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Corporate Power, People & Policy

PRESENTED BY

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Siena Chrisman

Director of Research

Agriculture & Food Systems Program

State Innovation Exchange

A Brief History

This doesn’t have to be our economy

Manifest Destiny

The US was founded by corporate interests, who pushed for policies including:

• Removal of Indigenous people so the land could be used “profitably”
• Institutionalizing slavery to provide labor for the valuable global sugar and cotton industries
• Codifying racial hierarchy by giving advantages to poor whites over their Black and Indigenous fellow workers

Sugar [and] cotton … explain much of the infrastructure of our capitalist economy to this day.

We can [say that]… the abundance of land originally held by the Indigenous and the labor of enslaved people was America's competitive advantage.

There's no way to really understand the economic might of America by the 19th century without understanding the role of cotton slavery and earlier sugar slavery in it. - Khalil Gibran Muhammad, Harvard Kennedy School, writer for The 1619 Project

Key Anti-Monopoly Reforms

◦ Sherman Antitrust Act (1890): prohibits monopolies; authorizes government to dissolve corporate entities that had grown large enough to restrict market competition

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◦ Clayton Antitrust Act (1914): gives the Department of Justice (DOJ) authority to review, prevent, or modify anticompetitive mergers

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◦ Packers and Stockyards Act (1921): prevents meatpackers and processors from unfair practices against farmers and ranchers

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◦ New Deal (1933-39): Labor laws, banking laws, farm programs, infrastructure, employment…

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Impacts of Reforms: Examples

• 1966: Supreme Court blocks a proposed merger of two Los Angeles supermarket chains because it would have given them control of 7.5% of the local market – seen as too much control for one company.
• Companies were restricted from consolidating power in one location. E.g., banks headquartered in one state could not established branches in other states. This was to ensure that financial institutions would be tied economically and socially to their communities.
• Reforms to the meatpacking industry improved farmer prices, worker wages, and food safety.

1918: 5 meatpacking companies slaughtered 55% of US beef

1976: 4 companies slaughtered just 25% of US beef

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Corporate Power Pushes Back

• 1970s: Carter government stops regulating airlines, railroads, trucking
• 1979: Supreme Court adopts “consumer welfare standard” for proposed mergers, opening the door to unprecedented consolidation
• 1980s: Reagan deregulation, union busting.
• 1990s: GATT, NAFTA, other global free trade agreements
• 1999: Congress repeals Glass-Steagall Act, deregulating banking industry
• 2010: Citizens United

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Consumer welfare standard: good for consumers?

In the US, 4 companies control:

73% of beef packing

67% of the hog market

77% of the beer market

80% of soybeans

And more…

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while:

Food prices up ~10% since 2021

Shortages and supply chain issues

49m Americans used food assistance in 2022

Family farms continue to consolidate

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Consumer welfare standard: good for consumers?

• Reduced costs are only passed onto consumer in competitive sectors. Otherwise, company gains from efficiencies go to shareholders or back to the firm.
• Post-merger prices increase by average of 4%. US price markups increased 3x from 1980 to 2016.
• An increase in price markups correlates to a decrease in share of profits going to workers, which can lower wages across the economy.
• Hazardous to health: drug prices have increased, hospitals have closed, supply chain delays
• Consolidation stifles innovation & entrepreneurship
• Gives bigger businesses a louder political voice