"Cancel Culture," Race and the Greed of the Billionaire Class

Nike's attempt to prove they care about the poor (screenshot from this ad). Nike will manufacture as many poor as it takes to manufacture shoes for less than 50 cents per hour. 

A fake MacDonalds ad mocking fake corporate caring

by Thomas Neuburger

"The elites will discuss race. They will not discuss class."
—Chris Hedges

Chris Hedges is the latest to weigh in on the "cancel culture" wars, saying what any number of widely cancelled others have said before him (for example, Matt Taibbi in this public post; he's even more pointedly analytical in a later, subscriber-only piece).

But Hedges summarizes the situation so well, he's well worth quoting. From his new perch at Robert Sheer's Sheerpost he writes:

The cancel culture — the phenomenon of removing or canceling people, brands or shows from the public domain because of offensive statements or ideologies — is not a threat to the ruling class. Hundreds of corporations, nearly all in the hands of white executives and white board members, enthusiastically pumped out messages on social media condemning racism and demanding justice after George Floyd was choked to death by police in Minneapolis. Police, which along with the prison system are one of the primary instruments of social control over the poor, have taken the knee, along with Jamie Dimon, the chief executive of the serially criminal JPMorgan Chase, where only 4 percent of the top executives are Black. Jeff Bezos, the richest man in the world whose corporation, Amazon, paid no federal income taxes last year and who fires workers that attempt to unionize and tracks warehouse laborers as if they were prisoners, put a “Black Lives Matter” banner on Amazon’s home page.

The rush by the ruling elites to profess solidarity with the protestors and denounce racist rhetoric and racist symbols, supporting the toppling of Confederate statues and banning the Confederate flag, are symbolic assaults on white supremacy. Alone, these gestures will do nothing to reverse the institutional racism that is baked into the DNA of American society. The elites will discuss race. They will not discuss class.

To repeat: Hundreds of corporations, nearly all in the hands of white executives and white board members, enthusiastically pumped out messages on social media condemning racism and demanding justice after George Floyd was choked to death by police in Minneapolis.

In addition, we're drowning in corporate self-polishing-apple ads, like those from Nike and MacDonalds touting how much they care about the market that buys their products, even as they exploit that market for all they can get take it for.

Is it not more than obvious at this point, that corporate America and the purchased "free-market" liberals they keep in office are using this racially charged moment — a moment that should be racially charged — to distract from the other crisis facing America, the one where "minimum wage workers cannot afford rent in any U.S. state," to cite just one of the hundred brutal tortures they inflict on us daily?

Make no mistake: The very very wealthy want even more of our money, want us to have even less control of our government than we have today, and they're more than happy — eager, in fact — to see us fully distracted with worry over which left-sympathizing writer isn't sufficiently sympathetic to violence, based on a tweet.

"But Isn't It Racist to Say Calling Out Racism Is Racist?"

Along with the good and sincere, there are many bad actors here. Along with the principled freedom-of-speech advocates (many, but not all, of those who signed this letter, for example), there are also a great many racists and right-wing opportunists calling out "cancel culture" — and a few "unhinged Zionists" as well — who've done what they now decry. The Right has jumped all over the cancel-culture controversy to try to paint the Left as focused to a fault on the rights of minorities to the exclusion of needs of the rest.

First, if the Right says something is true, does that make it false, or worse, not worth examining? The "liberal left" (as opposed to the actual left) does tend to ignore class as an issue. The cancel-culture controversy is complicated; let's not pretend it's not, or worse, cancel those who don't affirm its simplicity.

Moreover, at what time in modern America has the New York Times, which recently canceled its own editor for the crime of printing Tom Cotton, represented the actual Left, as opposed to that part of the Left that shovels free-market Democrats into office as fast as it can, then works like devils to keep them there? The Times is owned by a corporation with close to two billion dollars in yearly revenue  — advocates for the poor they're not, unless the poor will content themselves with only the smallest of marginal structural changes. 

In the meantime, while we're squabbling over the latest cancellation outrage — many are indeed outrageous, while many are not — America is being rebuilt as we speak into an even greater monopoly than before, with even more wealth going to the even more powerful.

As one wag put it, Jeff Bezos is having a very good crisis. Companies large enough to survive this event are flush with cash and gobbling failed competitors hand over fist. It's been rightly said that when Covid has done its work, we won't recognize the country it left behind.

Watching a Knife Fight While the Town Burns Down

The "cancel culture" war is a distraction, important though it is we have that discussion. While we watch the knife fight in the corner, cheering one side or the other on, the main event, the torched and burning town we all inhabit, consumes itself behind us.
 
 

Reminder: Electing J.D. Scholten Will Make Congress-- Not To Mention Iowa-- A Much More Productive Body

J.D. is running to represent a huge, mostly rural Iowa congressional district currently held by the most bigoted and far right Republican in the House, Steve King. But J.D.'s campaign isn't just about a referendum on King. He's far more concerned about offering voters a positive platform they can relate to. A few days ago, he wrote an OpEd for one of the local newspapers, the Carroll Times Herald.

Carroll County hasn't exactly been Democrat-friendly in recent years. Trump beat Hillary there 6,627 (63.5%) to 3,305 (31.7%). And in the 2018 Blue Wave, the county gave 62.9% of its gubernatorial vote to reactionary Republican Kim Reynolds.

Carroll County, though, was much closer for J.D. than for either Hillary or gubernatorial candidate Fred Hubbell who took just 35.3% in Carroll County. On that same day Hubbell, the gubernatorial candidate at the top of the ticket, won 3,186 votes, the county gave J.D. 4,075 votes (45.7%). It's counties like Carroll where J.D. impressed voters and came so close to winning and it's counties like Carroll he's in the process of winning over even more people. Strong, Clear Antitrust Policy Saves Lives isn't the kind of Republican-lite messaging the DCCC pushes on Democrats running in red districts. Ignoring their advice is what got J.D. so much closer than most of their red-district candidates. He held King down to 50.4% in an R+11 district. J.D. was one of the two or three top-performing Democrats in any district in the country even close to that kind of PVI. If he wins in November-- which is looking increasingly likely-- it's because he's talking to people in places like Carroll County, not to people in DC.

Right now, the failures of our healthcare system are on full display. Hospitals and their healthcare workers are overwhelmed and strapped for resources. Patients are receiving bills for COVID-19 testing and treatment that reach into the tens of thousands of dollars. The death count in America just topped 25,000-- and it could reach a quarter million.

One part of this equation is the concentration of the healthcare industry that has created fewer hospital beds, higher prices, lower quality of care and fewer resources for doctors, nurses and healthcare workers. This undoubtedly has compromised our ability to treat patients during this crisis.

Waves of consolidations and closures have plagued our nation’s hospitals with more than 680 mergers over the past decade alone.

Additionally, the reduction of about 600,000 hospital beds over the last 30 years has left our national public health infrastructure woefully unprepared for a global pandemic. This has affected urban and rural America alike: 72 percent of big metropolitan areas have highly concentrated hospital markets, and 13 percent are very highly-concentrated. And in 2019, rural America saw a record number of rural hospital closures, and another 430 rural hospitals are on the brink of closure if their financial situations do not improve. All in all, our hospital bed capacity is more than 10,000 beds short of the current projected need to respond to the coronavirus crisis.

As resources dwindle, research has proven that hospital mergers also contribute to rising health care costs and likely are a major factor in declining healthcare quality. During this coronavirus crisis, uninsured Americans could face up to $75,000 in hospital bills, an exorbitant fee and even more outrageous considering that hospitals are charging whatever they can get away with because they have the monopoly power to do so. This fact holds true with all consolidated industries: when a few players own a large percentage of the market share, there’s little incentive to reduce costs or improve the quality. It’s also easy to either buy out smaller players or simply push them out of business altogether.

During these recent years of hospital consolidation, a series of mergers and acquisitions has also increased the risk of supply shortages. In 2019 alone, hospital mergers and acquisitions were valued at $91.2 billion. These mergers pushed “just-in-time” supply chains that minimized inventories and downgraded manufacturing capacity.

We recently learned how devastating these anticompetitive mergers can be. The New York Times and ProPublica reported that public officials created a plan to address a glaring hole in our medical system’s preparedness: a ventilator shortage. The federal government signed a contract with Newport Medical Instruments, a small company in California to produce cheap, mobile ventilators that could accelerate production in the event of a pandemic. The work started and the company was on schedule to file for market approval, when Covidien, a multi-billion dollar company, bought Newport to prevent them from building a cheaper product that would undermine Covidien’s profits.

Suddenly, the ventilator program was dead. It took years for the government to line up another contract, and as you can see from this pandemic, it’s been too little, too late. Now, we have states trying to fill the gap by finding their own ventilator supply and sending supplemental ones to other states. These policies and practices are not sustainable for consumers and completely unfair to the hardworking doctors, nurses and other healthcare professionals who are working on the healthcare front lines. It’s a mess, and we must do better.

We need to reflect on these failures and have the foresight to make much-needed changes to our healthcare system. That starts with enforcing our antitrust laws in the healthcare industry and preventing the creation of these monopolies that can rake in profits at the expense of our health and well-being. Here are a couple of key steps we can take:

• Give the Federal Trade Commission and the U.S. Department of Justice more funding and resources to review and monitor mergers in the healthcare industry and challenge anti-competitive conduct.
• Adopt stricter scrutiny on anti-competitive conduct in horizontal mergers between hospitals as well as vertical mergers between hospitals, drug manufacturers, pharmacies, insurers and more.
• Repeal state COPA statutes that protect healthcare organizations from federal antitrust scrutiny and lead to healthcare mergers.

Will enforcing our antitrust laws solve everything? Will it magically give every American affordable, quality healthcare? Of course not. But it is a strong step in the right direction to lower hospital costs, improve patient care and ensure the resources needed to fight the next pandemic.

Everyone in Carroll County and across Iowa and the country is worrying about the pandemic. J.D. is telling his neighbors that it has shined a bright and deadly light on the failures of our healthcare system, especially in rural Iowa. In particular, concentration in the healthcare industry has resulted in hospital closures and fewer hospital beds, higher costs, lower quality care, and limited resources to treat patients. The result is that Iowa has the 49th latest "peak date" in the nation of when we project the highest number of single-day deaths. Please consider chipping in to help J.D. fund his campaign by clicking on the Blue America 2020 congressional thermometer on the right.

This afternoon, he told me that "Steve King has continued to praise President Trump's response to the coronavirus and downplay the reality and seriousness of this pandemic. In Iowa, we continue to see dramatic jumps in confirmed COVID-19 cases, stressing our already-fragile and under-resourced hospitals. Our leaders need to have the foresight to anticipate problems and work to avert them before there are catastrophic consequences. Unfortunately, King's leadership style is memes, proving just how urgently we need new representation."

Bernie, Elizabeth And Big Tech

I’ve always seen Elizabeth Warren as a future U.S. president-- one term (or two terms) as Bernie’s VP, two terms as president after that… 12 or 16 years of the fundamental transformational change Status Quo Joe, Bloomberg, Mayo Pete, the Democratic Party establishment and the GOP are so desperate to prevent. Meanwhile, she’s been acting as Bernie’s loyal wing-man in debates and out on the campaign trail. Or haven’t you noticed? And she concentrates on issues that have helped broaden the joint platform. Last April, Ken Rogoff, writing for The Guardian, reported on how Elizabeth has been going after Big Tech, the way progressive reformers once went after, for example, railroad monopolies.

“Displaying a degree of courage and clarity that is difficult to overstate,” wrote Rogoff, a former chief economist for the IMF and now a professor of economics and public policy at Harvard, “U.S. Senator and presidential candidate Elizabeth Warren has taken on big tech, including Facebook, Google, Amazon and Apple. Warren’s proposals amount to a total rethink of the United States’ exceptionally permissive merger and acquisition policy over the past four decades. Indeed, big tech is only the poster child for a significant increase in monopoly and oligopoly power across a broad swath of the American economy. Although the best approach is still far from clear, I could not agree more that something needs to done, especially when it comes to big tech’s ability to buy out potential competitors and use their platform dominance to move into other lines of business.”

Warren is courageous because big tech is big money for most leading Democratic candidates, particularly progressives, for whom California is a veritable campaign-financing ATM.

…Although the causal relationships are difficult to untangle, there are solid grounds for believing that the rise in monopoly power has played a role in exacerbating income inequality, weakening workers’ bargaining power, and slowing the rate of innovation. And, perhaps outside of China, it is a global problem, because U.S. tech monopolies have often achieved market dominance before local regulators and politicians know what has happened. The EU, in particular, has been trying to steer its own course on technology regulation. Recently, the UK commissioned an expert group, chaired by Barack Obama’s former chief economist (and now my colleague) Jason Furman, that produced a very useful report on approaches to the tech sector.

The debate about how to regulate the sector is eerily reminiscent of the debate over financial regulation in the early 2000s. Proponents of a light regulatory touch argued that finance was too complicated for regulators to keep up with innovation, and that derivatives trading allows banks to make wholesale changes to their risk profile in the blink of an eye. And the financial industry put its money where its mouth was, paying salaries so much higher than those in the public sector that any research assistant the Federal Reserve System trained to work on financial issues would be enticed with offers exceeding what their boss’s boss was earning.

There will be similar problems staffing tech regulatory offices and antitrust legal divisions if the push for tighter regulation gains traction. To succeed, political leaders need to be focused and determined, and not easily bought. One only has to recall the 2008 financial crisis and its painful aftermath to comprehend what can happen when a sector becomes too politically influential. And the U.S. and world economy are, if anything, even more vulnerable to big tech than to the financial sector, owing both to cyber aggression and vulnerabilities in social media that can pervert political debate.

Another parallel with the financial sector is the outsize role of U.S. regulators. As with US foreign policy, when they sneeze, the entire world can catch a cold. The 2008 financial crisis was sparked by vulnerabilities in the U.S. and the UK, but quickly went global. A U.S.-based cyber-crisis could easily do the same. This creates an “externality,” or global commons problem, because U.S. regulators allow risks to build up in the system without adequately considering international implications.

It is a problem that cannot be overcome without addressing fundamental questions about the role of the state, privacy, and how U.S. firms can compete globally against China, where the government is using domestic tech companies to collect data on its citizens at an exponential pace. And yet many would prefer to avoid them.

That’s why there has been fierce pushback against Warren for daring to suggest that even if many services seem to be provided for free, there might still be something wrong. There was the same kind of pushback from the financial sector fifteen years ago, and from the railroads back in the late 1800s. Writing in the March 1881 issue of The Atlantic, the progressive activist Henry Demarest Lloyd warned that:

Our treatment of ‘the railroad problem’ will show the quality and caliber of our political sense. It will go far in foreshadowing the future lines of our social and political growth. It may indicate whether the American democracy, like all the democratic experiments which have preceded it, is to become extinct because the people had not wit enough or virtue enough to make the common good supreme.

Lloyd’s words still ring true today. At this point, ideas for regulating big tech are just sketches, and of course more serious analysis is warranted. An open, informed discussion that is not squelched by lobbying dollars is a national imperative. The debate that Warren has joined is not about whether to establish socialism. It is about making capitalist competition fairer and, ultimately, stronger.

I knew just who to turn to for a solid perspective on this-- Riverside County historian and congressional candidate, Liam O'Mara. O'Mara is running on a cutting edge progressive platform against one of the most insidiously corrupt Republicans in Congress, Ken Calvert. The idea of Calvert ever taking on the establishment is... just unthinkable. He is the embodiment of congressional and personal corruption. O'Mara is the polar opposite. He told us last night that "Years before I got into college to become a history professor, I worked in IT as a network administrator and consultant. I spent the '90s fixing and installing systems for health insurance providers and aerospace companies. During those years, the free-software/open-source movement was starting to gain ground against the old titans of the industry. I saw first-hand the desperate efforts of Sun, Novell, and IBM to keep their software competitive against a fast-changing rival that could run circles around them. I also watched in helpless horror as another titan, Microsoft, managed to beat back that challenge by getting away with monopolistic practices and bribing Congress to achieve lighter regulation. In the decades since, I have often wondered how much better things might have been if government had, for example, been more willing to enforce fair competition in the marketplace. Many more people may have joined us in using things like Linux and OpenOffice, making our computers faster, easier to maintain, and vastly cheaper. That the tech. industry is complex does not make it different from all other big industries-- it needs to be regulated in order to prevent corruption and abuse of power by virtual monopolies. The right-wing dogma that business regulates itself is wrong on all the evidence, but large corporations do one thing very well-- they bribe thought-leaders and policy-makers into accepting whatever reality they sees fit. Those in politics need to stop taking their money and pay better attention to the facts instead.

GOLIATH Has Arrived

Yesterday I opened a package that arrived at my doorstep and found an old friend's new book, Goliath-- The 100-Year War Between Monopoly Power And Democracy. This is the book that Thomas Frank called "the secret history of economic democracy in America. 'Secret' because it's still a story that will trouble everyone: conservatives, liberals, Silicon Valley and Big Oil." Yep... that's Matt Stoller... who has worked on Capitol Hill both with Alan Grayson in the House and with Bernie in the Senate. One book reviewer wrote that Goliath is a "startling look at how concentrated financial power and consumerism transformed American politics, resulting in the emergence of populism and authoritarianism, the fall of the Democratic Party-- while also providing the steps needed to create a new democracy."

Americans once had a coherent and clear understanding of political tyranny, one crafted by Thomas Jefferson and updated for the industrial age by Louis Brandeis. A concentration of power, whether in the hands of a military dictator or a JP Morgan, was understood as autocratic and dangerous to individual liberty and democracy. This idea stretched back to the country’s founding. In the 1930s, people observed that the Great Depression was caused by financial concentration in the hands of a few whose misuse of their power induced a financial collapse. They drew on this tradition to craft the New Deal.

In Goliath, Matt Stoller explains how authoritarianism and populism have returned to American politics for the first time in eighty years, as the outcome of the 2016 election shook our faith in democratic institutions. It has brought to the fore dangerous forces that many modern Americans never even knew existed. Today’s bitter recriminations and panic represent more than just fear of the future, they reflect a basic confusion about what is happening and the historical backstory that brought us to this moment.

The true effects of populism, a shrinking middle class, and concentrated financial wealth are only just beginning to manifest themselves under the current administrations. The lessons of Stoller’s study will only grow more relevant as time passes. Building upon his viral article in The Atlantic, “How the Democrats Killed Their Populist Soul,” Stoller illustrates in rich detail how we arrived at this tenuous moment, and the steps we must take to create a new democracy.

At the same time the book arrived, the Wall Street Journal published a think piece by Matt that is based on the themes he developed in Goliath, Why U.S. Businesses Want Trustbusting, with a perspective on class war that I hadn't considered much nor felt much sympathy for. "The loudest complaints against today’s monopolies," he wrote, "come not from Occupy Wall Street types but from leaders of firms seeking freedom of commerce."

Trustbusting is back, and it’s a bipartisan effort. Last month, 50 state attorneys general, led by the conservative Republican Ken Paxton of Texas, announced an investigation of Google for anticompetitive conduct. Republican Sen. Josh Hawley of Missouri has been a fierce critic of big tech, as has the Democratic-led House Judiciary Committee, which is probing the sector. Several Democratic presidential candidates have pledged to address the problem of concentrated power not just in tech but in agriculture, defense and media too.

It might seem like both parties and the American public are turning against business creators and investors who put their hard-earned capital to work. But there’s a more optimistic way to see this dynamic. If you listen to the complaints against these large companies, they aren’t coming from Occupy Wall Street-style protesters. They are coming from business leaders who, in most cases, are just seeking the liberty to trade with whomever they wish and feel that they are being blocked.

Take complaints about Alphabet Inc.’s Google, which is such an important marketing platform that it is essentially the home page for every company. Google’s searches once primarily sent people to independent web pages, but the internet has increasingly become Google’s own walled garden. A recent study by the data analytics firm Jumpshot shows that more than half of Google searches now end with snippets from web pages displayed on the search page itself instead of visits to those pages, or else by sending users to Google apps or to sites that paid Google for ads-- instead of to pages outside Google’s sphere. Meanwhile, Google has packed so many ads onto its results page that companies are finding that they have to buy ads even to reach people who search for their product by name.

This would not be such a problem except that Google is essentially a search monopoly, with roughly 90% of the web search market and a dominant share in other segments of the internet, like mapping. (Google counters by defining the market more broadly to include any online service that helps consumers to find something, such as Amazon or Expedia.) One small-business owner told the Wall Street Journal, in an article earlier this year about fake listings in Google maps, that he fears Google far more than the government. “The government will hit me with a fine,” he said. “But if Google suspends my listings, I’m out of a job. Google could make me homeless.”

Facebook has similar power over the advertising market for social networking, which is also critical for anyone with products or services to sell. Facebook can, in essence, impose its own tax on all businesses that have to connect with customers. “In a lot of ways, Facebook is more like a government than a traditional company,” Mark Zuckerberg said in a 2009 interview. Now Mr. Zuckerberg is putting together his own Facebook “Supreme Court,” as he describes it, for content moderation, and attempting to create his own currency with Libra.

Nor are monopolies just appearing in technology. Across the economy, dominant market power is more the norm than the exception. There are concentrated markets in industries as diverse as coffins, syringes, baby formula, mobile-home manufacturing and bank management software. Rabbis recently had to beg the giant Mexican bakery chain Bimbo, which together with Flowers Foods controls roughly three-fifths of branded bread sales in the U.S., to continue baking kosher bread. Fully 97% of missiles and munitions produced for the Pentagon are controlled by just two companies, Raytheon and Lockheed Martin.

Dominant firms not only concentrate power but become the single sources for vital products. In 1997, Boeing and McDonnell Douglass merged, combining nearly all domestic civilian aerospace capacity in one company. While Boeing (as the new entity continued to be called) still faced some competition from Airbus, its market power largely insulated it from the consequences of poor management. The deadly crashes over the past year of two Boeing 737 Max passenger airlines have now begun to reveal the extent of the company’s failings. Because Boeing is the entire U.S. industry, its problems are rippling broadly across it suppliers and the airlines. To take just one example, the scandal has cost General Electric, which sells engines, up to $750 million in cash flow.

The U.S. has been here before. In the early 20th century, Standard Oil, among other industrial trusts, strode across the land as a corporate goliath. Though massively profitable, the company had misallocated capital and centralized the oil industry inefficiently. When the Indiana branch of Standard Oil wanted to invest in the then-crazy notion that oil could be refined into gasoline, the New York headquarters kept saying that the company should stick to kerosene. In 1911, after the company was broken up, the Indiana subsidiary developed the technology behind the gasoline industry. John D. Rockefeller became far richer after the breakup thanks to the stock appreciation of the subsidiaries. ( Teddy Roosevelt later joked, “No wonder that Wall Street’s prayer now is: ‘Oh Merciful Providence, give us another dissolution.’”)

Standard Oil helped to establish the traditional American response to corporate monopolies: Break them up so that other businesses can compete and innovate and investors can profit. During the New Deal, the government broke up giant banks, Hollywood studios, electric utilities, airline and aerospace companies and radio networks. In many cases, as with electric utilities, shareholders, bondholders and ratepayers all profited. Government took an energetic hand in promoting liberty in business, and it worked.

After World War II, Rep. Emanuel Celler, a Democrat from New York, took the lead in investigating domestic monopolies. He noted the pervasive climate of fear in industries where dominant firms could at any point destroy their competitors. “Under our ancient common law, your neighbor must not point a gun at you, even though he has never shot anyone,” Celler wrote in 1950. “Similarly, our antitrust laws were intended to protect businessmen not only from violence but from fear of violence.” That year, Congress passed the Celler-Kefauver Act to bar anticompetitive mergers.

In the 1950s, antitrust was a priority for Republicans too. The Eisenhower administration forced RCA, AT&T and IBM to license their patents to small companies. One of those patents was the electronic transistor, soon manufactured by Texas Instruments and Motorola. Antitrust thus freed American business and led to the creation of Silicon Valley.

Similarly, when the Reagan administration broke up AT&T in 1984, it allowed more businesses to innovate rather than to fight the dominant market player. Stockholders in AT&T and its spinoffs did much better than those who kept IBM shares, a giant that the Reagan administration left alone. One of the results of the AT&T breakup was that customers could easily plug modems into the phone network, which gave rise to the online service provider industry.

Even when the government has stopped short of breaking up a company, as with Microsoft, the results have often been beneficial. In the early 2000s, Microsoft, due in part to fear of antitrust action, refrained from using its power over browsers to keep a scrappy upstart called Google from reaching users. Antitrust oxygenated the market; a lack of antitrust has now allowed Google to turn into the monopolist of today.

It often seems like centralization and concentration in the hands of the best and brightest in business and finance is the American way. But liberty is our true birthright. Louis Brandeis, the patron saint of the antimonopoly tradition, once expressed a fear that America, once a nation of tradespeople, was becoming a nation of clerks. He was right to fear that transformation in his day, just as businesspeople and investors should fear it in ours. Fortunately, we are seeing the resurgence of an old, business-friendly trend: trustbusting. And it couldn’t come soon enough.

If There Are No Consequences Commensurate With The Crime Of Treason, Wall Street Executives Will Keep Selling Us Out

Russia may have paid to get them in office, but China seems to be getting the most out of it

During Wednesday’s debate, the candidates were all asked to name the biggest single national security threat to the country. Few of them had the self-discipline to name just one, but almost all of then named China. Tim Ryan caught himself about to say China is “whipping” us everywhere, realized that might sound defeatist and changed it in mid-sentence into something that didn’t make any sense— “wiping us everywhere.” Last night, one of the moderators just phrased it as a what-to-do-about-China question.

This week Matt Stoller co-authored a piece for the American Conservative, America’s Monopoly Crisis Hits the Military, about how Wall Street greed has “decimated our defense industrial base and undermined our national security… [T]he destruction of America’s once vibrant military and commercial industrial capacity in many sectors has become the single biggest unacknowledged threat to our national security. Because of public policies focused on finance instead of production, the United States increasingly cannot produce or maintain vital systems upon which our economy, our military, and our allies rely.”

When national security specialists consider preparedness, they usually think in terms of the amount of money spent on the Pentagon. One of President Donald Trump’s key campaign promises was to aggressively raise the military budget, which he, along with Congress, started doing in 2017. The reaction was instant. “I’m heartened that Congress recognizes the sobering effect of budgetary uncertainty on America’s military and on the men and women who provide for our nation’s defense,” then-defense secretary Jim Mattis said. Budgets have gone up every year since.

Higher budgets would seem to make sense. According to the 2018 National Defense Strategy, the United States is shifting away from armed conflicts in the Middle East to “great power” competition with China and Russia, which have technological parity in many areas with the United States. As part of his case for higher budgets, Mattis told Congress that “our military remains capable, but our competitive edge has eroded in every domain of warfare— air, land, sea, space, and cyber.”

In some cases, our competitive edge has not just been eroded, but is at risk of being— or already is— surpassed. The Chinese surge in 5G telecom equipment, which has dual civilian and military uses, is one example. China is making key investments in artificial intelligence, another area of competition. They even seem to be able to mount a rail gun on a naval ship, an important next generation weapons technology that the U.S. Navy has yet to incorporate.

And yet, the U.S. military budget, even at stalled levels, is still larger than the next nine countries’ budgets combined. So there’s a second natural follow-up question: is the defense budget the primary reason our military advantage is slipping away, or is it something deeper?

…[I]t wasn’t one of [our] adversaries that killed our telecommunications capacity, but one of our own institutions, Wall Street, and its pressure on executives to make decisions designed to impress financial markets, rather than for the long-term health of their companies. In 1996, AT&T spun off Bell Labs into a telecom equipment company, Lucent Technologies, to take advantage of investors’ appetite for an independent player selling high-tech telecom gear after Congress deregulated the telecommuncations space. At the time, it was the biggest initial public offering in history, and became the foundation of a relationship with financial markets that led to its eventual collapse.

The focus on stock price at Lucent was systematic. The stock price was posted daily to encourage everyone to focus on the company’s relationship with short-term oriented financial markets. All employees got a small number of “Founder’s Grant Share Options,” with executives offered much larger slugs of stock to solidify the connection. When Richard McGinn became CEO in 1997, he focused on financial markets.

Lucent began to buy up companies. According to two scholars, “The perceived need to compete for acquisitions became a ‘strategic’ justification for keeping stock prices high. This in turn demanded meeting or exceeding quarterly revenue and earnings targets, objectives with which Lucent top executives, led by the hard-driving McGinn, became obsessed.”

Lucent got even more aggressive. McGinn’s subordinate, an executive named Carly Fiorina, juiced returns with a strategy based on lending money to risky startups who would then turn around and buy Lucent equipment. Fiorina collected $65 million in compensation as the stock soared. And then, when the dot-com boom turned to bust, the company, beset by accounting scandals designed to impress shareholders and the financial markets, embarked on massive layoffs. CEO McGinn was among those laid off, but with a $12.5 million severance package—royal compensation for taking one of America’s strategic industrial assets down the road toward total destruction.

In the early 2000s, the telecom equipment market began to recover from the recession. Lucent’s new strategy, as Mottl put it, was to seek “margin” by offshoring production to China, continuing layoffs of American workers and hiring abroad. At first, it was the simpler parts of the telecom equipment, the boxes and assembly, but soon contract manufacturers in China were making virtually all of it. American telecom capacity would never return.

Lucent didn’t recover its former position. Chinese entrants, subsidized heavily by the Chinese state and using Western technology, underpriced Western companies. American policymakers, unconcerned with industrial capacity, allowed Chinese companies to capture market share despite the predatory subsidies and stolen technology. In 2006, French telecom equipment maker Alcatel bought Lucent, signifying the end of American control of Bell Labs. Today, Huawei, with state backing, dominates the market.

The erosion of much of the American industrial and defense industrial base proceeded like Lucent. First, in the 1980s and 1990s, Wall Street financiers focused on short-term profits, market power, and executive pay-outs over core competencies like research and production, often rolling an industry up into a monopoly producer. Then, in the 2000s, they offshored production to the lowest cost producer. This finance-centric approach opened the door to the Chinese government’s ability to strategically pick off industrial capacity by subsidizing its producers. Hand over cash to Wall Street, and China could get the American crown jewels.

The loss of manufacturing capacity has been devastating for American research capacity. “Innovation doesn’t just hover above the Great Plains,” Mottl said. “It is built on steady incremental changes and knowledge learned out of basic manufacturing.” Telecommunications equipment is dual use, meaning it can be used for both commercial and military purposes. The loss of an industrial base in telecom equipment meant that the American national security apparatus lost military capacity.

This loss goes well beyond telecom equipment. Talking to small manufacturers and distributors who operate in the guts of our industrial systems offers a perspective on the danger of this process of financial predation and offshoring. Bill Hickey, who headed his family’s metal distributor, processor, and fabricator, has been watching the collapse for decades. Hickey sells to “everyone who uses steel,” from truck, car, and agricultural equipment manufacturers to stadiums and the military.

Hickey, like many manufacturers, has watched the rise of China with alarm for decades. “Everyone’s upset about the China 2025 plan,” he told the American Conservative, referencing the current Chinese plan causing alarm among national security thinkers in Washington. “Well there was a China 2020 plan, 2016 plan, 2012 plan.” The United States has, for instance, lost much of its fasteners and casting industries, which are key inputs to virtually every industrial product. It has lost much of its capacity in grain oriented flat-rolled electrical steel, a specialized metal required for highly efficient electrical motors. Aluminum that goes into American aircraft carriers now often comes from China.

Hickey told a story of how the United States is even losing its submarine fleet. He had a conversation with an admiral in charge of the U.S. sub fleet at the commissioning of the USS Illinois, a Virginia-class attack submarine, who complained that the United States was retiring three worn-out boats a year, but could only build one and a half in that time. The Trump military budget has boosted funding to build two a year, but the United States no longer has the capacity to do high quality castings to build any more than that. The supply chain that could support such surge production should be in the commercial world, but it has been offshored to China. “You can’t run a really high-end casting business on making three submarines a year,” Hickey said. “You just can’t do it.” This shift happened because Wall Street, or “the LBO (leveraged buy-out) guys” as Hickey put it, bought up manufacturing facilities in the 1990s and moved them to China.

“The middle-class Americans who did the manufacturing work, all that capability, machine tools, knowledge, it just became worthless, driven by the stock price,” he said. “The national ability to produce is a national treasure. If you can’t produce you won’t consume, and you can’t defend yourself.”

The Loss of the Defense Industrial Base

But it’s not just the dual-use commercial manufacturing base that is collapsing. Our policy empowering Wall Street and offshoring has also damaged the more specialized defense base, which directly produces weaponry and equipment for the military.

How pervasive is the loss of such capacity? In September 2018, the Department of Defense released findings of its analysis into its supply chain. The results highlighted how fragile our ability to supply our own military has become.

The report listed dozens of militarily significant items and inputs with only one or two domestic producers, or even none at all. Many production facilities are owned by companies that are financially vulnerable and at high risk of being shut down. Some of the risk comes from limited production capability. Mortar tubes, for example, are made on just one production line, and some Marine aircraft parts are made by just one company— one which recently filed for bankruptcy.

At risk is everything from chaff to flares to high voltage cable, fittings for ships, valves, key inputs for satellites and missiles, and even material for tents. As Americans no longer work in key industrial fields, the engineering and production skills evaporate as the legacy workforce retires.

Even more unsettling is the reliance on foreign, and often adversarial, manufacturing and supplies. The report found that “China is the single or sole supplier for a number of specialty chemicals used in munitions and missiles…. A sudden and catastrophic loss of supply would disrupt DoD missile, satellite, space launch, and other defense manufacturing programs. In many cases, there are no substitutes readily available.” Other examples of foreign reliance included circuit boards, night vision systems, batteries, and space sensors.

The story here is similar. When Wall Street targeted the commercial industrial base in the 1990s, the same financial trends shifted the defense industry. Well before any of the more recent conflicts, financial pressure led to a change in focus for many in the defense industry— from technological engineering to balance sheet engineering. The result is that some of the biggest names in the industry have never created any defense product. Instead of innovating new technology to support our national security, they innovate new ways of creating monopolies to take advantage of it.

…Fleecing the Defense Department is big business. [TransDigm’s] executive chairman W. Nicholas Howley, skewered by Democrats and Republicans alike in a May 2019 House Oversight hearing for making up to 4,000 percent excess profit on some parts and stealing from the American taxpayer, received total compensation of over $64 million in 2013, the fifth most among all CEOs, and over $13 million in 2018, making him one of the most highly compensated CEOs no one has ever heard of. Shortly after May’s hearing, the company agreed to voluntarily return $16 million in overcharges to the Pentagon, but the share price is at near record highs.

L3 Technologies, created in 1997, has taken a different, but also damaging, approach to monopolizing Defense Department contracts. Originally, it sought to become “the Home Depot of the defense industry” by going on an acquisition binge, according to its former CEO Frank Lanza. Today, L3 uses its size, its connections within the government, and its willingness to offer federal employees good-paying jobs at L3, to muscle out competitors and win contracts, even if the competitor has more innovative and better priced products. This practice attracted the ire of two Republican congressmen from North Carolina, Ted Budd and the late Walter Jones, who found in 2017 that L3 succeeds, in part, due to “blatant corruption and obvious disregard of American foreign interest in the name of personal economic profit.”

Like TransDigm, this isn’t L3’s first brush with trouble. It was temporarily suspended from U.S. government contracting for using “extremely sensitive and classified information” from a government system to help its international business interests. It was the subject of a scathing Senate Armed Services Committee investigation for failing to notify the Defense Department that it supplied faulty Chinese counterfeit parts for some of its aircraft displays. And it agreed to pay a $25.6 million settlement to the U.S. government for knowingly providing defective weapon sights for years to soldiers serving in Iraq and Afghanistan.

Yet, also like TransDigm, L3 has thrived despite its troubles. When the company was granted an open-ended contract to update the Air Force’s electronics jamming airplane in 2017, Lieutenant General Arnold Bunch outlined the Air Force’s logic at a House Armed Services Subcommittee meeting. L3, he said, is the only company that can do the job. “They have all the tooling, they have all the existing knowledge, and they have the modeling and all the information to do that work,” he said.

In other words, because L3 has a monopoly, there was no one else to pick. The system— a system designed by the financial industry that rewards monopoly and consolidation at the expense of innovation and national security— essentially made the pick for him. It is no wonder our military capacities are ebbing, despite the large budget outlays— the money isn’t going to defense.

In fact, in some ways, our own defense budgets are being used against us when potential adversaries use Wall Street to take control of our own Pentagon-developed technologies.

There’s no better example than China’s takeover of the rare earth metal industry, which is key to both defense and electronics. The issue has frequently made the front page during the recent trade war, but the seldom-discussed background to our dependence on China for rare earths is that, just like with telecom equipment, the United States used to be the world leader in the industry until the financial sector shipped the whole thing to China.

In the 1970s and 1980s, the Defense Department invested in the development of a technology to use what are known as rare-earth magnets. The investment was so successful that General Motors engineers, using Pentagon grants, succeeded in creating a rare earth magnet that is now essential for nearly every high-tech piece of military equipment in the U.S. inventory, from smart bombs and fighter jets to lasers and communications devices. The benefit of DARPA’s investment wasn’t restricted to the military. The magnets make cell phones and modern commercial electronics possible.

China recognized the value of these magnets early on. Chinese Premier Deng Xiaoping famously said in 1992 that “The Middle East has oil, China has rare earth,” to underscore the importance of a rare earth strategy he adopted for China. Part of that strategy was to take control of the industry by manipulating the motivations of Wall Street.

Two of Xiaoping’s sons-in-law approached investment banker Archibald Cox, Jr. in the mid-1990s to use his hedge fund as a front for their companies to buy the U.S. rare-earth magnet enterprise. They were successful, purchasing and then moving the factory, the Indiana jobs, the patents, and the expertise to China. This was not the only big move, as Cox later moved into a $12 million luxury New York residence. The result is remarkably similar to Huawei: the United States has entirely divested of a technology and market it created and dominated just 30 years ago. China has a near-complete monopoly on rare earth elements, and the U.S. military, according to U.S. government studies, is now 100 percent reliant upon China for the resources to produce its advanced weapon systems.

Wall Street’s outsized control over defense contracting and industry means that every place a foreign adversary can insert itself into American financial institutions, it can insert itself into our defense industry.

At an Armed Services Committee hearing in 2018, Representative Carol Shea-Porter talked about how constant the conflict between financial concentration and patriotism had been in her six years on the committee. She recounted a CEO once telling her, in response to her concern about the outsourcing of defense industry parts, that he “[has] to answer to stockholders.”

Who are these stockholders that CEOs are so compelled to answer to? Oftentimes, China. Jennifer M. Harris, an expert in global markets with experience at the U.S. State Department and the U.S. National Intelligence Council, researched a recent explosion of Chinese strategic investment in American technology companies. She found that China has systematically targeted U.S. greenfield investments, “technology goods (especially semiconductors), R&D networks, and advanced manufacturing.”

The trend accelerated, until the recent flare-up of tensions between the United States and China. “China’s foreign direct investment (FDI) stock in the U.S. increased some 800% between 2009 and 2015,” she wrote. Then, from 2015 to 2017, “Chinese FDI in the U.S. …climbed nearly four-fold, reaching roughly $45.6 billion in 2016, up from just $12.8 billion in 2014.”

This investment runs right through Wall Street, the key lobbying group trying to ratchet down Trump’s tough negotiating posture with the Chinese. Rather than showing concern about the increasing influence of a foreign power in our commerce and industry, Wall Street banks have repeatedly followed Archie Cox down the path of easy returns.

In 2016, J.P. Morgan Chase agreed to pay a $264 million bribery settlement to the U.S. government for creating a program, called “Sons and Daughters,” to gain access to Chinese money by selectively hiring the unqualified offspring of high-ranking Communist Party officials and other Chinese elites. Several other banks are under investigation for similar practices, including Citigroup and Goldman Sachs, who, not coincidentally, hired the son of China’s commerce minister. It appears to have worked out for them. In 2017, Goldman Sachs partnered with the Chinese government’s sovereign wealth fund to invest $5 billion Chinese government dollars in American industry.

In short, China is becoming a significant shareholder in U.S. industries, and is selectively targeting those with strategic implications. Congresswoman Shea-Porter’s discovery that defense industry CEOs aren’t able to worry about national security because they “[have] to answer to shareholders” was disturbing enough. But the fact that it potentially translates as CEOs not being able to worry about national security because they have to answer to the Chinese should elevate the issue to the top of our national security discussion. This nexus of China, Wall Street, and our defense industrial base may be the answer to why our military advantage is ebbing. Even when American ingenuity can thrive, too often the fruits go to the Chinese.

In short, the financial industry, with its emphasis on short-term profit and monopoly, and its willingness to ignore national security for profit, has warped our very ability to defend ourselves.

How Did We Get Here?

Believe it or not, America has been here before. In the 1920s and 1930s, the American defense industrial base was being similarly manipulated by domestic financiers for their own purposes, retarding innovation and damaging the nation’s ability to defend itself. And American military readiness was ebbing in the midst of an increasingly dangerous world full of rising autocracies.

Today it might be artificial intelligence or drones, but in the 1930s the key military technology was the airplane. And as with much digital technology today, while Americans invented the airplane, many of the fruits went elsewhere. The reason was similar to the problem of Wall Street today. The American aerospace industry in the 1930s was undermined by fights among bankers over who got to profit from associated patent rights.

In 1935, Brigadier General William Mitchell told Congress that the United States didn’t have a single plane that could go against a “first-class power.” “It is a disgraceful situation and is due,” he said, “for one thing, to this pool of patents.” The lack of aerospace capacity reflected a broader industrial problem. Monopolists refused to invest in factories to produce enough steel, aluminum, and magnesium for adequate military readiness, for fear of losing control over prices.

New Dealers investigated, and by the time war broke out, the Roosevelt administration was in the midst of a sustained anti-monopoly campaign. The Nazi war machine, like China today, gave added impetus to the problem of monopoly in key technology-heavy industries. In 1941, an assistant attorney general for the antitrust division, Norman Littell, gave a speech to the Indiana State Bar Association about what he called “The German Invasion of American Business.”

The Nazis, he argued, used legal techniques, like patent laws, stock ownership, dummy corporations, and cartel arrangements, to extend their power into the United States. “The distinction between bombing a vital plant out of existence from an airplane and preventing that plant from coming into existence in the first place [through cartel arrangements],” he said, “is largely a difference in the amount of noise involved.”

Nazis used their American subsidiary corporations to spy on U.S. industrial capacity and steal technology, such as walkie-talkies, intertank and ground-air radio communication systems, and shortwave sets developed by the U.S. Army and Navy. They used patents or cartel arrangements to restrict the production of stainless steel, tungsten-carbide, and fuel injection equipment. According to the U.S. military after the war, I.G. Farben, the Nazi chemical monopoly, had influence over American production of “synthetic gas and oils, dyestuffs, explosives, synthetic rubber (‘Buna’), menthol, cellophane, and other products,” and sought to keep the United States “entirely dependent” on Germany for certain types of electrical equipment.

The Nazis took advantage of an industrial system that was, like the current one, organized along short-term objectives. But seeing the danger, New Dealers attacked the power of financiers through direct financing of factories, excess profits taxes, and the breaking of the power of the Rockefeller, Dupont, and Mellon empires through bank regulation and antitrust suits. They separated the makers of airplanes from airlines, a sort of Glass Steagall for aerospace. During the war itself, antitrust chief Thurman Arnold, and those he influenced, sought to end international cartels and loosen patent rules in part because they allowed control over American industry by the Nazis.

After the war, the link between global cartels and national security vulnerabilities was a key driver of American trade and military strategy. America pursued globalization, but with two differences from the form we have today. First, strategists sought to prevent the recurrence of global cartels and monopolies. Second, they sought to become industrially intertwined with allies, not rivals. While multinational corporations stretched across the West, they did not locate production or technology development in Moscow or among strategic rivals, as we do today in China.

Domestically, anti-profiteering institutions and rules protected against corruption, especially important when the defense budget comprised a large chunk of overall American research and development. The Defense Department’s procurement agency— the Defense Logistics Agency— was enormously powerful and oversaw procurement and supply challenges. The Pentagon had the power to force suppliers of sole source products— contractors that had monopolies— to reveal cost information to the government. The financial health of defense contractors mattered, but so did value to the taxpayer, a skilled defense industrial workforce, and the ability to deliver quality products to aid in national defense.

A fragmented base of contractors and subcontractors ensured redundancy and competition, and a powerful federal apparatus with thousands of employees with expertise in pricing and negotiation kept prices reasonable. The Defense Department could even take ownership of specialized tooling rights to create competition in monopolistic markets with specialized spare part needs— which is precisely where TransDigm specializes. This authority and expertise had been carefully cultivated over decades to provide the material necessary to equip American soldiers for World War II, the Korean and Vietnam wars, and the first Gulf war.

In the 1980s, while Ronald Reagan allowed Wall Street free rein elsewhere in the economy, he mostly kept Wall Street from going after the defense base. But scholars began debating whether it made sense to have such a large and expensive negotiating apparatus to deal with contractors, or if a more “cooperative” approach should be taken. Business consultants argued that the Pentagon could save money if it would simply be “a better customer, by being less adversarial and more trusting” of defense contractors.

With the end of the Cold War, these arguments found new resonance. Bill Clinton took the philosophical change that Reagan had pushed on the civilian economy, and moved it into the defense base. In 1993, Defense Department official William Perry gathered CEOs of top defense contractors and told them that they would have to merge into larger entities because of reduced Cold War spending. “Consolidate or evaporate,” he said at what became known as “The Last Supper” in military lore. Former secretary of the Navy John Lehman noted, “industry leaders took the warning to heart.” They reduced the number of prime contractors from 16 to six; subcontractor mergers quadrupled from 1990 to 1998. They also loosened rules on sole source— i.e. monopoly— contracts, and slashed the Defense Logistics Agency, resulting in thousands of employees with deep knowledge of defense contracting leaving the public sector.

Contractors increasingly dictated procurement rules. The Clinton administration approved laws changing procurement, which, as the Los Angeles Times put it, got rid of the government’s traditional goals of ensuring “fair competition and low prices.” They reversed what the New Dealers had done to insulate American military power from financiers.

The administration also pushed Congress to allow foreign imports into American weapons through waivers of the Buy America Act, and demanded procurement officers stop asking for cost data. Mass offshoring took place, and businesses could increase prices radically.

This environment attracted private-equity shops, and swaths of the defense industry shifted their focus from aerospace engineering to balance sheet engineering. From 1993 to 2000, despite dramatic declines in Cold War military spending and declines in the number of workers in the defense industrial base and within the military, defense stocks outperformed the S&P.

Today, the American defense establishment quietly finds itself in the same predicament it did in the 1930s. Despite spending large amounts of money on weapons systems, it often gets substandard equipment. It is dependent for key sources of supply on business arrangements with potentially hostile powers. The problem is so big, so toxic, and so difficult that few lawmakers even want to take it on. But the increasingly obvious danger of Chinese power means we can no longer ignore it.

The Fix

Fortunately, this is fixable. Huawei’s predatory pricing success has shown policymakers all over the world what happens when we don’t protect our vital industrial capacity. Last year, Congress strengthened the Committee on Foreign Investment in the United States, the committee that reviews foreign investment and mergers. The Trump tariffs have begun forcing a long-overdue conversation across the globe about Chinese steel and aluminum overcapacity, and Democrats like Representative Dan Lipinski are focused on reconstituting domestic manufacturing ability.

Within the defense base itself, every example— from TransDigm to L3 to Chinese infiltration of American business— has drawn the attention of members of Congress. Representatives Ted Budd and Paul Cook are Republicans and Representatives Jackie Speier and Ro Khanna are Democrats. They are not alone. Democratic Senator Elizabeth Warren and Representative Tim Ryan have joined Khanna’s demand for a TransDigm investigation.

Moreover, focus on production is bipartisan. One of the most ardent opponents of consolidation in the 1990s is current presidential candidate Bernie Sanders, who in 1996 passed an amendment to block Pentagon subsidies for defense mergers, or what he called “Payoffs for Layoffs.” On the other end of the spectrum, Trump has refocused national security and trade officials on the importance of domestic manufacturing.

Defense officials have also become acutely aware of the problem. In a 2015 briefing at the Pentagon, in response to questions about Lockheed’s acquisition of Sikorsky, then secretary of defense Ash Carter emphasized the importance of not having “excessive consolidation,” including so-called vertical integration, in the defense industry because it is “[not] good for the defense marketplace, and therefore, for the taxpayer and warfighter in the long run.” Carter’s acquisition chief, Frank Kendall, also noted the “significant policy concerns” posed by the “continuing march toward greater consolidation in the defense industry at the prime contractor level” and the effect it has on innovation.

American policymakers in the 1990s lost the ability to recognize the value of production capacity. Today, many of the problems highlighted here are still seen in isolation, perhaps as instances of corruption or reduced capacity. But the problems— diminished innovation, marginal quality, higher prices, less redundancy, dependence on overseas supply chains, a lack of defense industry competition, and reduced investment in research and development— are not independent. They are the result of the financialization of industry and of monopoly. It’s time for a new strategic posture, one that puts a premium not just on spending the right amount on military budgets, but also on ensuring that financial actors don’t capture what we do spend. We must begin once again to recognize that private industrial capacity is a vital national security asset that we can no longer allow Wall Street to pillage. By seeing the problem in its totality, we can attack the power of finance within the commercial and defense base and restore our national security capacity once again.

There are many levers we can use to reorder our national priorities. The Defense Department, along with its new higher budgets, should have more authority to promote competition, break up defense conglomerates, restrict excess defense contractor profits, empower contracting officers to get cost information, and block private equity takeovers of suppliers. Congress could reinstate the authority of the Defense Department to simply take ownership of specialized tooling rights to create competition in monopolistic markets with specialized spare part needs, a power it once had.

In the commercial sector, rebuilding the industrial base will require an aggressive national mobilization strategy. This means aggressive investment by government to rebuild manufacturing capacity, selective tariffs to protect against Chinese or foreign predation, regulation to stop financial predation by Wall Street, and anti-monopoly enforcement to block the exploitation of market power.

Policymakers must recognize that industrial capacity is a public good and short-term actors on Wall Street have become a serious national security vulnerability. While private businesses are essential to our common defense, the public sector must once again structure how we organize our national defense and protect our defense industrial base from predatory finance. For several decades, Wall Street has been organizing not just the financing of defense contractors, but the capabilities of our very defense posture. That experiment has been a failure. It is time to wake up, before it’s too late. 

Pig on the Wing

The Problem With Big Tech

Fox White Nationalist Tucker Carlson's biggest worry about the slaughter last week in New Zealand-- by a confessed Trump supporter-- was worry that social media might curtail "free speech" by blocking further broadcasting of live gun massacres. Facebook can't seem to figure out how to prevent the live streaming of mass murders, another in a long list of problems for the tech giant, problems that are rankling the public and bringing the industry front and center politically.

Nancy Scola did a piece for Politico Sunday asking how the Democrats running for president turned against tech-- a big change for the party. Scola sees evidence that "Democrats running for president see big tech companies as enemies of the progressive agenda, rather than the allies they once were. Warren’s complaint last week that the social media giant 'has too much power' might have been a shock coming from a prominent Democrat just a few years ago, when Barack Obama’s public appearances with CEOs like Mark Zuckerberg and Twitter’s Jack Dorsey were typical for a party seeking to boost its appeal to tech-savvy young voters.

The hard turn against the technology industry from prominent Democrats represents a major cultural change in the party-- and a real threat to Silicon Valley’s political influence with liberals who may share tech workers' political sensibilities but are diverging from the industry on fundamental issues about privacy, business practices and taxes. For the industry, the danger is that the next president could espouse policies harmful to tech’s bottom line, from pushing for tougher antitrust action to restricting government contracts for companies unwilling to change their ways.

Klobuchar sounded the theme at the very start of her campaign, during the announcement speech in February where she stood in blowing snow in Minneapolis.

“For too long the big tech companies have been telling you ‘Don’t worry! We’ve got your back!’ while your identities are being stolen and your data is mined,” the Minnesota senator said.

Even Cory Booker, a Stanford grad with close ties to Silicon Valley, used a recent NPR interview to lump tech in with other powerful lobbies that need to be reined in. "We need to make sure that whether it's Silicon Valley or the pharma industry or the big ag, we need to hold people accountable for their actions," he said.

...Warren has taken the hardest line of all, calling for the federal government to shrink and split up industry giants like Amazon, Facebook, and Google. “To restore the balance of power in our democracy, to promote competition, and to ensure that the next generation of technology innovation is as vibrant as the last, it’s time to break up our biggest tech companies," she wrote in a blog post this month.

The Massachusetts senator later singled out Facebook after Politico reported that the social media company had taken down Warren campaign ads calling for its breakup. Facebook soon restored the ads, but Warren said the episode only underscored the need for "a social media marketplace that isn't dominated by a single censor."

Republican Texas Sen. Ted Cruz publicly took Warren’s side in that dispute-- a rare occurrence that underscores the bipartisan populist appeal of the tech backlash. A Morning Consult/Politico poll earlier this month found that near-identical pluralities of Democrats and Republicans agreed with the statement, "Technology companies have too much power and the federal government should step in to regulate more."

A few days ago, former Labor Secretary Robert Reich penned an article for Salon explaining why Warren is right about busting up big tech. It's all about monopolies. Did you know, for example, that:

• Nearly 90% of all internet searches now go through Google.
• Facebook and Google together account for 58% of all digital ads
• 93% of Americans get their news online-- and Facebook and Google is where many of them go for it
• Amazon is now the first stop for a third of all American consumers seeking to buy anything.

Reich explains that "With such size comes the power to stifle innovation. Amazon won’t let any business that sells through it sell any item at a lower price anywhere else. It’s even using its control over book sales to give books published by Amazon priority over rival publishers. Google uses the world’s most widely used search engine to promote its own services and Google-generated content over those of competitors, like Yelp. Facebook’s purchases of WhatsApp and Instagram killed off two potential rivals."

Such size also confers political power to get whatever these companies and their top executives want.

Amazon-- the richest corporation in America-- paid nothing in federal taxes last year. Meanwhile, it’s holding an auction to extort billions from states and cities eager to have its second headquarters.

It also forced Seattle, it’s home headquarters, to back down on a plan to tax big corporations like itself to pay for homeless shelters for a growing population that can’t afford the sky-high rents caused in part by Amazon.

Facebook withheld evidence of Russian activity on its platform far longer than previously disclosed. When the news came to light, it employed a political opposition research firm to discredit critics.

Facebook’s Mark Zuckerberg, who holds the world’s speed record for falling from one of the most admired to the most reviled people on the planet, just unveiled a plan to “encrypt” personal information from all his platforms.

The new plan is likely to give Facebook even more comprehensive data about everyone. If you believe it will better guard privacy, you don’t remember Zuckerberg’s last seven promises to protect privacy.

Google forced the New America Foundation, an influential think tank it helped fund, to fire researchers who were urging antitrust officials to take on Google.

And it’s been quietly financed hundreds of university professors to write research papers justifying Google’s market dominance.

What to do? Some argue the tech mammoths should be regulated like utilities or common carriers, but this would put government into the impossible position of policing content and overseeing new products and services.

A better alternative is to break them up. That way, information would be distributed through a large number of independent channels without a centralized platform giving all content apparent legitimacy and extraordinary reach. And more startups could flourish.

Like the robber barons of the first Gilded Age, those of the second have amassed fortunes because of their monopolies-- fortunes that give them unparalleled leverage over politicians and the economy.

The combined wealth of Zuckerberg ($62.3 billion), Bezos ($131 billion), Brin ($49.8 billion) and Page ($50.8 billion) is larger than the combined wealth of the bottom half of the American population.

A wealth tax (also proposed by Warren) would help.

Some of the robber barons of the first Gilded Age were generous philanthropists, as are today’s. That didn’t excuse the damage they did to America.

Let’s be clear: Monopolies aren’t good for anyone except for the monopolists.

In this new Gilded Age, we need to respond to them as forcefully as we did the first time around. Warren’s ideas are a good start.

As we suggested earlier, a Bernie/Warren ticket would be a great idea to put up against Trump in 2020. One way Amazon, for example, has been able to exert influence over politicians is through substantial campaign contributions, substantial enough so that it's absolutely impossible to see them as anything other than bribes. Last year alone, Google and its executives poured $13,536,034 into electoral races (and that doesn't count the $27,400,000 they spent on lobbying in the last cycle). Amazon's biggest contribution-- by far-- went to the conservative-leaning With Honor Fund, which spent massively to elect Michael Waltz (R-FL), Dan Crenshaw (R-TX), Brian Mast (R-FL), Steve Watkins (R-KS), Donald Bacon (R-NE). They spent $1,744,822 on Waltz and $863,616 on Crenshaw, so we're not talking about nominal contributions here. The only Democrats who were elected with significant help from the PAC were Jared Golden (ME), Mikie Sherrill (Blue Dog-NJ) and Gil Cisneros (New Dem-CA). Amazon was their biggest contributor-- more than all other contributor combined-- and their second biggest was the Bezos Family Foundation ($2,004,324).

Amazon also gave significant money to the DCCC ($138,331), the DNC , the DSCC and the NRCC. As for individual campaigns, their dozen biggest contributions went to:

• Beto O'Rourke (New Dem-TX)- $75,751
• Kim Schrier (New Dem-WA)- $74,860
• Maria Cantwell (D-WA)- $59,970
• Heidi Heitkamp (D-ND)- $44,037
• Lisa Brown (New Dem-WA)- $37,357
• Jacky Rosen (New Dem-NV)- $35,828
• Bob Casey (D-PA)- $33,615
• Cory Gardner (R-CO)- $31,950
• Claire McCaskill (D-MO)- $31,391
• Suzan DelBene (New Dem)- $29,500
• Doug Jones (D-AL)- $28,674
• Kyrsten Sinema (Blue Dog-AZ)- $23,814

That's a list of mostly conservative candidates, Lisa Brown being the only exception. On top of that was the money that flowed from the company PAC, in House races, $533,500 to Republicans and $475,500 to Democrats. There were 12 House candidates they maxed out to ($10,000 each):

• Mike Bishop (R-MI)
• Gerry Connolly (New Dem-VA)
• Suzan DelBene (New Dem-WA)
• Jeff Denham (R-CA)
• Will Hurd (R-TX)
• Derek Kilmer (New Dem-WA)
• Zoe Lofgren (D-CA)
• Nancy Pelosi (D-CA)
• Scott Perry (R-PA)
• Cathy McMorris Rodgers (R-WA)
• Paul Ryan (R-WI)
• Adam Smith (New Dem-WA)