Monday, January 20, 2020

Goliath

Goliath tells the tale of America's multi-century war against monopolies abusing their economic power. Government responses to monopolies and oligopolies seems to be cyclical: sometimes monopolies have abused their power to such an extent that the citizenry has fought back through the government to break them up. Other times, the population is complacent, allowing a fresh crew of monopolies to rise to power, against causing a backlash.

The book takes you through a number of different US governments over the years and how they dealt with the large corporations that drew economic rents from their customers and exercised disproportionate power in politics. Though I found it educational, I knew enough about certain topics the author discussed to know that he was not telling the whole story at times, which in my eyes reduced the credibility of the rest of the book. For example, the author's discussions of Federal Reserve actions (e.g. raising/lowering interest rates) were made almost completely ignoring inflation levels and expectations!

There are a lot of facts in this book, but there is also a lot of editorializing. It wasn't always clear to me where that line was drawn.

The author clearly has a beef with monopolies, and I can understand that. But his beef seems to be limited only to the private sector. Public monopolies are also bureaucratic messes which abuse their power, but get no mention, giving this book a political bias.

There is also a bias against large corporations in the book. But sometimes large corporations can be more efficient than small ones. The author ignores discussion of productivity advantages from large corporations, instead reducing the entire argument to one about market power. Abuse of market power is of course a bad thing, but to ignore the efficiency benefits of some large corporations is to ignore an important part of the discussion, in my opinion. For example, I've seen research suggesting that a huge part of US wealth comes from the massive and relentless productivity gains in the cutthroat US retail sector. From what I gathered, the author would have us go back to a fragmented mom-and-pop shop system that would substantially reduce standards of living, in my opinion.

On that subject, the author appears to be a big fan of fair trade laws, as they require retailers to sell products at the same price. The benefit here is that manufacturers or wholesalers can't get squeezed by big retailers who can make-or-break them by abusing market power. But there was absolutely no discussion about how these laws affect the retail industry itself. If more efficient retail upstarts can't sell products at cheaper prices, even when they can do so profitably, what a stagnant sector the retail industry would be!

Nevertheless, I think the book offers a history lesson (if somewhat biased), and raises an important topic for discussion: the role of government in taking on private monopolies. Citizens right now probably don't know enough about how monopolies abuse power, because the days of the robber barons are too far gone for many to remember. But the new monopolies in the tech world are probably a threat, and therefore a renewed interest in this topic is likely warranted.

One thing this book did make clear was how much money is (and has been) involved in shaping US political policies. This is a major bug limiting the power of its democratic institutions.

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