v. Trinko, Justice Antonin Scalia could write for the Supreme Court that the “mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system.” In other words, antitrust laws were far from being anti-monopoly in motivation; they recognized and accepted the value of monopolies.

Of course, Scalia’s and Bork’s positions were political, despite their claims of neutrality. It is a political choice to argue for a policy that includes some factors (consumer prices) and excludes others (size, influence, political power). Just as it is a political choice to put a thumb on the scale in favor of mergers, against enforcement, and for consolidation. And it is a political choice to believe in monopolists when they claim they are simply trying to make the world a better place.


Wu also seeks to point the way forward for a neo-Brandeisian approach to antitrust law. The Curse of Bigness is neither an academic book nor a policy brief, so his prescriptions are more a sketch of an agenda than a blueprint for reform. But they include most of the main components that must accompany an antitrust revival: reforms to merger policy, more big prosecutions, breakups of existing conglomerates, industrywide investigations, and a rethinking of the consumer welfare standard.

One omission is surprising. When compared to most areas of domestic regulation, antitrust is exceptional because the courts—not regulatory agencies—are the central policymakers. This makes little sense, as judges are not experts in economic policy-making, nor are they meant to have a leading policy- making role in our constitutional system. Taking antitrust policy-making away from the courts and rooting it back in Congress and regulatory agencies must also be a core part of neo-Brandeisian reforms.

“We must decide very quickly what sort of country we want to live in,” Senator Estes Kefauver said in debates over his 1950 Anti-Merger Act. “Through monopolistic mergers the people are losing power to direct their own economic welfare. When they lose the power to direct their economic welfare they also lose the means to direct their political future.” Sweeping in scope, The Curse of Bigness is probably the best popular account of the history of American antitrust law and policy. It captures the stakes in the battle for antitrust—and it cuts to the heart of one of the central questions of our time: Can democracy survive?