“The Question Is Whether We Live in a Democracy or a Corporate State”

In an interview with ProMarket, Goliath author Matt Stoller discusses the political choices that led to the downfall of the American antimonopoly movement and the “addiction to powerlessness” that threatens to undermine its rebirth.

It has become increasingly common in recent years to refer to the combination of rampant inequality and corporate impunity that characterizes present-day America as the Second Gilded Age.

Aside from vast concentrations of wealth and economic power, two of the New Gilded Age’s main features are widespread anger and an overwhelming sense of powerlessness. A recent NBC News/Wall Street Journal poll found that 70 percent of Americans are angry “because our political system seems to only be working for the insiders with money and power, like those on Wall Street or in Washington.” Polls conducted before the 2016 election similarly showed that an overwhelming majority of Americans see the US economy and political system as “rigged.”

The American antimonopoly tradition could provide an antidote to this pervading feeling of hopelessness. Americans who feel frustrated in the face of a political system captured by wealthy donors and industry lobbying might derive some hope from the successes of previous generations who stood up to the corrupting influence of big money in politics and concentrated corporate power. 

In the last half-century, however, much of that history has been marginalized, forgotten, or distorted. Enter Matt Stoller’s Goliath: The 100-Year War Between Monopoly Power and Democracy  (one of ProMarket’s top 10 political economy books of 2019), which seeks to remind Americans of the pivotal role that antimonopoly used to play in their politics and the political choices that allowed the US economy to become so concentrated. 

Stoller, a fellow at the Open Markets Institute (and frequent ProMarket contributor), has been at the forefront of the recent revival of American antitrust and is a key figure in the growing New Brandeisian movement. To learn more about how the US was able to beat back nascent oligarchy and how it could do so today, we recently interviewed Stoller. In his interview with ProMarket, he discussed the political choices that led to the downfall of the American antimonopoly movement and the “addiction to powerlessness” that threatens to undermine its rebirth.

[The following conversation has been edited and condensed for clarity and length.]

Q: You’re one of the main figures in the recent resurgence of antimonopoly politics. Yet in this particular moment, with antitrust once again at the forefront of political discourse, you chose to write a book of history. Why?

How we understand ourselves and how we understand power contextualizes what is possible.

When I was working in Congress during the financial crisis, the stories that were in people’s heads about what was happening were based on what they thought about the past. The history that they knew gave them a sense that they couldn’t do anything about the financial crisis except listen to the bankers. They had a set of stories in their heads about what America was. That set of stories was false, but in a sense it also controlled them. It controlled us, controlled me. I didn’t know that we had had similar crises before, that we had a series of different responses, and that there were ideological battles over the nature of finance and politics in America. I didn’t know that history.

Instead, I knew the false history, which said there weren’t any battles over ideology, that America was always “capitalist”—whatever that word means—and that politics is mostly about social questions, such as whether you support flag-burning or not. I was not able to see power, because my understanding of what politics really was and who we were as a people relied on a history that airbrushed important stuff out of the picture.

As I learned more about the origins of the laws and institutions that we were using to address the financial crisis, I realized there’s a fake history here, and somebody needs to tell the story of what really happened. The point of writing Goliath was to say, “Here are the battles that we had over ideology, over finance. Here’s why we made the choices that we did. Here’s how we were able to effectively defeat domestic fascism.”

Q: What do you mean by “false history”?

The false history was created in the late 1940s, early 1950s, and solidified by people on the left, actually—mainly John Kenneth Galbraith, Richard Hofstadter, and C. Wright Mills. What they argued is that there was never any fight in America over banking power or corporate power, because monopolies are inevitable. There was just this progressive evolution of businesses into large, natural monopolies.

Politics, in that sense, didn’t involve corporations or banks, just a cultural sense of our own status. Hofstadter said all the fights over corporate power that took place in the 19th century between railroad barons, bankers, and small farmers actually had nothing to do with railroads or banking power, but that farmers were just afraid of foreigners and immigrants and blamed it on railroads because they were anti-modern. Galbraith created this idea of affluence, where he said that America just automatically produces jobs, goods, and wealth because of these corporations that are natural and that it’s vanity by people to imagine they could do anything about the nature of the economic system.

In the same way, you see a lot of people say, “Oh, those white, working-class people are Trump supporters. They’re just a bunch of inconsolable racists, and there’s no way to talk to them.” I think on the right you see this as well: “Oh, the leftists and the liberals are these irrational children that you can’t talk to.” I think both come out of this understanding of history where corporate power, political power, and financial power are not focal points.

Q: Goliath is a book of history, but it also reads in parts like a book about the present. Do you see parallels between the historical figures and cases you review, like Andrew Mellon or the A&P case, and America today?

I think today’s very similar to what FDR called the “informal economic government of the United States.” There are a bunch of people—probably around 10,000—who run the country. These people run the top 50 big companies, they run Amazon, Google, Facebook, Apple, Walmart, Lockheed, Monsanto, and the top 100 private equity firms.

They go to the same conferences, they go to the same vacation houses. They read the same books, they know the same people, they sit on the same museum boards and same university boards, they donate to the same politicians.

In 1933, Ferdinand Pecora found something called “The Preferred List,” which was basically a list of people that JP Morgan was regularly bribing: top CEOs, Supreme Court people, military leaders, high-level people in both parties, and bankers. It was a list of people who informally ran the country. My guess is you could probably find something similar if you review the early investors in Uber, or the early investors in any hot new startup of the last 15 years, or just a list of McKinsey clients. It’s probably a similar group: people like Jeff Bezos and Bill Gates, but also very connected political leaders, well-known celebrities, and private equity.

Q: The notion that monopoly power is antithetical to democracy was taken as evident for much of the 20th century. Then a philosophical shift occurred. The right-wing aspect of this shift has been thoroughly documented, researched, and written about in the past few decades, but where you seem to differ is in exploring its strong left-wing elements, from corporatists like Galbraith and Thurow to consumerists like Ralph Nader.

I think that’s right. What’s interesting to me is that the left is less able to come to grips with what I’ve written, and it’s because the left often doesn’t see power. They don’t see business. They don’t see the military. They have a few slogans that they use, and that’s it.

During the financial crisis, there was no obvious left-wing attack on corporate and banking power. There were a few protests that happened a few years after the crisis about foreclosures, but there really wasn’t any sustained argument about how to run the economy or what to do about the banking system. The people that wanted to break up the banks were largely frustrated technocrats and professionals.

Q: The Obama presidency seems like the best example of this sort of “depowered” politics. You yourself are a harsh critic of the Obama presidency, particularly his handling of the crisis.

Yeah, but also it’s easy to focus on Obama’s personality, and that’s not what I’m trying to do. The thing about the crisis of 2007-2009 is that unlike the crisis of 1929-1933, there really weren’t disagreements within the Democratic Party. In the late 1920s and the early ‘30s, there were fights and arguments among Democrats about what to do. This wasn’t the case in 2008. There wasn’t a sense of independent congressional fortitude. The political movements we had built—and I was part of building those movements in the early 2000s—just weren’t equipped to understand what was going on as a political crisis with which we could contend.

Q: Your current political identity, you said, has been forged while you were working as a congressional staffer during the financial crisis. What did the crisis reveal about the way the US is governed?

I think the financial crisis showed that we are in a moment of transition where we are afraid of having our elected leaders wield power. We promote private, unaccountable actors who wield power, but we’re also nervous about them. We basically decided to not govern. I think that’s true everywhere in the world, except for China.

One of the consequences of refusing to govern could be weak democracies, and we do see the emergence of dictators and autocrats trying to take power. FDR said this in 1938: Weak democracies produce dictatorship.

Q: There was also an underlying assumption that successful businessmen like Jamie Dimon or Jeff Bezos were just better at governing because they weren’t some Washington bureaucrats.

I think that was the narrative from the 1990s to the financial crisis, but it’s not the narrative anymore. The narrative now is more like, “You may not like Jamie Dimon or Mark Zuckerberg, but who’s going to run these big institutions?”

I think you see this problem in Europe, too, where the Europeans are desperately afraid of breaking up Big Tech. Their response is to say “We need European champions, we need our European Mark Zuckerberg to take on the American Mark Zuckerberg.” Which is the same dynamic: they’re actually afraid of democratically-elected officials running things.

We have to make a decision whether we want to live in a democratic society, and we haven’t made that decision. We’re not run by autocrats yet, but we’re not run by democrats either. There’s a power vacuum, and that’s what we’re all experiencing.

Q: One theme that runs like a thread through Goliath is the tension between technocracy and democracy.

I think that’s right. I think they’re not always enemies, because technocrats can serve democratic ends. You want your bureaucracies run by people who are detail-oriented and believe in stability and order. But there’s a kind of natural tension there, because this tendency for order creates a fundamental distrust of democracy, because democracy is about large groups of people being able to complain and make changes.

What happened from the 1970s onward is that the technocrats, the experts, the people that we were relying on for advice, decided that they shouldn’t just be serving democratic ends and offering us advice about what’s possible and helping us choose, but that they should, in fact, make those decisions.

I think that’s where it gets dangerous, with economists essentially making political decisions while hiding the politics in math and models. You could see this very clearly in the mid-2000s, when millions of people were saying “Hey, you’re moving our jobs to China, we don’t like that.” Economists didn’t think that was true until 2011 or so, when three economists wrote a paper called The China Shock. All of a sudden, economists had “proven” what millions of people were saying happened. Economists can’t see things in real time because they don’t listen to people, only to other economists.

Q: You mentioned economists hiding political choices inside their models. What are the political choices that economics today reflects?

They elevate the power of finance. A good example is that the Congressional Budget Office, whose job is basically to tell Congress whether legislation raises or lowers the deficit. The CBO scores bills in highly political ways but disguises that it does so, and Congress then votes on points of order based on CBO assumptions.

As an example, from 2010 they over-estimated the cost of spending on social priorities by keeping baseline interest rates far too high. A bill providing nutrition assistance for poor mothers or a bill to increase aid to the unemployed raised the deficit dramatically in their models, even though it didn’t do so as much in reality. The reason why they got this so wrong, and did it knowingly, is because they were using the interest rate models that the rest of the financially driven economics profession used, from academic economists to Goldman Sachs.

By contrast, CBO scored a bill to push a bunch of bank liabilities onto the public balance sheet, the Commodities Futures Modernization Act, which deregulated derivatives, at basically zero. They don’t have a model for a financial crisis, and it’s politically dangerous to go against the banking lobby, so they lied to Congress and told Congress that such a bill doesn’t increase the deficit. They did it again in 2014 with a bill to get rid of a key part of Dodd-Frank.

This is autocratic. CBO shouldn’t exist, or it should be split into a Democratic and Republican CBO and be under the budget committee so the political assumptions can be made explicit. Instead, economists have a club and lie to Congress that they have Godlike authority. It’s not all their fault; while Republicans know this and lobby CBO to change their models in ways favorable to conservative ends, Democrats don’t even know that this dynamic exists and proudly parade around how CBO scores their bills. It’s pathetic.

Q: You previously described the 2020 presidential election as a contest between Elizabeth Warren/Bernie Sanders and billionaires like Mark Zuckerberg.

That’s right. Bernie and Warren have some stylistic differences, which are important, but they effectively have the same philosophy. What they’re both basically saying is that billionaires are running our society: In some cases, they’re doing it by paying a lot of money to influence elections; in others, like Mark Zuckerberg or other huge players that are running infrastructure, they are actually structuring the elections themselves.

Either way, the question is whether we live in a democracy or a corporate state.

Q: Antimonopoly has entered the mainstream in a big way these past two-three years, but still attracts a lot of resistance. What are the main forces pushing back against reinvigorated antitrust?

Obviously, you have monopolists, particularly the big ones. Then you have the technocratic establishment—economics, liberal media elites—who are profoundly happy with order.

That’s why you see so much panic about Trump, a bad president who’s continuing and worsening a bunch of trends. Trump’s a bad president but he’s not a fascist, at least not yet. He hasn’t started a war like George Bush did. He’s a real estate grifter who wants to steal money. It’s not that complicated.

The total panic is designed around the preservation of establishment status. That’s the main obstacle here: not the people who are saying, “Monopoly is good” or “Monopolies are efficient.” It’s the people that are saying, “There’s nothing we can do. Everything’s too corrupt. This is just the way things are.” It’s the people that are telling you, “No, we can’t. We can’t have nice things. We can’t afford that.”

The problem is that there’s a whole social hierarchy within the liberal and conservative establishment worlds that is based around an addiction to powerlessness.

Q: This shift within the Democratic Party seems to be part of a bigger political realignment. Republicans like Josh Hawley are suddenly attacking corporations like Amazon and Facebook. Even Mitt Romney, as you wrote, now opposes some tax cuts.

I think that’s right. You’re seeing realignments in the military, on the right, within the Republican Party, in different parts of the business world. All over Silicon Valley, there’s a lot of anger and frustration. There’s a sense that things are not sustainable and that they need to change. There’s a lot of curiosity about how to do that. Those debates are real and they’re important. We shouldn’t overlook them because they’re not necessarily as sexy, or just because people are so obsessed with making noise about Trump.

Q: The late Texan Congressman Wright Patman (1893-1976) is almost like a protagonist in Goliath, his shadow looming large over events that happened long after he died. What is the significance of Patman and why has he been forgotten?

Patman represented a string of thinking that goes back to Thomas Jefferson, and even further back, to levellers in 1600s England: The notion that decentralizing property and property rights is the best way to protect us from tyranny.

Patman was the student of Brandeis. He was a political operative who fought banks, who fought big business, because those were the aristocrats of his day. In the 1930s, he fought against Andrew Mellon and against domestic fascists. But he was also a segregationist in the 1950s, and so he represented that paradox of liberalism in the 20th century.

Then in 1975, he was overthrown as chair of the Banking Committee by the Watergate Babies, which was Bill Clinton’s generation, the nascent neoliberals. The new chair, Henry Reuss, very quickly pledged to stand up to the banks like Patman did, but then almost immediately called a truce. That’s the moment when you could tell, the Democrats immediately collapsed.

Q: Patman wasn’t the only populist New Dealer to oppose desegregation. The alliance between New Dealers and Southern racists is an under-acknowledged part of the history of antimonopoly in the United States. How can today’s antimonopolists make sure they don’t repeat the same mistakes?

Jim Crow concentrated wealth and power in the hands of a small group and then demonizing black people, particularly black people with any economic power, using terrorist tactics to destroy and kill them, and then essentially, re-enslave everyone else. It was fascism.

Patman himself wasn’t racist. He always faced primary challengers that said he’s not segregationist enough. He said in the ’70s, “Look, if I had voted against segregation, I would have lost.”

America was a super racist country. It’s still racist, but it’s less racist than it used to be. There’s a lot of serious problems today, we still have enormous amounts of segregation and racism, but we don’t have that cultural allegiance to eugenics and racial division. That was a political problem that we just couldn’t solve, but is actually solvable today.

Q: The “Watergate Babies” are portrayed in the book almost like useful idiots, duped by bankers and monopolists to unwittingly do their bidding.

That’s right. They were taught that economics was something that the economists and the scientists handled, that it wasn’t their job. That was the history they learned. It was the intellectual framework that they learned. It was the antitrust that they learned.

When there started to be really serious problems in the political economy, which happened almost immediately when they got elected in the ’70s, they didn’t know what to do. They were just like “Well, it’s not my job. My job is to hire the guy that knows how to do it.” That’s what they did.

Then they kept hiring people who would be like Bob Rubin types, who would be like, “Oh, well, the answer to this problem is to give me more money and power.”

Q: Goliath ends on a surprisingly hopeful note. Do you see the current moment as a hopeful one, despite all evidence to the contrary?

I would say that what I learned from Goliath is that it’s up to us. The reason it’s hopeful isn’t because I think things will get better, or worse, it’s because we have the power to make the differences that we want. We can choose whether to be free or whether to give in to our fears.

I think that’s why people find it hopeful, because saying “It’s actually up to us” is a hopeful message. It’s also a scary message, because it means it really is up to us.

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