The Hidden History of Monopolies

How Big Business Destroyed the American Dream

Thom Hartmann

• Publisher: Berrett-Koehler Publishers
• Year: 2020
• ISBN:
  9781523087754
• Topic: History
• Subtopic: North American History
• Index: History

"This is the most important, dynamic book on the cancers of monopoly by giant corporations written in our generation" (Ralph Nader, from the foreword). American monopolies dominate, control, and consume most of the energy of our entire economic system; they function the same as cancer does in a body, and, like cancer, they weaken our systems while threatening to crash the entire body economic. American monopolies have also seized massive political power and use it to maintain their obscene profits and CEO salaries while crushing small competitors. But Thom Hartmann, America's #1 progressive radio host, shows we've broken the control of behemoths like these before, and we can do it again. Hartmann takes us from the birth of America as a revolt against monopoly (remember the Boston Tea Party?), to the largely successful efforts of both Presidents Theodore and Franklin Roosevelt and other like-minded leaders to restrain corporations' monopolistic urges, to the massive changes in the rules of business starting during the "Reagan Revolution" that have brought us to the cancer stage of capitalism. He shows the damage monopolies have done to so many industries: agriculture, healthcare, the media, and more. Individuals have taken a hit as well: the average American family pays a $5, 000 a year "monopoly tax" in the form of higher prices for everything from pharmaceuticals to airfare to household goods and food. But Hartmann also describes commonsense, historically rooted measures we can take—such as revitalizing antitrust regulation, taxing great wealth, and getting money out of politics—to pry control of our country from the tentacles of the monopolists.

PART ONE

America Was Founded on Resistance to Monopoly

Birthed in the Fight Against Monopoly

America was birthed in a fight against monopoly.

There’s a pervasive myth in America—promoted by wealthy anti-tax activists—that the Revolutionary War was fought because colonists didn’t want to pay taxes to England. While that sentiment was certainly widespread, the spark that lit the fuse of the Revolution was monopoly and a giant tax cut for the world’s largest corporation, not an increase in taxes.

By 1773, Great Britain had a stranglehold on the economy of the colonies, enforced through the British East India Company, which held monopoly rights to much of the commerce with North America.¹

The Company, whose stock was heavily held by the British royal family and senior government officials, successfully lobbied Parliament for a variety of restrictions on commercial activity in the colonies, including a ban on the manufacture of most high-end products, such as clothing, and an absolute monopoly on the wholesaling of tea to the colonies.

Up and down the East Coast, small tea shops and tea importers reacted with rage to the Tea Act of 1773, which gave the East India Company a massive tax break, eliminating all tax on their tea sold into the colonies, and expanded their monopoly on the tea business. Small importers, who’d been buying in the London markets or from Dutch trading companies to sell to teahouses from Boston to Washington, DC, found themselves undercut by the tax-free Company tea.

The citizens of Boston and surrounding areas covered their faces, massed in the streets, and destroyed the property of a giant global corporation. Declaring an end to global trade run by the East India Company that was destroying local economies, this small minority started a revolution with an act of rebellion later called the Boston Tea Party.

In a rare-book store around 2000, I came upon a first edition of A Retrospect of the Boston Tea-Party, With a Memoir of George R. T. Hewes, a Survivor of the Little Band of Patriots Who Drowned the Tea in Boston Harbour in 1773. Because the identities of the Boston Tea Party participants had been hidden (other than Samuel Adams), and all were sworn to secrecy for the next 50 years, this is the only existing first-person account of the event by a participant.

Hewes’s description suggests that the Boston Tea Party resembled today’s growing protests against corporate monopolies, as well as the efforts of small towns to protect themselves from chain-store retailers, frackers, toxic waste sites, coal-fired power plants, and factory farms.

Although schoolchildren are usually taught that the American Revolution was a rebellion against “taxation without representation,” akin to modern-day conservative taxpayer revolts, in fact what led to the Revolution was rage against a transnational corporation that, by the 1760s, dominated trade from China to India to the Caribbean and controlled nearly all commerce to and from North America, with subsidies and special dispensation from the British crown.

Hewes wrote, “The [East India] Company received permission to transport tea, free of all duty, from Great Britain to America,” allowing it to wipe out New England–based tea wholesalers and mom-and-pop stores and take over the tea business in all of America.

Hence, it was no longer the small vessels of private merchants, who went to vend tea for their own account in the ports of the colonies, but, on the contrary, ships of an enormous burthen, that transported immense quantities of this commodity. . . . The colonies were now arrived at the decisive moment when they must cast the dye, and determine their course.²

Hewes, dressed as an Indian, disguised his face with coal dust and joined crowds of other men in silently hacking apart the chests of tea and throwing them into the harbor. In all, the 342 chests of tea—over 90,000 pounds—thrown overboard that night were enough to make 24 million cups of tea and were valued by the East India Company at 9,659 pounds sterling, or, in today’s currency, just over $1 million.

In response, the British Parliament immediately passed the Boston Port Act, stating that the port of Boston would be closed until the citizens of Boston reimbursed the East India Company for the tea they had destroyed. The colonists refused.

A year and a half later, the colonists again defied the East India Company and Great Britain by taking on British troops in an armed conflict at Lexington and Concord (the “shots heard ’round the world”) on April 19, 1775.

That war—triggered by a transnational corporation and its government patrons trying to deny American colonists a fair and competitive local marketplace—ended with independence for the colonies.

The revolutionaries had put the East India Company in its place with the Boston Tea Party, and that, they thought, was the end of that.

Unfortunately, the Boston Tea Party was not the end; 150 years later, during the so-called Gilded Age, powerful rail, steel, and oil interests rose up to begin a new form of political system to benefit the wealthy and their corporations. America’s economic royalists captured the newly formed Republican Party in the 1880s and have been working to establish a permanent wealthy and ruling class in this country ever since.

The Founders Challenge Monopoly

The more things change, the old saying goes, the more they stay the same. It’s true, at least with regard to giant corporate interests fighting regulation and seizing control of governments that might try to restrain them.

The year of 1776 had a huge impact on the future of the world. Not only did Thomas Jefferson and friends declare that they’d no longer submit to the military, commercial, and political power of Great Britain, but one of the world’s great analysts of capitalism, Adam Smith, published his book An Inquiry into the Nature and Causes of the Wealth of Nations.³

At the same time that the American colonists were decrying the monopoly that the East India Company held over them, Smith was criticizing the Company—and the others who had succeeded in creating monopoly—in Great Britain.

He started out by calling for a return to “natural liberty”— competition—to return to Great Britain’s economy “especially if the privileges of corporations . . . were abolished.” In order to make the economy work correctly, Smith said, Great Britain must “break down the exclusive privileges of corporations” and take from them the power to regulate employment “so that a poor workman, when thrown out of employment either in one trade or in one place, may seek for it in another trade or in another place, without the fear either of a prosecution or of a removal.”

He condemned the actions of the big corporations that then dominated Britain’s economy, noting that even military officers wouldn’t be as greedy to maintain their numbers and positions, and oppose any laws that might regulate their behavior, as were the monopolistic corporations:

Were the officers of the army to oppose with the same zeal and unanimity any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market; . . . to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us.

Referencing the East India Company, Smith wrote, “This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature.” Indeed, many members of the Great Britain legislature at that time either were afraid of the Company and its colleagues or owned so much stock in them that their votes aligned with the monopolists’ interests—a situation not unlike what we see today in our legislatures.

“The member of parliament who supports every proposal for strengthening this monopoly,” Smith wrote, “is sure to acquire . . . great popularity and influence with an order of men whose numbers and wealth render them of great importance.”

On the other hand, the Company and others routinely punished—severely—those legislators who dared call for its regulation, regardless of how much power or reputation those legislators may have had. Nothing, literally nothing, Smith said, could restrain these corporations, and everybody knew it.

If he [a legislator] opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.

Smith went on to recommend that the British Parliament take on the monopolists while preventing more from arising. “The legislature,” he said, directed “by an extensive view of the general good,” should “be particularly careful neither to establish any new monopolies of this kind, nor to extend further those which are already established.”

On the other side of the ocean, Jefferson and his compatriots eagerly read Smith, that day’s revolutionary economic thinker, along the lines of Thomas Piketty today. Jefferson so absorbed Smith’s lessons about the dangers of monopoly that he argued—and nearly took down the Constitution itself in fighting for it—that the Bill of Rights should contain an explicit ban on monopoly.

When he was the US envoy to Paris in 1786, he repeatedly attacked specific monopolistic industries. The tobacco monopolies that had been granted by Great Britain and France were particular recipients of his bile. In a January 24, 1786, letter to the governor of Virginia, he wrote,

I have been fully sensible of the baneful influence on the commerce of France and America, which this double [tobacco] monopoly will have. I have struck at its root here, and spared no pains to have the form itself demolished, but it has been in vain. The persons interested in it are too powerful to be opposed, even by the interest of the whole country.⁴

Jefferson wasn’t immune to fear of retribution from large monopolistic enterprises. The next sentence in his letter says, “I mention this matter in confidence, as a knowledge of it might injure any further endeavors to attain the same object.”

On May 8 of that year, he wrote to James Ross, revisiting the topic. “My hopes, therefore, are weak, though not quite desperate. When they become so, it will remain to look about for the best palliative this monopoly can bear.”⁵

In another letter on the same day, this one to T. Pleasants, Jefferson wrote, “I was moreover engaged in endeavors to have the monopoly, in the purchase of this article, in this country, suppressed. My hopes on that subject are not desperate, but neither are they flattering.”⁶

He revisited the topic in a half dozen or more letters that year.

But it was the “operating system,” or constitution, that would direct the future of America—including the economic future—that most concerned Jefferson. When James Madison sent him a first draft of the new US Constitution that they’d worked out that summer and fall in Philadelphia, Jefferson’s response was blunt.

On December 20, 1787, he replied to his protégé:

I will now tell you what I do not like. First, the omission of a bill of rights, providing clearly, and without the aid of sophism, for freedom of religion freedom of the press, protection against standing armies, restriction of monopolies, the eternal and unremitting force of the habeas corpus laws, and trials by jury in all matters of fact triable by the laws of the land, and not by the laws of nations.⁷

Every item except the restriction of monopolies made its way into the Bill of Rights.

But Jefferson couldn’t let it go; he’d been thinking about this for years, and he had written about it in some of his private papers such as his diary, and spoken about it in conversations with close friends. A constitution, after all, would become the supreme law of the land for generations to come.

Although the Constitution had come into effect on March 4, 1789, six months later he was still writing about the matter to Madison. On September 6, 1789, he opened his letter by saying that he was compelled to reach out to Madison “because a subject comes into my head.”

At its core, Jefferson said, was “[t]he question, whether one generation of men has a right to bind another” because “it is a question of . . . the fundamental principles of every government.”⁸

Among those principles was the need to prevent monopolists from rising up and taking over America, locking us into a rigid class system that kept small economic players out of the marketplace while encumbering working-class families with multigenerational debt (like student loan debt is, by law, today, thanks to George W. Bush’s 2005 bankruptcy “reform”).

Noting how quickly wealth and business interests can corrupt government, Jefferson wrote, “Various checks are opposed to every legislative proposition. Factions get possession of the public councils, bribery corrupts them, personal interests lead them astray from the general interests of their constituents.”

The solution? Among other things, Jefferson said that the Constitution should address “monopolies in commerce.”⁹

Like Adam Smith, he never lived to see the day.

Madison’s Vision: Government to Fight Factions

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