When Semafor reported this month that Lina Khan was helping New York City mayor-elect Zohran Mamdani identify overlooked legal tools to make daily life cheaper, the example that caused the most controversy was almost comically trivial: beer prices at Yankee Stadium. In her new role as co-chair of Mamdani’s transition team, the former FTC chair, who spent the Biden years cracking down on junk fees and captive-market exploitation, has been studying the statutory authority the city possesses, for example, an “unconscionable pricing” rule, new transparency requirements for algorithmic pricing, and levers embedded in stadium leases and concession contracts. Khan aims to see whether the city can use its powers to lower prices in areas where New Yorkers face monopolistic markups—stadium concessions among them. The $21 ballgame beer was only one of Khan’s illustrative examples.  

Still, the prospect of using existing law to lower beer prices was enough to provoke, shall we say, a pissy response from prominent economic commentators. Barack Obama’s Council of Economic Advisers Chair Jason Furman warned about externalities like excessive drunkenness. “What happens to prices when demand changes and supply is inelastic?” Furman asked. Matt Yglesias insisted price caps would create shortages unless paired with rationing. He argued that cheaper beer would inevitably raise the “profit-maximizing” ticket price, because concessions and admission are complementary goods. Others chimed in with familiar Econ-101 cautions about deadweight loss and market distortions. 

The vehemence of the response revealed something more profound than a disagreement over beer. No critics acknowledged the actual market structure they were describing. Their objections rested on the false assumption that stadiums behave like ordinary competitive environments—places with multiple sellers, substitution options, and price signals that discipline both sides. Stadiums and their vendors resemble almost none of that. 

Professional sports teams operate as publicly subsidized functional monopolies. In Major League Baseball’s case, they enjoy a literal federal antitrust exemption. Every major stadium in New York is either built on public land, financed with public support, or governed through city-negotiated leases. Concessionaires operate under exclusive contracts. Once inside, fans face a single seller with no substitutes and no exit short of abandoning the entire experience. Of course, there may be multiple vendors and brands within a stadium, but concession prices are almost always set from the top.  

These monopolies do not arise naturally: New York has poured hundreds of millions of public dollars into the infrastructure for Yankee Stadium, Citi Field, Madison Square Garden, and the Barclays Center. Critics defending market discipline are talking about a market that exists only because the public built and maintains it. 

This is why applying competitive-market logic is a category mistake. Yglesias’s complementarity argument only makes sense in a textbook world where teams set a single profit-maximizing “bundle” price and every dollar shaved off beer must be added to tickets to break even. In reality, fans vary in whether they buy concessions at all, many don’t remember or anticipate how much they’ll spend, and modern ticket prices are driven by dynamic pricing and a volatile secondary market—so clean, dollar-for-dollar pass-through is unlikely. Teams are already pricing tickets right up to the point where higher prices would scare off enough customers to reduce revenue, which is why they routinely leave seats empty rather than cut prices. His second point—that cheaper concessions might make games more enjoyable and thus raise ticket demand—is probably valid, but that’s a good thing. The goal is fuller stadiums and better experiences, and a fair front-end ticket price for a more fun event is a perfectly reasonable trade. Only on a chalkboard does making the game more enjoyable become a policy problem. 

Empirical evidence supports this. When Atlanta’s Mercedes-Benz Stadium moved to “fan-friendly pricing”—$2 hot dogs, $3 refillable drinks, $5 beers—food sales increased. Ticket prices did not rise. Shortages did not appear. Attendance improved. Far from distorting a competitive equilibrium, lower prices expanded volume in a setting where cost wasn’t the constraint on consumption, but monopoly markup. 

A policy intervention will have different second-order effects than a team willingly reducing its margins, but that’s an argument for more price regulation, rather than less. If venues jack up ticket prices in response to having concessions tied to their street value, ticket price increases should be scrutinized by regulators, too. The goal is to fill more seats and stop subjecting people to rip-offs.  

Stadiums fit neatly into what Brian Shearer at Vanderbilt Policy Accelerator calls captive-customer environments—markets where consumers cannot “reasonably avoid” a purchase and where firms can extract “island prices” unrelated to wholesale costs or scarcity. Airports, hospital emergency departments, and prison phone systems all exhibit similar patterns. Regulators commonly impose caps or oversight in those settings because competition cannot do its disciplining work. Stadium pricing is analytically the same. 

This isn’t just about $21 beers. As The Nation reported, the Mamdani transition team is cataloguing an array of dormant or underused legal tools to lower prices across a range of markets. Section 349 of the state’s consumer-protection law prohibits “unconscionable” or “deceptive” acts in any business operating in New York, a definition courts have applied in captive environments. New algorithmic-pricing transparency rules could force rideshare companies like Uber and Lyft, as well as stadium vendors, to disclose how they set prices. 

What Mamdani and Khan are exploring, then, is not some socialist fantasy about micromanaging beer prices. It is the application of existing law to a market whose structure the public has already shaped, and whose monopoly behavior the public has every right to restrict. They are standard legal powers that New York has chosen not to use until now. 

The strangest part of the debate was the sense of alarm, almost a moral panic, that a city might want to make a night out at the ballgame slightly more fun for the people who paid for it. It was especially odd coming from public intellectuals who pride themselves on advising democratic candidates on issues, yet failed to see the value of ‘lower beer prices at ballgames.’ To hear the reaction, one would think a cheaper Bud Light threatened the delicate machinery of American capitalism. But fans shouldn’t have to endure monopoly markups just because economists prefer the purity of their models to the messiness of reality. 

The post The Freakout Over Cheaper Beer at Yankee Stadium appeared first on Washington Monthly.

As the world soured on Big Tech platforms in the “techlash” of the late 2010s, the conversation centered on how technology was harming its users. An avalanche of best-selling books, magazine think pieces, and documentaries sounded alarms about the annihilation of privacy and attention spans, crises of loneliness and teen depression, and echo chambers and political polarization. This era of commentary connected broad societal problems back to the intimate relationship between tech platforms and the individual.

The Age of Extraction, by the Columbia Law professor Tim Wu, takes a different route to the conclusion that Big Tech is destabilizing society: one focused on the economic relationship between platforms and other businesses. Wu, a founding father of the “neo-Brandeisian” anti-monopoly movement that influenced antitrust policy under the Biden administration, contends that platforms such as Google and Amazon have become essential commercial infrastructure and use this power to extract ever-more value from smaller businesses in the form of exploitative fees and pricing. He calls artificially intelligent platform extraction “the emergent form of economic power in our time,” and suggests that it is a driver of inequality and ultimately the rise of authoritarianism.

This argument won’t be revelatory to those steeped in anti-monopoly debates. Nor does the book serve as an especially persuasive introduction to the topic for those encountering it for the first time. Still, Wu’s writing is lively and lucid and he provides some fresh insights, especially on where the power of platforms is headed in the age of AI, and the dangers this poses to the republic.

The Age of Extraction is divided into two parts. The first delivers a rendition of the familiar Big Tech hero-to-villain story, framed around the platforms’ evolution from “enablement” of economic activity to the “extraction” of value. The second, shorter section looks at the global trend toward political instability and democratic backsliding.

In the optimistic late 1990s and 2000s, Wu reminds us, there was never supposed to be a “big” tech. Pundits predicted that the internet, by lowering barriers to business entry and favoring nimbleness, would usher in a decentralized, egalitarian economy. The business writer Seth Godin declared that Small Is the New Big; the blogger Glenn Reynolds envisioned An Army of Davids replacing old corporate Goliaths. The tech thought leader Jeff Jarvis, in his 2009 book, What Would Google Do?, declared that “the Lilliputians have triumphed. The economies of scale must now compete with the economies of small.”

According to Wu, such predictions were based in part on the perception that new tech platforms like Google and Amazon were “public-spirited town squares that existed to help others, almost like corporate charities.” The platforms played into this perception—especially Google, with its famous “Don’t Be Evil” slogan. A letter the company’s founders Larry Page and Sergey Brin wrote to investors in 2004 explained that Google would do “good things for the world even if we forgo some short-term gains.” But in the early days, they also lived up to it. Amazon created Amazon Marketplace, which empowered countless Americans to start small businesses using its built-in customer base and logistics capabilities. In return, the company asked only for a reasonable fee: about 19 percent of a seller’s revenue as of 2014.

But as Amazon cemented itself as the dominant e-commerce platform—in large part by subsidizing shoppers and hoovering up potential rivals—it began to put the squeeze on sellers. It ratcheted up monthly fees and introduced a major implicit fee by placing rows of sponsored results at the top of search results pages. (By 2024, sellers were paying Amazon more than $56 billion per year to make their products visible.) By 2023, fees averaged more than 50 percent of sellers’ revenue. And yet, with Amazon commanding such a large market, sellers couldn’t walk away. Wu shares anecdotes of entrepreneurs who built thriving e-commerce businesses largely through Amazon, only to be put out of business as the fees mounted up.

If Wu wanted to persuade readers that we are truly living in an age of extraction, some additional case studies might have been helpful. Journalists such as the Washington Monthly’s Phillip Longman have compared Big Tech platforms to the railroad monopolies of the Gilded Age for the better part of a decade. There are plenty of other examples to choose from. Google’s dominance in “ad tech,” the stack of platforms connecting advertisers and web publishers, allows it to extract 30 percent of publisher ad revenue through various fees. Apple’s commission on iOS in-app purchases reached 30 percent before a recent court ruling forced the company to allow app developers to route purchases through their own websites. Uber’s “take rate” on ride fares is dynamic and opaque, but it increased dramatically in recent years and has been shown to range from 40 to 70 percent.

Puzzlingly, The Age of Extraction leaves these examples on the table, not even giving them a brief mention. Readers might be left wondering if platform extraction is a problem that extends beyond Amazon as Wu moves ahead to explore tangentially related topics. One chapter observes that the internet failed to translate into “the rise of a new creative class holding significant wealth,” and that even the influencers who have found financial success are “a laboring class” with stressful lives—although it does not tie this reality to any specific extractive practices by platforms. (Wu doesn’t mention, for example, content creators’ paltry share of YouTube and X ad revenue.) Another chapter describes how private equity roll-ups of specialist medical practices raise patient costs while degrading quality of care, and how the mega-landlord Invitation Homes has exploited renters by consolidating local housing markets and then systematically raising rents and piling on absurd “junk fees.” Wu argues that these phenomena represent “platform power beyond tech,” because private equity-backed medical groups bill themselves to doctors they hope to buy as convenient administrative intermediaries, and Invitation Homes uses technology to buy and manage thousands of homes.

The freshest material in The Age of Extraction comes in Wu’s analysis of how Big Tech is diversifying and augmenting its platform ecosystems to maintain their power. Wu describes Google, Apple, and Amazon’s splashy ventures into entertainment and sports broadcasting as an effort to become “fully spun cocoons of life and living.” And, of course, the platforms are now “investing heavily in owning or controlling the relevant talent, data, and technologies” of the AI race. OpenAI and Anthropic are backed by Microsoft and Amazon, respectively; Google, Meta, and Elon Musk’s X are developing popular models in-house and control key distribution channels. Thus while AI technology may disrupt certain Big Tech products, Wu points out that AI market structures appear “headed in the direction of reinforcing [Big Tech’s] advantage.”

Just a few decades ago, Francis Fukuyama was predicting The End of History, “the old dictators, cranky old men, were on their way out,” and “a kinder, gentler future was meant to be on its way in,” Wu writes. “What went wrong?” His answer is a bit slippery, particularly with respect to how much weight it assigns to the tech platforms that are the main subject of his book. At first he blames “the destabilizing effects of laissez-faire capitalism,” and concedes that “the tech platforms are not nearly the entirety of this story.” At another point, he blames “the emergence of platform capitalism and broader trends in the economy.” The theory he actually fleshes out centers on corporate consolidation generally, although the tech platforms certainly fit in.

Wu sketches the progression from consolidation to authoritarianism as a “sequence in five steps, each based on known and well-studied tendencies.” Monopolization is followed by extraction, which, “by its nature … creates a narrow class of winners” and a “broader class” of losers: “consumers who pay more, workers who are paid less, and local, regional, smaller, and medium-sized businesses that are acquired or driven out of business.” This inequality leads to the emergence of mass resentment, then democratic failure—“compounded if the state is understood or credibly portrayed as supporting and perpetuating the ongoing extraction”—and ultimately the rise of the strongman. In a play on the title of the libertarian economist Friedrich Hayek’s iconic book, Wu calls this progression “the real road to serfdom.”

He presents this as a sort of natural law, and doesn’t make much of an effort to support it empirically. That’s not much of an issue with respect to the latter part of the causal chain, as the link between inequality and resentment and political instability is fairly self-evident. But readers might need some evidence to be satisfied that monopolization is a significant driver of inequality to begin with. Wu could have mentioned the work of the economists Marshall Steinbaum, José Azar, and Ioana Marinescu, who have connected employer concentration in labor markets to lower wages. From the consumer perspective, he could have surveyed anti-monopoly research into how consolidation is making household cost centers like health care and groceries more expensive. Or he could have deployed a historical example, such as that of the Gilded Age, to illustrate his point. But as with his argument about platform extraction, Wu declines to elaborate.

Nevertheless, The Age of Extraction concludes—after a few short chapters taking down the ideas that markets are self-correcting and that crypto technology will solve inequality—by presenting policy solutions to the expansion and abuse of monopoly power as a broad “architecture of equality.” The solutions begin with antitrust. Wu mentions that antitrust enforcement “staged a comeback” under the Biden administration and lists major cases, although he doesn’t explain how specifically they could mitigate extraction. Other solutions could include utility-style regulation and price caps, which Wu points out have proved successful beyond the utility sector. For instance, “swipe fees” are capped in the European credit and debit payment processing markets. New “common carrier” rules, such as those historically used to govern railroads and telecommunications networks, could prevent dominant tech platforms from discriminating in favor of their own products or services. And quarantines and “line of business” restrictions could prevent platforms from leveraging their preexisting monopolies to dominate new markets, such as artificial intelligence.

At around 200 pages, The Age of Extraction is a fun and breezy read, and it will hold the attention of casual readers even if they do not end up convinced of its grandest claims. But for neo-Brandeisian true believers, the book is likely to frustrate. At a pivotal moment for the movement, with its Biden-era champions out of power and the Trump administration reversing much of their agenda, Wu is content to retread familiar intellectual territory rather than illuminating what comes next. And amid a contentious factional battle to shape the future of the Democratic Party, the thinness of the book’s argumentation makes it unlikely to win hearts and minds. For an advocate of Wu’s talents, The Age of Extraction represents a missed opportunity on multiple fronts.

The post Monopoly Men appeared first on Washington Monthly.

In the last two years, iPhone customers may have been pleasantly surprised to see a standardized USB-C charger port, allowing them to dispose of Apple’s custom Lightning wires. The world’s 1.5 billion iPhone users can thank Europe for forcing Apple’s change. The tech giant decided to switch all its new iPhones, determining it too costly to produce the USB-C port just for Europe. 

It’s only in recent years that consumers have woken up to Big Tech’s power over our attention, moods, privacy, stock market, economy, and wallets—over us. It’s fortunate then that with our heads buried in our phones scrolling through social media, consumer advocates, regulatory agencies, and litigators have been sounding the alarm on surveillance and monopoly power and delving into the drier nuts-and-bolts details of right-to-repair and interoperability regulations, like the one that led to Apple standardizing its charging port. 

Prolific tech critic Cory Doctorow, whose pronouncements make him akin to a town crier in the digital square, is among those leading the charge. After coining and popularizing the term “enshittification” to mean how tech platforms degrade over time, Doctorow has bestowed his latest book, Enshittification: Why Everything Suddenly Got Worse and What to Do About It, with the title.  

His book, derived mainly from his blog Pluralistic, will be eye-opening to consumers and those like me who are already familiar with Big Tech’s bullying methods. (I’m the editorial director of the Open Markets Institute, a think tank that seeks to regulate Big Tech monopolies and curb corporate power.) 

Enshittification is a ride through all the bait-and-switch tactics, financial trickery, and gatekeeping to which Big Tech platforms subject users. A prime example is how Google began degrading its always reliable workhorse of a product, search, in the mid-aughts, once there was no more room for its flagship segment, which had captured a 90 percent global market share, to grow. In a strategy laid bare in internal memos and emails in the Department of Justice exhibits in one of its two monopoly cases against the corporation, Google made users input more queries into the search bar to get the answers, leading to more ads and more revenue for Google. “After all, even if Google couldn’t find more people to search, or more ways to use search, they could certainly find new ways to charge for search,” Doctorow observes. “In other words, once Google stopped growing, it started squeezing.”  

Doctorow takes us through the how and why of enshittification. How tech companies enshittify proceeds in four steps: 1) first, platforms are good to their individual customers, 2) they abuse their individuals to improve things for their business customers, 3) next, they undercut their business customers to keep more profit, and 4) finally, they have turned into a giant pile of shit. 

Both Amazon and Facebook have turned on their once-prized business customers, Facebook, by raising the price of ad targeting and failing to show its users the ads advertisers paid for. News outlets, in particular, were hurt badly when the platform began downranking short excerpts of news articles in favor of longer ones, effectively cannibalizing the news business. Similarly, Amazon started to shaft the merchants who sell on its marketplace by effectively forcing them to pay to be included in Amazon Prime, forbidding them to sell their product at a lower price on any other website, including their own, and, perhaps most galling, ripping off merchants’ ideas to make its own Amazon-branded copycat products. 

According to Doctorow, the enshittifier’s “credo” is, “Your job is to create as much value on that platform as possible. Our job is to harvest all of that value, leaving behind the smaller quantum of utility that will keep the platform from imploding.” 

But it’s not just the well-known platforms. Tech companies, in general, have gotten into the game. In one of the book’s most brazen examples, Unity, a company that offers tools for video game developers, announced a change to its pricing policy: it would start charging game developer customers a fee every time they sold a video game, claiming it wanted “shared success” with its customers, the developers who used their tools.  

Unity’s customer base of video game developers balked. Doctorow likens the scheme to selling hammers to build a lemonade stand and expecting a nickel from each drink sold. “Unity is an avatar of the attitudes that produce enshittification,” he writes. “Enshittification is what happens when the executives calculate that they can force you to go along with their schemes, and when they’re right about it.” In Unity’s case, its plan to fleece its customers didn’t work 

Part of the reason is that the law allows them to get away with things traditional companies never could, owing to underregulation, copyright law, and regulatory capture. Having an app allows tech companies to break the law and then claim they didn’t because the crime was committed with an app, for instance, app-based lending platforms that ignore usury law or cryptocurrency apps that illegally trade in unregistered securities.  

Regulation hasn’t kept pace with technology, as we see most vexingly in the case of AI, which has sent government regulators worldwide scrambling. Add to underregulation the billions of dollars the tech industry has funneled into lobbying, and you have regulatory capture that has helped tech companies weaponize intellectual property laws. For instance, IP laws for apps ban “circumvention,” which means technology companies can destroy rivals that have developed anti-features allowing users to skirt the app’s undesirable features: “In other words, tech companies don’t stop with ‘It’s not a crime if we do it with an app.’ They also say, ‘It’s a crime if you fix our app to defend yourself from our crimes.’” 

Enshittification also describes the waning counterbalancing influence of the tech industry’s white-collar workforce, an aspect of Big Tech’s exceptionalism that gets little attention. Doctorow notes that Google’s way of sorting web pages came from an academic research paper on citation analysis by its founders, Larry Page and Sergey Brin, giving the company its scholarly atmosphere. Technologists were recruited from top universities worldwide, offered generous pay with stock options, and given one day a week to work on side projects. 

For years, Google deferred to its technical staff, who remained a bulwark against enshittification. It believed deeply in Google’s mission statement to “Organize the world’s information and make it universally accessible and useful.” Yet, letting engineers run the show exasperated investors, whose greed won out over workers’ idealism as we saw with the corporation’s strategy to degrade search quality. 

Google wasn’t the only giant to rein in its high-minded workers; it was among the most prominent. The rupture with their workforce, which began when Big Tech corporations ramped up their enshittificatory (yes, Doctorow uses this form of the word, too) ways over the past decade, became a chasm in 2023 when a quarter of a million tech workers were fired—despite the industry’s record profits. In 2025, the unspoken covenant was severed with tech executives’ embracing Donald Trump at his inauguration.  

Big Tech may have outfoxed regulators and its workforce, but Doctorow sees a reckoning coming. Absent U.S. regulation, as the Trump administration protects the tech platforms, we may have to rely on Europe to check the tech industry’s power.  

We saw this dissonance between the U.S. and Europe this autumn when a federal judge imposed a modest penalty on Google for its illegal search market dominance. That stood in sharp contrast to the much larger, albeit affordable for Google, $3.5 billion fine levied by the European Commission for its digital advertising monopoly. 

Enshittification may seem outdated amid the surge of AI, which is barely mentioned. It’s not that Doctorow hasn’t been thinking and talking about AI—he considers it a bubble—it’s that we have to wait for his AI book to be released next year, by which time his predictions might already have come true. 

Sneak preview: He’s not optimistic. In a recent post, Doctorow warns, “I firmly believe the (economic) AI apocalypse is coming. These companies are not profitable. They can’t be profitable. They keep the lights on by soaking up hundreds of billions of dollars in other people’s money and lighting it on fire. Eventually, those other people are going to want to see a return on their investment, and when they don’t get it, they will halt the flow of billions of dollars. Anything that can’t go on forever eventually stops.”  

Doctorow’s Enshittification is an indispensable guide to understanding how we got here. If Part 1 is a must-read, Part 2 will be epic. 

The post The Cory Doctorow Doctrine  appeared first on Washington Monthly.

In July, Union Pacific (UP), the largest railroad by revenue in the United States, announced plans to acquire Norfolk Southern (NS), the country’s fourth largest railroad. With UP’s dominance west of the Mississippi River and NS’s dominance to the east, the combined $250 billion railroad would create the first coast-to-coast railroad company and leave America’s already consolidated rail system even more concentrated. 

Freight railroads are the backbone of the United States economy. They move the inputs and outputs of nearly every industry: grain, coal, steel, lumber, chemical, and finished goods like automobiles. A functional, competitive freight rail system is necessary if the United States wants to reshore manufacturing or build a green economy. 

At first glance, a freight railroad that spans the United States might appear to bring significant efficiencies—faster transit times and more efficient routing because traffic would not need to be interchanged between the railroads. However, experience shows that mergers often result in chaos instead of coordination. The 2023 combination of Canadian Pacific and Kansas City Southern, the first large railroad merger in more than two decades, quickly ran into trouble, causing delays, service failures, and growing frustration among shippers. When Union Pacific acquired Southern Pacific and CSX and NS absorbed Conrail in the 1990s, the combined companies attempted to “rationalize” their systems, creating nationwide service meltdowns so severe that regulators were forced to impose a 15-month merger moratorium. 

Rather than streamline freight services, these mega-mergers tend to break systems and concentrate power.  

For most of the 20^th century, the American rail system operated under a very different model rooted in public accountability, regional balance, and cooperation, not consolidation. The Interstate Commerce Act of 1887 and subsequent legislation subjected railroads to strict federal oversight, including uniform pricing, service obligations to rural communities, and “common carriage” responsibilities that required them to serve all customers fairly. Railroads could not play favorites, abandon lines at will, or set arbitrary rates based on market leverage. The system was far from perfect, but it helped ensure that rural and urban communities could access reliable freight and passenger service, even if they weren’t along the most profitable corridors.  

This regulatory framework also encouraged operational creativity. During this period, a consortium of regional carriers that went by their acronyms, including the W&LE, the P&WV, and the NYNH&H, cooperated to form the “Alphabet Route,” an informal alliance that provided long-haul service across multiple jurisdictions—without consolidation. They proved that collaboration, not monopoly—through standardized tariffs, car interchange agreements, and coordinated schedules—could meet national freight needs.  

After the Staggers Act of 1980 largely discarded this regulatory regime, the industry rapidly consolidated. In 1980, the United States had 33 Class I railroads. Today, there are six. The biggest lines ripped up tracks, closed yards, and stopped serving regions. By consolidating, railroads began exerting monopoly pricing over shippers; shippers were effectively told to take or leave it. 

Then came the financiers.  

With barriers to competition high and oversight minimal, Wall Street moved in. Hedge funds took control of every major U.S. freight railroad except one. Their mission wasn’t to grow the rail business but to extract as much cash as possible, as fast as possible. The preferred tool for this was “Precision Scheduled Railroading” (PSR), a euphemism for asset liquidation and severe job cuts. Under PSR, railroads laid off workers, parked locomotives, and “rationalized” operations to focus only on the most profitable long-haul freight. Customers with more complex needs, especially those in rural areas or those moving lower-margin commodities, were abandoned. 

Since 2014, the Class I railroads have cut nearly a third of their workforce. In theory, PSR was about efficiency. In practice, it gutted the system’s ability to handle real-world logistics. The biggest railroads have experienced 13 major operational meltdowns in the past decade. Disruptions deteriorated service quality, rates rose, and many shippers decided to move to trucks. 

That shift carries immense costs. Trucks are far less efficient than trains, emitting more carbon, causing more accidents, and inflicting more wear and tear on public infrastructure. Yet railroads have done little to win that business back. Instead of investing in expanded capacity or better service, they’ve used their profits for stock buybacks and dividends. Between 2010 and 2021, the rail industry spent nearly $50 billion more on rewarding shareholders than on maintaining its network.  

Union Pacific is emblematic. In 2021, it spent $4 billion more on buybacks and dividends than it had available from free cash flow, even as it racked up $100 million in deferred maintenance. Technologies like positive train control, a system designed to prevent crashes and derailments,  long touted as game-changers for safety and reliability, were only implemented under heavy regulatory pressure. The industry has repeatedly chosen extraction over investment, and financial engineering over operational excellence. Despite making the systems brittle and ripe for financialization, mergers rarely deliver the efficiencies they promise. Since 2004, railroad stocks have soared nearly four times as much as the S&P, all while the railroads have lost 10 percent of their business. 

Despite that record, the Union Pacific-Norfolk Southern deal may still win federal approval. The Surface Transportation Board has the sole authority to approve or reject rail mergers and is currently split 2-2 between Democratic and Republican appointees, with one seat vacant. Crucially, the terms of two board members—Democrat Karen Hedlund and Republican Michelle Schultz—will expire during the lengthy review process. That opens the door to a Trumpian shift in the board’s balance.  

Trump has shown that consolidation does not bother him as long as the checks clear. If Trump faces any Republican opposition to his yet unannounced STB nominee, there’s every reason to believe Trump could fire the Democratic board members and replace them with industry loyalists eager to rubber-stamp the merger.  

The review process will likely be long, technical, and riddled with opportunities for corporate influence. Even under the Board’s current composition—split between Democrats and Republicans—a merger of this scale could gain approval. The Surface Transportation Board’s recent track record offers little reassurance. An STB with a Democratic majority voted to approve the Canadian Pacific-Kansas City Southern merger despite significant reservations from labor unions and shippers. 

This merger will be the first to be reviewed under the Board’s more-stringent 2001 merger guidelines, which require any transaction to enhance competition and avoid downstream consolidation, which is critical, as all signs point to a second shoe dropping. If the Union-Pacific-Norfolk-Southern merger is approved, BNSF, the other western railroad—owned by Warren Buffett’s Berkshire Hathaway—will almost certainly pursue CSX, the other eastern railroad, to avoid being boxed out. The result, a national duopolistic rail system, was precisely the downstream effect the STB’s 2001 merger guidelines were designed to prevent.  

It would also be historically perverse.  

In 1904, President Theodore Roosevelt broke up the Northern Securities Company, a J.P. Morgan-backed trust that aimed to consolidate control of the western railroads. The Supreme Court sided with Roosevelt, ruling that such consolidation violated the Sherman Antitrust Act. The lessons were not learned, however. Through a series of mergers in the mid-20^th century, several pieces of the broken-up railroad would be reconstituted into a significantly larger entity that would eventually create BNSF. The current merger proposals, if approved, would be multiple orders of magnitude larger and more impactful than the monopoly created by Northern Securities. 

If the United States is serious about reshoring manufacturing, it cannot afford to let its rail system become a duopoly. Allowing Union Pacific to absorb Norfolk Southern would leave just two national carriers, each with incalculable leverage over customers, workers, and regulators. 

The post Railroad Merger: Why It Could Go Off the Rails  appeared first on Washington Monthly.

In late March, the New York Times columnist and podcaster Ezra Klein went on the Weekly Show with Jon Stewart podcast to talk about his new book, Abundance, which Klein had co-authored with journalist Derek Thompson, then of The Atlantic. The book’s thesis is that over the years Democrats, often bowing to left-wing interest groups, have encouraged various forms of red tape—from federal environmental statutes to local zoning rules to minority contractor set-asides—that have gummed up the workings of government to the point that it is no longer possible to build things the country desperately needs, like new housing and clean energy infrastructure, in a timely and cost-effective manner. To illustrate his point, he regaled Stewart with a tragicomic tale of the government failure to expand rural broadband access.  

In late 2021, Klein explained, Congress passed and Joe Biden signed a major infrastructure law that contained $42 billion to subsidize the construction of broadband networks in rural areas that lack access to high-speed internet service. But more than three years later, not a single home had been connected by the so-called Broadband Equity, Access, and Deployment (BEAD) program. Indeed, he noted, not a dime of that $42 billion had even been spent.  

The reason, Klein went on, has to do with a “baroque” 14-stage implementation process for how BEAD funds can be distributed from the federal government to state governments, and ultimately to internet providers. To give Stewart a full appreciation for the bureaucratic nightmare this entails, he listed the steps one by one. States submit a “Letter of Intent,” a request for planning grants, a “5-year Action Plan,” an “Initial Proposal,” and a “Final Proposal,” with long federal review and approval periods in between. (This elicited an anguished “Oh my god!” from Stewart.) The federal government publishes a map of where broadband needs to be built, states challenge the map for accuracy, the feds review and approve the challenge results. (“My hair was dark when we started this process!” Stewart exclaimed.) Notice and comment periods are sprinkled in throughout. No state, Klein explained, had made it past the “Final Proposal” stage. Stewart sat in apparently stunned silence, later quipping that BEAD is not a broadband program at all, but rather an “overcomplicated Rube Goldberg machine that keeps people from getting broadband.” To Stewart’s pleas for an explanation of how this defective process came about, Klein responded simply, “This is the Biden administration’s process for its own bill—they wanted this to happen.” 

Clips of the conversation went viral—boosted by Elon Musk, who was angling for the Trump administration to call BEAD a failure and reroute the funds to his Starlink satellite internet service. And as the broader “abundance liberalism” movement has continued to gain traction among prominent Democratic politicians and donors, Klein’s narrative of the BEAD program has become a favorite anecdote of its leading evangelists. Jonathan Chait, Dylan Matthews, Josh Barro, and Matt Yglesias have all cited BEAD as an example of liberal governance failure. 

The accuracy of the story, however, has come under question. In April, Bharat Ramamurti, a former member of the Biden administration’s National Economic Council who worked on telecommunications policy, alleged that the BEAD implementation process was not a Biden or even a Democratic prerogative, but the result of a compromise with Senate Republicans during negotiations over the infrastructure law. According to Ramamurti, these Republicans had “insisted” on a cautious implementation design in part to monitor spending for waste, and in part “at the behest of large incumbent internet providers,” who wanted more opportunities to shape the program to protect their interests.  

In a subsequent New York Times column, Klein admitted that he had gotten some of the facts wrong—that “portions of [BEAD’s] 14-stage process were insisted upon by congressional Republicans.” But rather than concede the broader argument, he doubled down, saying that after further talks with “various people who’d been part of the broadband program,” he discovered that “much of the process was worse than I’d known.” One official, he wrote, told him that “he’d wasted 40 to 50 percent of his time on internal government requirements he judged irrelevant to the project,” though Klein didn’t name the official or the specific requirements the official was referencing. Similarly, Klein’s coauthor, Derek Thompson, acknowledged in an interview with the journalist Mehdi Hasan that Klein initially “got some things wrong” about BEAD, but insisted that “rules we’ve put in our own way” (he didn’t specify which) had derailed the program. 

So, what’s the real story here? Was it liberal proceduralism or corporate power that incapacitated Biden’s rural broadband effort? Getting the answer right is vital for two reasons. First, the economic and political stakes of the rural broadband problem are serious. High-speed broadband is to the 21st century what electricity became in the 20th—a service so essential that lacking it means not fully participating in modern life. Yet more than 40 million Americans today live in small towns and rural communities that lack access to internet service at the speeds that are required to pursue an education, hold down a job, or run a business that can compete with firms in the big cities. This broadband “digital divide” is a major driver of regional inequality. A study by the Center on Rural Innovation found that rural counties with greater broadband utilization, typically due to faster and better broadband service, have 213 percent higher rates of business start-ups and 18 percent higher per capita income growth than comparable rural counties with lower broadband usage. And according to a survey by the Pew Research Center, 58 percent of rural residents believe that access to high-speed internet is a problem in their area, compared to only 13 percent of urban dwellers and 9 percent of suburbanites who think the same is true in their communities. Rural residents have valid reasons, in other words, for believing that the economy is rigged against them.  

Second, figuring out what precisely screwed up the BEAD program can help adjudicate a crucial debate taking place among Democrats about how best to make the party more politically competitive. Abundance liberals say the answer is for Democrats to embrace an agenda of targeted deregulation—one that would free both government agencies and private companies from picayune procedural constraints that get in the way of building needed physical infrastructure and developing promising new technologies that can solve abiding human problems. Others, including the editors of this magazine, argue that abundance liberals, in their laudable eagerness to diagnose the deficiencies of government, fail to recognize that corporate behemoths are frequently the hidden saboteurs, and that their outsized economic and political power is a direct result of past deregulatory efforts.  

To resolve this question, we spoke with nearly two dozen government officials and outside experts who were involved in the design and implementation of the BEAD program, pored over hundreds of pages of program documentation, and researched rural broadband policies of previous administrations going back to the 1990s. What we found is that while abundance liberals are certainly right that some infrastructure projects have been slowed or stalled by regulations and public engagement processes put in place by Democrats to placate progressive interest groups, that is simply not the case with Biden’s rural broadband initiative. Rather, the complexity and delays of the BEAD program and the broader failure of Washington over many years to solve the digital divide is overwhelmingly the result of telecom monopolies whose economic and political power previous administrations unleashed. And this misjudgment by abundance liberals is not a one-off mistake, but part of a pattern. 

Understanding BEAD requires a bit of background on the government’s decades-long effort to spur broadband deployment. 

When we talk about internet access, we are actually talking about two distinct, layered services. The first is data transmission, or the carriage of data from point A to point B across network infrastructure. The second is data processing, or the transformation of data from digital computer language into a more easily transmitted format at point A, and back into digital computer language at point B, using equipment like modems that sit on top of the transmission infrastructure. 

To create a competitive market for data processing, the Federal Communications Commission in the early days of the internet regulated basic transmission services—which at the time could only be provided by telephone wires—under “common carrier” rules. In practice, this meant that telephone carriers had to allow a third-party data processor (an “internet service provider,” or ISP) like AOL to connect modems and other hardware to their telephone wires. The telephone carrier then had to transmit data processed by AOL modems on the same terms as it transmitted data from modems belonging to its own ISP business, if it had one. This regulatory regime was widely considered a success: by the late 1990s, there were more than 7,000 ISPs in North America. 

The Telecommunications Act of 1996 is mostly remembered as ushering in sweeping deregulation and monopolization across the telecom and media industries. But as the Harvard Law professor Susan Crawford writes in her 2013 history of American internet policy, Captive Audience, the act actually represented continuity with the FCC’s regulations. Indeed, the legislation empowered the FCC to subject two-way “telecommunications service” providers not only to open-access requirements, but also to a broader suite of common carrier regulations. 

But this approach seemed oppressive and old-fashioned to George W. Bush’s first FCC chairman, Michael Powell, a tech enthusiast who believed fundamentally that “broadband should exist in a minimally regulated space.” By the early 2000s, new innovations had enabled cable television networks to transmit internet data, breaking the monopoly previously held by telephone wires. Other technologies, such as satellite, broadband over power lines, wireless (data transmitted via cell towers to either a fixed antenna or a mobile device), and fiber-to-the-premise (extending the fiber-optic “backbone” of transmission networks all the way to end users) were promising to join the fray. Powell feared that common carrier regulation would stifle investment in these emerging technologies. Alternatively, Crawford writes, he believed that a hands-off approach would allow them to flourish, ultimately creating a world where competition between vertically integrated transmission and internet service providers would protect consumers in the way ISP competition on top of individual transmission networks once had. “The great regulatory difficulty over the past one hundred years is, we have always had just one wire to the home,” said Powell at a 2004 conference. “We have a historic opportunity here not to repeat that world … The future is exciting, innovative, and bright.” 

To unlock this vision, Powell declined to regulate internet networks as common carriers and waged a legal battle to liberate them from the act’s “telecommunications service” classification that made such regulation possible. When a court ruled in 2003 that cable was a telecommunications service, Powell enlisted the Department of Justice to appeal; the Supreme Court ultimately ruled in Powell’s favor in a technical decision related to the FCC’s authority. With this ruling in hand, Powell was free to do as he pleased. As he campaigned for reelection in 2004, George W. Bush pledged that with Powell “clearing the underbrush of regulation”—and additional supply-side reforms Bush enacted that year, such as easing permitting requirements for providers to access federal rights-of-way—the market would deliver “universal, affordable access to broadband technology by the year 2007.” 

Of course, this vision didn’t come to pass. Powell’s deregulation effectively gave the telecoms permission to deny competing firms access to their lines, leading thousands of ISP start-ups to go out of business, as the Washington Monthly reported at the time. Moreover, in urban and suburban areas, the “intermodal” competition Powell had banked on failed to arrive. The technology behind broadband over power lines never panned out. Satellite and wireless service reached the market but proved to be poor substitutes for a wired connection (IT geeks took to calling satellite “fraudband”). Telephone carriers experimented with rolling out fiber-to-the-premise networks in affluent areas, but Wall Street insisted that they focus their investment on cornering the growing, less capital-intensive cellular service market. By the end of Bush’s second term, most consumers were left with only two choices for genuine broadband internet: their local telephone carrier or their local cable company. Under this duopoly market structure, as Nicholas Thompson reported in these pages in 2009, Americans paid far more, for worse service, than citizens of other developed nations, where forms of common carrier regulation had almost universally been adopted. 

For rural Americans, the situation was even worse. Deregulation and permitting reform were not enough to lure cable internet providers to remote, sparsely populated areas. This left telephone carriers, which had preexisting rural infrastructure thanks to long-standing universal phone service obligations, firmly entrenched as the dominant transmission providers in these areas (satellite “fraudband” and fixed wireless service had some presence). Meanwhile, lax antitrust enforcement was allowing these carriers to “cluster” their regional monopolies into increasingly large, and politically powerful, entities. By 2005, the “Baby Bell” offspring of the 1984 AT&T breakup had already reconsolidated into two behemoths: a reborn AT&T, and Verizon. CenturyLink and Frontier Communications also grew to control significant chunks of rural territory, sometimes by buying lines from AT&T and Verizon. Just like that, the Bush administration had handed a handful of carriers lucrative, unregulated monopoly fiefdoms over rural internet service provision—and the political clout to protect them. 

Before the Bush presidency was even over, it had become clear that a new approach to broadband policy was needed. In 2006, former Clinton Chief of Staff John Podesta and the Free Press founder Robert McChesney pointed out in the Monthly that a better model would be to follow what Franklin D. Roosevelt had done to bring electricity to rural America. In the 1930s and ’40s, the Rural Electrification Agency had provided low-cost loans and other support for municipalities and farmer cooperatives to set up public power utilities. Unburdened by short-term profit imperatives, public power initiatives proved a resounding success, while the threat of competition often spurred investment from private utilities. The federal government could replicate this playbook with broadband, Podesta and McChesney argued—if it first preempted a growing number of state “anti-muni” laws, passed at the behest of incumbent providers, that banned municipal networks.  

As a presidential candidate, and early in his first term, Barack Obama seemed to agree with this logic. A spokesperson for his 2008 campaign told PBS that “if private entities are not going to deliver wireless internet or broadband to an area, municipal governments should be allowed to,” suggesting Obama would preempt anti-muni laws. In his first month in office, he signed into law a major post-financial crisis stimulus that contained more than $7 billion in broadband grants and loans, much of which would go toward municipalities and cooperatives. This investment, the president declared, would allow “a small business in a rural town” to “connect and compete with their counterparts anywhere in the world.” 

Unfortunately, Obama’s promises held up little better than those of Bush. The stimulus grants were undermined by the administration’s desire for immediate results: the Commerce and Agriculture Departments, the agencies tasked with implementing the grants, insisted on funding “shovel-ready” projects, leading to rushed, ill-conceived proposals. Defaults and other misfires ensued, providing years’ worth of ammunition for industry-aligned advocates and academics to discredit the New Deal model for broadband. Meanwhile, Obama didn’t follow through with preempting state anti-muni laws, allowing them to proliferate across the country.  

The Obama administration was handed a separate opportunity to get broadband policy right. In the stimulus bill, Congress mandated that the FCC transform a long-standing program it administered to subsidize rural telephone service, the Universal Service Fund, into the new broadband-focused Connect America Fund. This could have gone a long way toward closing the digital divide by redirecting several billion dollars of federal spending every year into broadband upgrades. The question was, how would the money be spent?  

Other nations that had made significant public investments in broadband prioritized fiber-optic networks. The upfront cost of laying fiber is relatively high, but the networks are “future proof” in the sense that once the high-bandwidth wire is in the ground, it can be scaled up to provide ever-faster speeds by cheaply switching out electronic components (cable broadband is also future proof, although to a lesser extent). In other words, a one-time investment in fiber can yield true broadband internet service for decades, whereas other technologies are expensive to upgrade or, in the case of satellite, need to be replaced altogether after a few years. 

But in the development of the plan, two factors discouraged the FCC from prioritizing fiber. The first was lobbying from incumbent providers. Telephone companies were well positioned to deploy fiber in rural areas, but they preferred to squeeze all the juice they could out of their legacy telephone wire networks rather than cannibalizing these sunk-cost investments. Satellite and fixed wireless providers, meanwhile, wanted a slice of the subsidy pie—and did not want the government to fund fiber competitors to their low-quality offerings. 

The second factor was a flawed, consultant-produced cost model commissioned by the FCC, which greatly overestimated the price tag of laying fiber in rural America. Jonathan Chambers, who would help implement the Connect America Fund as the FCC’s chief of policy analysis from 2012 to 2016, told us that the model projected the costs of building “greenfield” networks from scratch, rather than the more common “brownfield” approach of leveraging preexisting poles, ducts, or other infrastructure. “They calculated a cost of like, $150 to $180 billion,” Chambers said. “They said, ‘Well, my God, we don’t have that kind of budget.’” 

Thus, Julius Genachowski, Obama’s first FCC chair, had a conundrum. Subsidizing satellite, fixed wireless, and telephone wire was clearly not a long-term solution to the digital divide. But Genachowski was a business-friendly moderate who had already been engaged in another battle with industry over an Obama campaign pledge to prevent internet providers from privileging their own content applications. With incumbents opposing a fiber-first approach—and a study suggesting that it would take decades to implement—Genachowski took a technologically neutral approach to the new Connect America Fund, pledging support over the following decade for any networks capable of providing download speeds of at least 4 megabits per second (Mpbs). This speed threshold could be met with modest upgrades to telephone networks, and by satellite and fixed wireless service. 

Four Mpbs service allows a user to browse the web, send emails, and stream standard definition video. These were the essential needs as of 2010, but far short of where the internet was heading—the plan itself set a target for most Americans to receive service at 100 Mpbs download speeds by 2020. When consumer advocates and members of Congress raised these concerns, Genachowski responded that 4 Mpbs was just an initial speed threshold, and could be scaled up as the FCC implemented the subsidies over time.  

Nevertheless, the direction had been set: Through the Connect America Fund, rural Americans would receive second-class service from incumbent providers. Between 2012 and 2015, the FCC offered the 10 largest telephone companies more than $10 billion to upgrade their networks. Between 2016 and 2019, the FCC gave $15 billion to smaller, rural-only telephone carriers to do the same. In 2018, the FCC held a $1.5 billion auction for alternative providers to bid on locations that the large telephone companies had declined to serve, allowing fixed wireless and satellite providers to get a piece of the action. 

By the close of the 2010s, most of the networks supported by the Connect America Fund were already obsolete. As Donald Trump’s FCC crafted the $20 billion Rural Digital Opportunity Fund in 2020, its signature program under the Connect America Fund umbrella, it found it had to re-subsidize many of the same locations subsidized just a few years prior. “It was scandalous, what the commission did,” Jonathan Chambers would tell Broadband Breakfast of the Obama-era implementation of the fund. “It was graft.” 

The Trump FCC’s iteration of the Connect America Fund would be an improvement in one critical respect. Rather than offer money to incumbents and auction off what they declined, it ran an auction from the start. The third-largest winner in the auction was a consortium of over 90 rural electric cooperatives led by Chambers himself, who had cofounded a company that helps cooperative energy utilities leverage their infrastructure to deploy fiber broadband. The consortium secured more than $1 billion by bidding as much as 50 percent below the FCC’s asking price on more than 600,000 locations, validating Chambers’s hypothesis that its cost model had been way off the mark. 

But at the same time, the Trump FCC repeated many mistakes of the past. While the Rural Digital Opportunity Fund primarily financed fiber, it also put billions toward short-term fixed wireless and satellite deployments—including a new satellite entrant whose infrastructure came with better service quality but equally short life spans: Elon Musk’s Starlink. And as with Obama’s original stimulus grants, haste to deployment undermined many of the projects that received funding. Hoping to get money out the door amid Trump’s reelection campaign, the FCC awarded the subsidies without asking for much proof that bidders had the financial means or technological capability to follow through on their commitments. The result was widespread defaults that continue to roll in to this day. 

In total, the federal government spent $50 billion on rural broadband over the 2010s—more than enough money to lay fiber to every rural home and business in the nation, according to Chambers’s estimate. And yet by 2020, as many as 42 million Americans still lacked broadband. 

The rural broadband programs of the 2010s were products of what the telecommunications scholar Christopher Ali has called “the politics of good enough.” Politicians and regulators wanted to do something about the digital divide. But their deference to industry, and desire for immediate results, prevented them from approaching the problem rationally. 

The COVID-19 pandemic looked like it might finally upend this political calculus. “We reached a pressure point where we couldn’t play games anymore,” Harold Feld, a longtime public interest advocate at Public Knowledge, told us. Suddenly, members of Congress were overwhelmed by “their constituents calling them up and saying, ‘My kid is doing homework in a parking lot.’” The door was open for a real solution. 

In March 2021, when Joe Biden unveiled his vision for one of the first major legislative pushes of his young presidency—a massive infrastructure package that would ultimately become the Infrastructure Investment and Jobs Act, or IIJA—it contained a remarkably ambitious broadband plan. It was a plan that finally seemed to grasp the urgency of closing the digital divide, and the correct historical precedent for doing so. “With the 1936 Rural Electrification Act, the federal government made a historic investment in bringing electricity to nearly every home and farm in America, and millions of families and our economy reaped the benefits,” read an announcement from the White House. “Broadband internet is the new electricity.” 

Biden’s plan called for a $100 billion investment focused on “future proof” technology. It promised to promote competition, including by “lifting barriers that prevent municipally-owned or affiliated providers and rural electric co-ops from competing on an even playing field with private providers”—a clear reference to preempting state anti-muni laws—and “prioritiz[ing] support” for these networks. Finally, the plan promised to “reduce the cost of broadband internet service” while noting that “providing subsidies to cover the cost of overpriced internet service is not the right long-term solution,” hinting at a move toward rate regulation. “When I say ‘affordable,’ I mean it,” Biden declared in a speech in Pittsburgh the day the plan was released. Through these measures, Biden vowed to bring broadband to “every single American” at long last.  

For incumbent providers, Biden’s plan was nothing short of an existential threat. Big telecom stocks tumbled on the announcement. Providers and trade associations released a flurry of statements urging the new president to be reasonable. “A fiber first policy might inadvertently grow a rural mobility digital divide,” warned one. A “misguided” push to fund municipal networks would prevent continued private investment from “get[ting] the job done,” warned others. Michael Powell himself, the architect of internet deregulation under Bush and now the president of the National Cable & Telecommunications Association, cautioned against “discarding decades of successful policy.”  

Congress took up the task of converting Biden’s plan into legislation in the early summer of 2021. The broadband portion of the IIJA was hammered out by a bipartisan working group of senators from heavily rural states, with Susan Collins of Maine and Jean Shaheen of New Hampshire serving as lead Republican and Democratic negotiators. Behind the scenes, an epic lobbying campaign was underway. 

Across a long summer of negotiations, the key provisions of Biden’s plan were pared back one by one. The $100 billion figure dropped to match a Republican counteroffer of $65 billion, with only $42 billion allocated to the new subsidy program, now known as the BEAD program (the rest would support preexisting initiatives). Forty-two billion dollars was still a historic investment, sufficient to connect all unserved areas of the country. But it would leave almost nothing left over to fund the deployment of new networks in “underserved” areas with existing but inadequate service. This aligned with incumbents’ goal of avoiding competition to their existing infrastructure. Meanwhile, Biden’s mandate to fund future proof networks was cast aside when Congress set a speed threshold allowing fixed wireless networks, and Elon Musk’s Starlink, to qualify for subsidies. The proposals to preempt anti-muni laws, and to give municipalities priority in applying for subsidies, disappeared altogether. When the dust settled on negotiations in August, one disappointed consumer advocate called the BEAD program a “Shadow of Its Former Self.”  

A different Senate compromise was ultimately responsible for slowing the pace of BEAD’s implementation. In early stages of negotiations, the White House had proposed to run a centralized, nationwide subsidy program out of the federal government, according to several former Biden administration officials and congressional staffers with knowledge of negotiations. This proposal—and the other key elements of Biden’s original plan—was modeled on legislation first introduced by Representative James Clyburn in 2020, which would have tapped the Commerce Department to award funds to providers. But Senate negotiators instead opted for a federalist design. The final text of the infrastructure law ordered the Commerce Department—specifically, a bureau within the department called the National Telecommunications and Information Administration, or NTIA—to award grants to states, which would then design their own subsidy programs within guidelines set forth by the NTIA, and ultimately allocate the funds out of newly created “broadband offices.” 

With those provisions, the Senate overrode Biden’s streamlined vision, and created a whole new layer of bureaucracy: Rather than directly awarding subsidies to providers, the NTIA would have to manage 56 separate broadband programs (one in each state, plus several territories). Government sources told us that the initial impetus for implementing BEAD through the states came from Republicans and rural-state Democrats. It was a good outcome for providers, which maintained extensive lobbying operations in statehouses. It also provided a way for Republicans to defeat a White House proposal to force subsidized networks to provide a basic internet plan for low-income consumers costing $30 a month. This proposal was a top priority for the White House; one former senior White House official said that “at one point, we had [it] signed off and in text by Susan Collins, because we made the case over and over again.” But with the states in play, Collins was able to force a compromise. The final text of the infrastructure law allowed states to propose their own definitions of a “low-cost service option,” while explicitly prohibiting the NTIA from “regulation of rates.” 

Consumer groups also supported state involvement in BEAD, not wanting to repeat the hastily deployed, default-prone programs of the Obama and Trump years. “I mean, who wants to repeat that nonsense when you’re talking about $42 billion?” said Gigi Sohn, a cofounder of Public Knowledge and former Biden FCC nominee. 

The upshot, however, was that BEAD would be a much slower program to implement. No one was happier about this than telecom lobbyists, who were cheerfully gearing up for the coming state-by-state battle for funding. “In general,” reported the IT trade publication Light Reading, “the message from top telecom trade associations to their members is: Don’t worry. We’ve got this.” 

Right up front, BEAD’s federalist design added an extra step to the implementation process: the divvying up of a $42.5 billion pie between the states. A key piece of context about BEAD—one that has been missing from the discourse surrounding the program—is that this one step would account for nearly half of the total time between the enactment of the infrastructure law and the end of Biden’s term.  

To allocate funds fairly, the federal government needed to know how many underserved locations each state needed to connect. The problem was that no accurate and comprehensive data set existed. Thanks to more than a decade of industry lobbying, the FCC’s map of broadband availability counted coverage at the level of census blocks, based entirely on provider self-reported data—allowing incumbents to keep subsidized competitors at arm’s length. In early 2020, Congress finally intervened, enacting legislation to force the FCC to create a granular, address-level map, and implement a system for the public to challenge provider coverage claims. But Trump FCC Chairman Ajit Pai sat on his hands for the remainder of his term, claiming that the FCC could not start work on the map until Congress appropriated funds explicitly for that purpose. (The funds were appropriated in December, but Pai was by then looking ahead to a private-sector career—first in private equity and later as the president of a major wireless provider trade association.) By the time the infrastructure bill was being negotiated, the Biden FCC had just begun work on the new map, and staff predicted that it would not be ready until “probably next year.” 

If speed to deployment had been the top priority, Congress could have allowed the NTIA to make initial allocations based on a rough approximation of each state’s needs. Instead, the law was written to explicitly require the NTIA to wait for the new map. 

As with the decision to run BEAD through the states in the first place, the political dynamics behind this move were mixed, people with knowledge of the negotiations told us. All senators wanted to ensure that their own state received its fair share of what remained, even after all the watering-down in the Senate, a “once-in-a-generation” federal investment. But Republicans also worried about the possibility of any state receiving a disproportionately large budget. Their motivation for cutting BEAD down to $42.5 billion in the first place had been to allow the program to cover unserved locations, while minimizing leftover funds that might be used for competitive deployments. But if certain states received too much money, the calculation would be thrown off, opening the door for providers’ worst nightmare: the “overbuilding” of incumbent networks. Thus, basing the state-by-state allocation on the new map “became table stakes for Republican members,” a former senior Commerce Department official with knowledge of infrastructure law negotiations told us. “You’ve got to use the maps, you’ve got to serve all the unserved locations before you do anything else.” 

From November 2021 through September 2022, the new map was caught up in a series of legal challenges filed by a losing bidder for the contract to build the map’s underlying “fabric” of broadband-serviceable locations. When the “pre-product,” yet-to-be-challenged version of the map finally arrived in November 2022, it was riddled with errors. In many states, the pre-product map overstated broadband coverage—an expected outcome, since at this stage it was still based on provider-reported data. In other states, the map fabric mistakenly included so many sheds, barns, and other uninhabited structures that on balance it erred in the opposite direction, overstating the number of locations that needed to be served. Seeing the extent of the mess, senators of both parties called for the NTIA to push back its “aggressive” June 2023 allocation deadline, to allow for an extended challenge period. Future Republican Senate Majority Leader John Thune even cosponsored legislation to codify the extension, in hopes that funding would go “to areas that are truly unserved.” The NTIA declined to extend the deadline, and allocated the funds in late June. 

By then, a large chunk of the 14-step process Ezra Klein would later describe to Jon Stewart was already complete. States had applied for and received planning grants from the NTIA, used the planning grants to create new broadband offices, and taken care of preliminary planning tasks. The NTIA had released its guidelines to structure state program proposals. From the day allocations were made, the NTIA gave state offices exactly six months—until late December 2023—to submit initial proposals for their programs, and one year after that to finalize them with the NTIA. By November 2024 at the latest, states would be able to start getting money out the door. 

If you put abundance-aligned punditry on BEAD under a microscope, you’ll find that it shifts between multiple narratives to explain the slowness of the program. Ezra Klein has emphasized the Democratic fetish for pointless process. But others in his orbit peg the delays on a separate preoccupation of abundance liberals that Klein has dubbed “everything-bagel liberalism”: the Democratic penchant for loading up infrastructure projects with burdensome requirements related to labor, climate, and social justice goals. “One thing the abundance movement asks Democrats to do is to scrape the toppings off the ‘everything bagel,’” wrote Josh Barro in June. “Don’t assign climate goals to your rural broadband project, et cetera.” In May, Matt Yglesias published a guest essay by a former Biden political operative, who repeated the abundance conventional wisdom that “in an attempt to satisfy a narrow ideological faction,” the Biden administration had saddled BEAD with “rigid, impractical rules, sacrificing effective governance for ideological purity.”  

A close look at how the NTIA’s everything-bagel-y state requirements played out in the real world reveals that they were not major time sinks. While states had to document steps taken to ensure that minority- and women-owned businesses would be “recruited, used, and retained when possible,” complying with this was as simple as advertising that BEAD was happening through identity-based nonprofit organizations (the “Houston Hispanic Chamber of Commerce,” the “Women’s Business Center of Utah”). While states had to ensure that subsidized providers “use strong labor standards and protections,” the minimum requirement here was simply asking subsidy applicants to submit a written plan for ensuring compliance with labor and employment laws. In awarding grants, states had the option to prioritize applications from providers who committed to additional labor and wage provisions, but there was no federal requirement to do so. Finally, a requirement that states conduct “an assessment of climate threats” served to ensure that states prioritized funding technologies resilient against local weather patterns—it did not have anything to do with fighting climate change. “Resilience is important, right?” said Veneeth Iyengar, executive director of Louisiana’s ConnectLA broadband office. “Hurricane season is coming soon, and over 90 percent of our infrastructure is gonna be buried.” 

In reporting this story, the Monthly spoke with five leaders of state broadband offices, as well as outside experts who consulted on state proposals. While they expressed various frustrations with the NTIA’s management style—confusing or delayed guidance on technical requirements was a big one—all dismissed the idea that liberal requirements were a significant drag on completing their proposals. They emphasized that most of their time was spent figuring out how to divide unserved areas into parcels (“project areas”) that would make sense to providers as network building blocks, and how to design a scoring rubric for applications that would result in commitments to serve each parcel at a competitive price—in other words, the essential business of parlaying their budgets into universal broadband coverage. “If you want to know the biggest lift of designing the proposal, it was trying to figure out how to do the project areas,” said Eric Frederick, Michigan’s chief connectivity officer. Frederick explained that his office developed a “hexagonal grid system” rather than relying on oddly shaped census blocks, allowing providers to propose more efficient network designs. Compared to this technical challenge, writing a few paragraphs on how his office had advertised BEAD to diverse populations “was not a lift for us.” 

Sascha Meinrath, a Penn State telecommunications professor who consulted on several state proposals, concurred. “Doing an entire regional network, you know, diagramming and all that, is easily 90 percent of the time,” Meinrath said. “Having done many of these successfully, I can tell you that if that’s the case [that a state is struggling to comply with the everything-bagel requirements], they’re definitely doing it wrong.” 

Nor was compliance with everything-bagel requirements a barrier to states receiving final NTIA approval on their program designs. If any particular requirement stood out as a limiting factor here, it was the requirement for states to define a low-cost plan that subsidized networks would have to offer to poor consumers. (Lest this be dismissed as a nonessential social justice priority, it’s worth noting that affordability is a key driver of the digital divide. There are more Americans who forgo broadband because they cannot afford it than there are Americans who do not have any access at all.) 

Recall that during infrastructure law negotiations, a compromise between the White House and Senate Republicans had given states flexibility over what counted as “low cost.” Several states took this flexibility to an extreme, proposing in their initial program designs to leave the definition of low cost entirely up to providers. When the NTIA ordered these states to define low cost as an exact price or formula, several states—including South Carolina, Virginia, and Georgia—held firm, accusing the NTIA of illegal rate regulation.  

After a prolonged back-and-forth negotiation, another compromise was reached, with the NTIA allowing states to define the low-cost option within a range of acceptable minimum prices. But in the case of Virginia, the standoff lasted over a year, and inspired a Politico feature later cited by Vox as evidence of a generalized problem with BEAD bureaucracy, rather than a fight centered on affordability. Texas, which fought the NTIA over its low-cost proposal as well as requirements that implicitly restricted states’ ability to subsidize wireless providers, was the very last state to receive NTIA approval, right up against the November 2024 deadline. By that point, eight states were already in the process of committing funds to broadband projects; Louisiana had finished. 

For all the messiness of its implementation design, in early 2025 the BEAD program was shaping up to be a success. Three states had finished running their processes for awarding grants, and the results were promising: Provider participation had been robust, and in each state, more than 80 percent of awards were going toward fiber projects. Unserved areas, as determined by genuinely accurate maps, would finally receive future proof networks. 

Then, immediately following Donald Trump’s inauguration, the president signed an executive order that froze BEAD funds. The administration’s cynical rationale echoed the criticisms the abundance camp has made in earnest: “woke mandates” and “government red tape,” Commerce Secretary Howard Lutnick explained, had caused “delays and waste.” To rectify this, the Administration was delaying BEAD intentionally while it “revamp[ed]” the program. 

In June, the NTIA released updated program guidelines that shifted subsidies to Musk’s Starlink satellite service by forcing states to award grants to the lowest-cost providers that meet a minimal set of requirements. The change sets BEAD back to where it was in mid-2023. All states will need to submit, and have approved, updated program proposals; states that have already awarded subsidies to providers must rescind them. Analysts now predict that money won’t get out the door until 2026.  

While Starlink satellites have some advantages (if your fiber power goes out in an emergency you can still get a satellite signal as long as you have a home generator), they have greater disadvantages (slow signal during peak traffic, latency issues). Even worse, while fiber can last for decades with minimal upkeep, satellites need to be replaced every five to seven years, thus requiring billions of dollars more in ongoing federal subsidies. The new pro-Starlink guidelines give Trump leverage over Musk in their on-again, off-again feud. If the bulk of BEAD funds ultimately go through to Musk’s company, a program that was meant to close the digital divide for good will become just the latest in a series of shortsighted, wasteful investments.  

The digital divide should have been closed long ago. Indeed, it would never have opened in the first place had Washington dealt with broadband the way other rich democracies did, or the way FDR handled electricity back in the 1930s: essentially, by treating broadband as a public good. Instead, the advent of broadband coincided with a bipartisan swing toward deregulatory policymaking. Deregulation, in turn, empowered monopolies to capture the new broadband industry and use their economic and political clout to beat back nearly every attempt at sensible reform. That, not some liberal fetish with procedures and everything-bagel requirements, is why implementation of the BEAD program took so long and why, over decades, we’ve made so little progress in shrinking the digital divide despite the billions of taxpayer dollars we’ve thrown at the problem. 

Abundance liberals aren’t wrong that excessive rules and regulations pushed by progressive interest groups can, in some cases, slow down or increase the cost of building housing, infrastructure, and the like. But as we have seen, the BEAD program is not one of those cases. The slow and convoluted nature of BEAD is better understood as an example of what the Johns Hopkins University political scientist Steve Teles has called American “kludgeocracy.” A “kludge” is computer coding jargon meaning a “a clumsy but temporarily effective solution to a particular fault or problem.” U.S. policymakers, Teles argues, increasingly create kludgy government because of the tension between liberals who want to use federal power to address national problems and conservatives who want to siphon federal largess through private corporations and the states. The result is unnecessarily complicated federal programs that don’t work, that citizens can’t understand, and that “redistribute resources upward to the wealthy and the organized at the expense of the poorer and less organized.” 

It would be one thing if BEAD were the only Biden program abundance liberals have misunderstood and mischaracterized. But it’s not. For instance, they accused the administration of unwisely burdening its flagship legislation to reshore semiconductor manufacturing, the CHIPS Act, with everything-bagel requirements such as onsite daycare and training pathways for the disadvantaged. But as Joel Dodge reported in the Washington Monthly, those rules didn’t seem to have bothered the chip manufacturing firms, whose applications for funding outstripped the program’s budget by nearly two to one. Moreover, executives at the companies have said the legislation’s training and other requirements match their own strategies for opening up pipelines for hard-to-find talent. 

Time after time, Klein and other abundance thinkers blame liberal proceduralism for policy disasters that, on further inspection, turn out to be partly or entirely the result of corporate power. The United States lacks high-quality nationwide passenger rail service not just because of the soaring expense and snail-like pace of California’s high speed rail project—a special obsession of abundance pundits. The bigger reason is that hedge fund–controlled freight rail monopolies own nearly all existing U.S. rail infrastructure and refuse to give Amtrak trains reasonable right of way—and politicians in Washington are too afraid to take those corporations on. America lacks sufficient electricity transmission lines to carry renewable energy from rural areas where it’s produced to metro areas where it’s needed not just because of federal environmental laws, as abundance liberals argue. It’s also because investor-owned utilities use their control over the grid to block those new lines to protect the profits from their own fossil fuel–driven generation facilities. American health care is increasingly expensive not because of bottlenecks in the supply of doctors, as abundance liberals insist, but because the whole health care sector, from hospitals to pharmaceuticals to insurance, is now controlled by private monopolies.  

The story Ezra Klein told Jon Stewart, of the Biden administration deliberately bogging down its own broadband program in needless complexity, went viral in part because it fits an increasingly popular abundance liberal vision of what’s wrong with liberal governance and what Democrats need to do to win back power. The story told here, of how telecom monopolies are behind the failure of government to solve the digital divide, suggests a different strategy for Democrats, and has the advantage of being true. 

The post The Broadband Story Abundance Liberals Like Ezra Klein Got Wrong appeared first on Washington Monthly.

On April 9, President Donald Trump used his Sharpie to sign an executive order titled Maintaining Acceptable Water Pressure in Showerheads. But while Trump’s shower order was showered with headlines, the commander-in-chief signed another water-related directive of greater import during the same ceremony. Trump directed his administration to find ways to save American shipbuilding by rebuilding the nation’s nearly defunct maritime industry. This order may have been inadequate to the problem, but at least it addressed an issue of serious bipartisan concern.  

America relies on ocean shipping to transport nearly 80 percent of its international trade. Yet so few large U.S. shipyards remain that they produce only about 0.04 percent of the world’s oceangoing commercial vessels. Meanwhile, nearly 99 percent of our exports and imports are carried by foreign-owned shipping companies—almost all of them operating as cartels. Some of the dangers of this dependency became evident during the pandemic, when U.S. reliance on foreign shipping cartels led to deep supply chain disruptions while fueling inflation. Since then, the United States has continued to cede maritime dominance to China, which controls over half of global shipbuilding capacity and the world’s fourth-largest ocean carrier, COSCO Shipping.

The effects of shrinking commercial shipping and shipbuilding capacity on U.S. military logistics are equally frightening. The United States no longer has sufficient sailors or ships to move military supplies. Nearly 90 percent of our military equipment travels by ship, yet a 2019 test activation of sealift ships showed a little more than a third met their mission capability, due to their age and wear. Consequently, as the Washington Monthly previously reported, “it would require more than 40 days for a brigade to unload equipment, get organized, and move to the front.”  

This decline in military readiness is closely related to the deterioration of commercial shipbuilding, as the loss of domestic shipyards leaves the U.S. without the facilities and skilled workers to build and repair naval ships and support vessels efficiently.  

How did we get here? For decades, a bipartisan chorus has blamed the decline of the U.S. maritime sector on a 105-year-old law, the Jones Act. Invoked in various policy debates, the legislation is purportedly an egregious example of government overregulation. Colin Grabow, a policy analyst with the libertarian Cato Institute, for example, tweeted about the Jones Act nearly 1,000 times in just a three-month span in 2020, blaming it for a slew of problems ranging from auto traffic congestion in the Northeast to high gas prices. Senator Mike Lee, the Utah Republican, has blasted the act, saying, “What could be more fitting than a dumpster fire full of manure and flames to represent the Jones Act?” 

And it’s not only self-styled market libertarians who have attempted to turn the Jones Act into a symbol of industrial policy gone amok. Many who hold themselves out as “Abundance Liberals” have criticized it. Matthew Yglesias, for example, published a broadside against the act during his tenure at Vox, calling it “protectionism and exploitation at its worst.” Derek Thompson, the co-author of Abundance, has also voiced his opposition to the legislation. There is no greater example of the received wisdom of the neo-liberal consensus than its denunciations of the Jones Act.  

What is supposedly so bad about it? Most of its original provisions, it turns out, have long been watered down or repealed, along with the once extensive regulation that governed the markets for shipping and shipbuilding. But a vestigial Jones Act still requires all vessels transporting cargo between two American ports to be U.S.-flagged, U.S.-built, U.S.-owned, and mostly U.S.-crewed. These regulations, critics charge, have destroyed America’s maritime sector by protecting domestic shipbuilders and carriers from foreign competition, thereby causing them to become inefficient and uncompetitive.  

With the benefit of hindsight, however, it’s now easy to show that it was not excessive regulation, but excessive deregulation combined with a retreat from public investment that destroyed America’s maritime sector, leaving us dangerously exposed to mounting military and economic threats.  

For decades before the outbreak of World War I, countries such as Great Britain subsidized their ship construction and operations, while the United States relied on laissez-faire. This caused U.S. shipbuilders to lose the technological edge they had enjoyed during the clipper ship era and hemorrhage market share to foreign competitors. By the turn of the century, U.S.-built vessels carried a mere eight percent of the country’s international trade. U.S.-owned shipping lines also went into steep decline.  

The United States was thus left highly vulnerable once the Great War began. In 1914, Great Britain, France, and Italy diverted most of their shipping capacity to support their own war effort. The United States did not have enough tonnage to replace the withdrawn tonnage; Germany, Austria, France, and Russia’s withdrawals alone were close to seven times the tonnage of the entire international-trading U.S. fleet in 1914. This stranded U.S. shippers. The carriers that remained in the trade inflated prices significantly, increasing the cost to ship goods such as cotton by 17 times. 

During the war, the U.S. government took drastic measures to increase the country’s shipbuilding capacity. For example, it requisitioned any German ships that happened to be in U.S. harbors. More significantly, Congress also passed the Shipping Act of 1916, which tasked the U.S. Shipping Board with regulating ocean shipping as a public utility and created the Emergency Fleet Corporation to create a massive shipbuilding and mobilization program.  

The results were impressive. Thanks to massive direct government investment, the U.S. broke free of years of technological stagnation in shipbuilding by creating standardized, replicable designs for steel vessels that used oil instead of coal to generate more cargo space and reduce dependence on British coaling stations. The U.S. also developed the pre-fabrication techniques that allowed large cargo ships to be built in a matter of days. As a result of these government interventions, the U.S. built more than 2,300 vessels for the war effort.  

After the war, lawmakers wanted to ensure that the United States would never again become so dangerously dependent on foreign shipping. Foreign governments, meanwhile, learned the same lesson from World War I and could, therefore, be counted on to regulate and subsidize their own marine sectors directly.  

In that context, Congress passed the Jones Act in 1920, a 37-section law that, among other provisions, codified seamen’s rights, authorized low-cost shipping loans, and granted preferential railroad rates to cargo carried by American ships. Critically, it also tasked the Shipping Board with identifying steamship routes critical to U.S. national interests. It also tasked the Board with selling cargo vessels built during the war to private carriers to operate on those routes. In cases where private carriers were unwilling to operate vessels on those routes, the Board was authorized to run the line itself. To ensure that subsidized foreign carriers did not drive U.S.-flag carriers out of the domestic fleet, Section 27 of the law reinstated so-called cabotage restrictions. Initially put in place by the 1817 Navigation Act (and briefly waived during World War I), these required ships moving cargo between U.S. points to be U.S.-built, U.S.-flagged, U.S.-owned, and U.S.-crewed. 

Combined with the rate regulation created by the Shipping Act of 1916 and later, the Merchant Marine Act of 1936, the systems-based approach of the Jones Act successfully built up the U.S. maritime sector into world dominance. The Shipping Board established, operated, and sold multiple ocean liner routes in international trade. By the end of the Second World War, the United States controlled 60 percent of the world’s tonnage and transported 63 percent of the world’s goods. It was the largest fleet in world history. 

Over the years, however, critical parts of the Jones Act and other related maritime policies have been steadily chipped away or undermined. In 1946, for example, Congress passed the Merchant Ship Sales Act, which sold vessels that the United States constructed at below-market rates to allies and former enemies, significantly reducing demand at U.S. shipyards, leading to many mergers and closures. The United States also encouraged ship owners to pursue “flags of convenience,” where they could dodge U.S. labor and tax laws by registering their vessels in countries such as Panama and Liberia, shrinking the U.S. international fleet.  

But the real death knell came during Ronald Reagan’s administration, when the U.S. government stopped providing subsidies for constructing and operating U.S.-flagged vessels and deregulated international ocean shipping markets. This change in policy, along with an abandonment of antitrust enforcement, led to mass consolidation and a severe reduction of shipping and shipbuilding capacity, as orders for vessels shifted to the heavily subsidized shipyards of East Asia. U.S. ocean carriers were also swallowed up by foreign competitors due to neoliberal policies, further shrinking U.S. shipping capacity. 

Unlike what critics contend, it was not the vestigial cabotage restrictions of the Jones Act that shrank the U.S. merchant fleet. Rather, it’s abandoning its core provisions, along with other adjacent polices, in favor of a deregulatory, “free-market” approach. To be sure, American shipyards are less productive, have higher capital costs, and are less efficient than their foreign counterparts, but that is the result of abandoning market regulation and public investment. Much of the innovation in shipbuilding, from the transition from coal to oil to the use of welding over riveting to the growth of containerization, resulted from government design and execution.  

Fully repealing the Jones Act would likely result in outsourcing any last vestiges of U.S. shipping and shipbuilding capacity rather than incentivizing competition and increasing shipping. Take, for example, India, which liberalized cabotage restrictions in 2018 to grow its shipping industry. Its Directorate General of Shipping recently noted that after liberalization, “Indian container shipping entered a phase of stagnation and decline.” In response, the Indian government recently proposed returning to more restrictive cabotage regulations to arrest the decline.  

Today’s vestigial Jones Act does create fundamental inequities for a few places, most notably Puerto Rico. Because the Jones Act’s cabotage restrictions force them to rely on high-priced U.S. ships and crews to trade with the mainland, the people of Puerto Rico effectively cross-subsidize the cost of maintaining what remains of our merchant marine and domestic shipbuilding industry. But the solution to that inequity is not to repeal what remains of the Jones Act, but rather to expand it so that it once again achieves a vital national interest and shares the burden of achieving that end equitably to save American shipbuilding.  

Legislation should require an increasing percentage of all U.S. imports and exports to travel on U.S.-built, U.S.-flagged vessels. These policies should be paired with smartly targeted tariffs and subsidies to counter China’s robust maritime industrial policy. Capacity at the Maritime Administration should be drastically increased to develop new, standardized ship designs powered by green technologies. Government shipyards should be created so the United States can start building at scale. Antitrust enforcement should prevent the consolidation of shipbuilding capacity, and the defense industrial base more broadly, in the hands of a few corporations.  

Rebuilding America’s maritime strength will not happen by accident. It requires bold, coordinated policy that learns from history, reinvests in innovation, and recognizes that maritime strength cannot be achieved through laissez-faire. If the United States embarks on a dedicated effort to establish a suite of policies that combines public investment with regulation of the shipping and shipbuilding sectors, it would be well on the path to achieving true maritime abundance. 

The post How to Fix Our Dangerous Dependency on Foreign Ships and Save American Shipbuilding appeared first on Washington Monthly.

All RF Buche wants is a fair shake. For a few months earlier this year, it seemed he might get one. 

Buche runs a family-owned grocery chain in rural South Dakota that’s been in business since 1905. In Buche’s 25 years at the helm of Buche Foods, he rarely, if ever, got a fair deal from big food and drink manufacturers, many of whom are the same conglomerates that sell their goods to the behemoth chain stores. 

Buche sells a lot of soda, he told Senator Chris Murphy during a recent live-streamed conversation. “If I compare my Pepsi sales to Dollar General’s Pepsi sales in any given town, I know I sell more,” he says. But Buche can’t get the wholesale price that chains like Walmart and the dollar stores pay. He says he buys his 12 packs for $8.52; meanwhile, a Dollar General near one of his stores can sell the same 12-pack to customers for $5.

This dynamic is not unique to South Dakota. Buche says grocers face the same battle across the Midwest. “What’s going to happen to these small towns when the local grocers dry up?” he asked Murphy. For Buche’s location on the Pine Ridge Indian Reservation in southwest South Dakota, where poverty is so extreme that most people don’t own cars and the next-nearest grocery store is nearly 40 miles away, the answer to his question is particularly crucial. 

The Joe Biden-era Federal Trade Commission addressed Buche’s problem in its final months. A landmark antitrust case against PepsiCo accused the beverage giant of illegally offering steep discounts to Walmart—its largest customer—while overcharging smaller outfits like Buche’s for Pepsi, Doritos, Cracker Jack, and the Purchase, New York based company’s dozens of other brands. The agency cited the Robinson-Patman Act, a New Deal-era law banning price discrimination.

It was the first Robinson-Patman enforcement in more than 20 years, and a signal that the FTC, under its then-chair, Lina Khan, intended to dust off an old but once-effective tool its toolbox of statutes used to ensure fair markets for smaller businesses.

Then, last month, the PepsiCo case ended just as quickly as it began. 

In May, the FTC withdrew the lawsuit against PepsiCo, a global company with 319,000 employees and a market capitalization of $177.5 billion, ending its most substantial and potentially impactful price discrimination prosecution in decades. The agency’s new chair, Republican commissioner Andrew Ferguson, who had opposed the lawsuit before he ascended to Khan’s post claimed that the case lacked evidence. He and the other GOP commissioners, Mark Meador and Melissa Holyoak, pulled the lawsuit from court. 

Ferguson, the former solicitor general of Virginia and a GOP staffer on Capitol Hill with extensive corporate experience, claimed that, despite a two-year investigation, the FTC’s evidence wouldn’t survive in court. He called the case “rushed” and that it was based on “little more than a hunch that Pepsi violated the law.” 

Proving a Robinson-Patman violation should be straightforward, but much of the FTC’s initial lawsuit was redacted, including how Walmart purportedly benefited and perhaps directed PepsiCo’s price discrimination scheme. But the FTC killed the lawsuit just days before the court could have made the full, unredacted complaint public. Unless someone sues and wins access to the lawsuit, we’ll never know the full scope of the agency’s evidence. 

Typically, the public would also have heard counterarguments from minority-party commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, the Democrats on the FTC. But Trump fired both, perhaps unlawfully, in March. 

Congress passed the Robinson-Patman Act in the 1930s to prevent precisely this kind of corporate practice, which had become common alongside the rise of supermarket chains like Kroger and A&P. While Robinson Patman does not outlaw all discounts—for example, discounts for buying in bulk rather than less-than-truckload volumes are still permitted—it does ban suppliers from offering different prices for different customers based solely on their relative market power.

The Federal Trade Commission used the law for decades, from its passage through the 1970s, to ensure fair competition in the retail industry. It worked. Big, often unionized chain supermarkets operated alongside smaller grocers in towns everywhere. Workers made a decent living, while opening and running a store often provided a pathway to the middle class, especially for immigrant families. 

Then came the Ronald Reagan revolution.

A generation of academics, policymakers, and enforcers came to believe bigness would best deliver deals to shoppers—even if cheaper prices were largely the result of their power to squeeze their suppliers and workers, not the result of superior productivity.  The intellectual godfather of this movement, the late jurist Robert Bork, had dubbed it “the antitrust paradox,” and the “consumer welfare standard” is its progeny, a belief that if consumers are afforded lower prices, unfair competition is unimportant. Bork infamously characterized Robinson Patman Act as “the Typhoid Mary of Antitrust.” 

The retail industry transformed when the Reagan-era FTC stopped enforcing Robinson-Patman, essentially lifting the ban on predatory price discrimination enshrined in the law. Above all others, Walmart understood how unshackled its power truly was and began squeezing its suppliers. The Bentonville, Arkansas-based company took root everywhere, using its power to squeeze its suppliers. (It now has a market cap of $716 billion.) When those suppliers hiked prices to smaller grocers, many independent stores were forced to shutter, hollowing out main streets and often cutting off communities’ access to fresh food. 

Under constant pressure from their largest customer, those suppliers merged, expanding already-powerful consumer goods conglomerates like Unilever, ConAgra, and PepsiCo. 

PepsiCo has existed since the 1960s, when it bought snack company Frito-Lay, but since the late 1990s, PepsiCo has spent billions acquiring or buying a major stake in dozens of brands, from drinks companies Gatorade, Tropicana (which it eventually sold), Rockstar, Celsius and, this March, upstart soda maker Poppi; to food brands Quaker Oats, Sabra and others. Former PepsiCo chief executive Indra Nooyi once told investors about a face-to-face meeting with her Walmart counterpart. “I don’t think the Wal-Mart CEO is going to spend time with me if PepsiCo is not so big and so important,” she said.

ConAgra’s growth into a vertically-integrated food titan happened in lockstep with Walmart’s rise; by the early 1990s, the conglomerate was averaging 35 acquisitions or other corporate deals every year. “That’s just the way of the world,” Gary Rodkin, ConAgra’s former chief executive, told Reuters when discussing consolidation in the food industry. “ The big get bigger.” Even long-established conglomerates, like 150 year-old Procter & Gamble, made blockbuster deals in the 1990s and 2000s. When P&G paid a staggering $56 billion to buy leading razor maker Gillette in 2005, the Associated Press said the deal would ensure P&G “would have even greater clout against mass-market retailers like Wal-Mart Stores Inc., which have been pressuring consumer product suppliers to keep costs low.”

As consumer goods companies began merging to keep up with Walmart, other grocers struck their own deals to match might with their suppliers. A merger wave in the mid-to-late-1990s rapidly consolidated the industry. Supermarket chain Fred Meyer, for example, bought out smaller rivals Smith’s, Ralphs, and Quality Food Centers before finally merging with Kroger. Safeway, meanwhile, spent billions buying Vons, Dominick’s, and Randall’s before being absorbed into the growing Albertsons empire. At mid-century, when Robison-Patman enforcement was active, the combined market share of the four largest grocers remained below a combined 25 percent. Today, they control more than half of the market. Sales at independent grocers have likewise plummeted, from more than 50 percent of all food sales in the early 1980s to just 22 percent in 2017. 

The loss of small town and urban independent grocers meant chain supermarkets could also leave those communities. With no local store to compete with, Walmart and the other big chains shuttered many of their smaller, local stores, focusing instead on the biggest supercenters in regional hubs nationwide. Many folks in small towns today must drive miles to reach the nearest full-service supermarket. Food deserts—a post-Robinson Patman retail economy invention—spread to epidemic levels nationwide. The damage price discrimination has inflicted has been particularly acute in rural America, where local grocers have shuttered en masse and, today, a full third of low-income people outside of major cities live in food deserts (which, for rural areas, is when a certain number and/or percent of a population lives without a grocery store within 10 miles, according to the USDA). 

Small business and consumer advocates say the agency’s withdrawal from the Pepsi case signals to the corporate giants—Walmart, Amazon, Kroger, and their massive suppliers—that they can resume corporate practices favoring bigger businesses. Stacy Mitchell, the co-director of the Institute for Local Self-Reliance, where I work, called the decision “a fundamental abandonment of the commission’s responsibility to ensure a level playing field for small businesses.” Analysts at law firm Faegre Drinker Biddle & Reath said that while FTC’s decision did not mean the end of all Robinson Patman enforcement, it “marks a sharp redirection from Biden-era enforcement tactics.”

When Covid struck in 2020, the true power of today’s ultra-concentrated retail food industry became too much to ignore. Supply issues initially sent prices higher, but those prices never came back down even after supply chains were back up to speed. Corporate bosses bragged to investors that shoppers have no choice but to pay higher prices. Their profits soared, including at PepsiCo, which hiked prices by double digits seven quarters in a row while raking in billions more than before the pandemic. A months-long FTC investigation found that retailers like Walmart and Kroger put prices up far above their total costs and kept them there—a brazen display of their power and a recognition of how little competition they face. 

Neither the FTC’s deep retail market investigation nor its subsequent investigation of Pepsi’s business stopped Chair Ferguson from killing the PepsiCo lawsuit. This sent a message to retailers and suppliers—along with every small grocer struggling to survive—that corporate bullying is back. 

Is the FTC’s decision to kill the PepsiCo lawsuit a sign that it abandoned Robinson Patman again? Maybe — but the agency’s other Robinson Patman lawsuit against powerful wine and spirits distributor Southern Glazer’s continues, at least for now. Instead, dropping the Pepsi suit feels like a political decision rather than a legal one. Did PepsiCo or aligned trade groups push Trump to kill the lawsuit? Or did Walmart, whose name was about to be mentioned dozens of times in the Pepsi lawsuit, push someone in the administration to quash the case before it was made fully public? 

For local grocers like Buche, why the FTC pulled the lawsuit matters less than whether the agency has again rejected competitive markets as a goal of the antitrust laws and re-embraced Borkian economics. The fate of an open economy, particularly in small towns and rural communities hit hardest by the past half-century of corporate concentration, rests on the answer. 

The post Has Trump’s FTC Abandoned Fair Markets? appeared first on Washington Monthly.

Republicans and Democrats now generally agree that we must make more stuff in America but no consensus exists about how to do that. Under President Joe Biden, the strategy was to offer subsidies to key industries, like microchip manufacturers, and then use targeted tariffs to protect those efforts. Under President Donald Trump, the plan apparently is to impose, or threaten to impose, high tariffs on a shifting set of nations and products while threatening to cut Biden’s targeted financial incentives and replace them with across-the-board tax cuts, mostly for the well-to-do.

Considering how central the goal of reindustrialization is to both parties, it’s noteworthy that the range of policy levers being debated is by and large limited to just three: tariffs, the tax code, and direct public investment. Yet while these can be useful tools, they are hardly the only ones, or even the most powerful. Indeed, historically, fostering America’s industrial strength depended far more on deploying regulations to steer market behavior. 

When Americans hear the word regulation they tend to think of the environmental and consumer protection measures put in place by federal agencies mostly since the 1970s. But for a century before that, a huge body of regulation of a different kind steered the course of the nation’s economic development. It was regulation that set market rules of competition. Which kinds of banks could operate where and how much interest could they charge or pay? What rates could railroads or airlines set for transporting various types of cargo or passengers over different distances? How much profit could investors in electric utilities or telecommunications companies make, and what customers were they required to serve and at what prices? Working with industry, federal lawmakers and regulators hashed out rules that determined who could enter and exit different key sectors, what terms of service they could impose, and with whom they could merge.

During America’s century-long rise as a capitalist superpower, such market rules fit together to form an increasingly sophisticated and pervasive system that the political scientist and economic historian Gerald Berk has dubbed “regulated competition.” It was a uniquely American system for governing industrial capitalism, and it delivered broad prosperity for decades. It did so first by catalyzing a virtuous cycle of innovation. Firms in key industry sectors like transportation and electricity were guaranteed modest but predictable profits that allowed them to attract more capital, and to take greater risks, than they otherwise could. In exchange, companies were obliged to serve all market segments, rather than cherry-pick the most profitable. This enabled smaller cities, towns, and rural areas to compete on a more equal footing with large cities on the coasts, thus spreading economic development and wealth creation more equitably across the country while also serving as a check on the growth of financiers and oligarchy. But then, beginning in the 1970s, policy makers from both parties largely dismantled this well-calibrated system of political economy in a rush to “deregulate” the economy and unleash “the market.” 

An especially vivid example of how America’s system of regulated competition once worked is aviation. This essay tells the story of how careful federal marketplace rules fostered the growth of air travel, domestic airplane manufacturing, and commerce in smaller cities across America—and how the demise of that system eroded all three. The same story could be told of other crucial industries, from finance to retail to shipbuilding. Washington’s abandonment of regulated competition explains much of what’s gone wrong with the American economy over the past 40 years, and its restoration could be the key to the country’s industrial revival. 

To understand how smart market regulation spurred innovation and equitable growth in aviation it’s useful to begin with the way the country dealt with the previous big revolution in transportation technology. Throughout the late 19th and early 20th centuries, policy makers had wrestled with what had come to be known as “the railroad problem,” a seemingly intractable dilemma involving a vicious mix of monopoly and ruinous competition. Early railroads held local monopolies in many places, which they used to extract wealth from the local community and retard its economic development. Yet early railroads also often faced cutthroat competition in many other markets due to duplicative lines and other forms of excess capacity. As a result, railroad owners repeatedly engaged in self-destructive rate wars, often moving freight and passengers at below cost in a desperate attempt to help defray their high fixed costs. Largely because of the effects of these price wars, by the end of the 1870s, railroads accounting for more than 30 percent of domestic mileage had failed or fallen into court-ordered receivership.

Seeking to redress the railroad problem, Congress passed the Interstate Commerce Act in 1887. The resulting Interstate Commerce Commission attacked the twin problems of monopoly and ruinous competition primarily through rate regulation. The ICC mandated that railroads publicly post their rates and that they charge all passengers and shippers roughly the same price per mile for the same level or category of service. This eliminated price discrimination based on sheer market power, thereby reducing regional inequalities and market distortions caused by local railroad monopolies. The ICC also used rate regulation to guard against ruinous competition by setting rates high enough to enable railroads to attract the capital they needed to maintain their infrastructure and finance a wave of new technologies, including much larger, more powerful locomotives and much safer rolling stock made of steel rather than wood. 

Starting in 1916, Congress extended this same basic regulatory framework to maritime transportation by passing the Shipping Act. It created a new agency, the U.S. Shipping Board, which was charged with ensuring that all ocean carriers publicly posted their prices and offered all “similarly situated” shippers roughly equal terms of service. To limit destructive price wars and to advance other public purposes, the Shipping Act and subsequent legislation also limited access to many domestic ports to U.S. flagged ships. Under this regime of regulated competition, the industry was able to finance a dramatic transition from wind-powered to steam-powered ships. 

In 1935, Congress extended the same regulatory model to interstate trucks and buses by giving the ICC jurisdiction over these modes. In this instance the twin challenge of limiting ruinous competition while avoiding monopoly was accomplished through a combination of rate regulation and high regulatory barriers to entry. For example, by limiting the number of commercial interstate truck licenses and the markets that individual truckers could serve, the ICC prevented ruinous competition, thereby ensuring that truckers could earn a living wage, trucking companies could earn their cost of capital, and truck manufacturers could finance the cost of innovation.  

So it is hardly surprising that the United States would wind up applying the same principles to aviation. The story begins in the decade following Charles Lindbergh’s celebrated 1927 solo flight across the Atlantic. During these years, rapid advances in aviation technology promised a revolutionary new age of public air transport if only a viable airline business model could be found.

In 1933, Boeing introduced its model 247, a monoplane capable of hauling 10 passengers at 155 miles per hour. Soon came a series of other revolutionary passenger planes, including the Lockheed Electra and the iconic Douglas DC-3, which could carry 21 passengers at a cruising speed of 180 miles per hour for as far as 1,200 miles. Thanks to these technological advances, by 1935 air traffic had increased to an annual rate of nearly 200 times what it had been in 1926.  

Yet the airline industry was in a state of near economic collapse. The primary reason was the destructive competition that existed among carriers. Starting a new airline required no regulatory approval, and the financial barriers to entry did not extend much beyond the cost of buying a plane and hiring a small crew. As more and more “fly-by-night” carriers flooded into the market, margins became slim or nonexistent. This lack of profitability—worsened, of course, by the effects of the Great Depression—left the industry unable to attract the capital it needed to take full advantage of new technology or even maintain existing planes. By 1938, an estimated 50 percent of all capital invested in commercial aviation had disappeared and the number of airlines offering scheduled service had shrunk from a hundred to less than a score. 

Carriers that survived this era did so mostly by winning lucrative, exclusive federal contracts to haul air mail along specific routes. But the process for the letting of such contracts generated repeated charges of widespread corruption involving collusion between the postmaster general and favored carriers. Responding to the scandals, President Franklin D. Roosevelt canceled all air mail contracts. Confronted with this darkening atmosphere, Roosevelt and Congress began debating how to create a regulatory structure that would enable the aviation industry to at last become economically viable while also serving the public interest. The result was the Civil Aeronautics Act of 1938, which laid out a system for regulated competition in aviation markets that would last into the jet age and beyond. 

For the architects of the Civil Aeronautics Act, a key goal was to stem the deleterious effects of unrestrained airline competition. “We are interested,” noted Senator and future President Harry Truman, “… in seeing that ‘fly-by-night’ operations do not start up and bring down prices and create chaos.”

A House committee report on the proposed legislation charged that excessive airline competition was undermining the government’s previous investments in aviation: “The government cannot allow unrestrained competition by unregulated air carriers to capitalize on and jeopardize the investment which the government has made during the last 10 years in their transport industry through the mail service.” West Virginia Democratic Representative Jennings Randolph went further, noting, “Air transport today is the only mode of transportation and communication for which there exists no comprehensive and permanent system of Federal economic regulation.” He concluded that “unbridled and unregulated competition is a public menace,” citing as examples “rate war[s], cutthroat devices, and destructive and wasteful practices.”

In the eyes of regulation advocates, these and other market failures were unlikely to go away on their own as the industry matured. Instead, they were thought to be built into the cost structure of flying. For example, when an airline operates a plane, it faces fixed costs that must be paid regardless of how many passengers are on board. At the same time, the cost of adding one more passenger to a flight is marginal. This means that an airline can be tempted to sell seats at below the average fare needed to meet expenses if that’s what it takes to fill the plane. Even if an airline can only fill seats by offering some or all passengers money-losing discounts, this practice will at least partially cover the high fixed cost of operating the plane, thereby allowing the airline to lose less money on the flight than it otherwise would. 

To overcome these and other structural sources of destructive fare wars and inequitable pricing policies, Congress settled first on a system of entry control. In the future, to start a new airline or offer service on any route, carriers would need to apply to a new regulatory agency called the Civil Aeronautics Board (CAB) for a certificate of “public convenience and necessity.” 

The meaning of this phrase allowed for differing interpretations. As the aviation icon Amelia Earhart testified before a House committee, “I defy anyone at the present period to define convenience or necessity as applied to aviation. I feel that mere study cannot determine that matter, as we have no background yet of sufficient experimentation to afford adequate interpretation.” 

In practice, however, the standard became clearer. Once the CAB was up and running it grandfathered in most incumbent carriers by granting them regulatory authority to continue operating on their existing routes. It then used a two-step process to control new entry and routes. First it would determine how many carriers a given market could profitably support. If it found sufficient demand to support a new carrier, it would then choose among competing applicants based on their own financial viability and ability to serve the public’s “convenience and necessity.” 

The Civil Aeronautics Act also required CAB regulators to avoid facilitating monopoly power even as they constrained competition. In response to this mandate, the CAB tended to favor smaller over larger carriers in issuing operating authorities. In some cases, the CAB would enhance the economic viability of smaller carriers by allowing them to extend their limited route structures to serve particularly lucrative market segments. To ensure air service to sparsely populated destinations, the CAB sometimes required incumbent carriers to provide the money-losing service using returns on higher-margin routes. This was consistent with Congress’s mandate that the CAB ensure “any citizen of the United States a public right of freedom of transit in air commerce through the navigable air space of the United States.”

The Civil Aeronautics Act also empowered the CAB to mitigate the effects of concentrated market power by using two other policy levers. First, it gave the CAB statutory authority to block any airline mergers or acquisitions that it found to be not in the public interest. More significantly, the act also gave the CAB authority over what rates carriers could charge and mandated that they be fair and reasonable. 

In setting rates, the CAB began by compiling industry cost and revenue figures. Then it calculated what the industry’s cost and revenue would have been if the average flight had been 55 percent full. Fares were then set at a level no higher than what the CAB determined would be sufficient to generate this “revenue requirement” plus a projected 12 percent return on investment for airline stockholders.

An important additional provision of the Civil Aeronautics Act required that CAB rate setting promote “adequate, economical, and efficient service by air carriers at reasonable charges, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices.” Mindful of the mandate to prevent “unjust discriminations,” the CAB ensured that the per mile cost of flying was roughly the same on all routes, regardless of distance, destination, or volume of demand. Similarly, the CAB required that all passengers on any plane pay identical fares for the same class of service, thus denying airlines the ability to engage in discriminatory practices commonly used by airlines today, such as charging some passengers more than others depending on when they bought their ticket or on what their destination is when they change planes. Finally, to guard against price wars that might threaten the industry’s overall financial viability, the CAB also generally prohibited any single carrier on a route from lowering fares unless all its competitors did as well. 

During the years that the U.S. was engaged in fighting World War II, civilian airline travel virtually vanished. Yet by 1955, more Americans were already traveling by air than by train, and airliners had replaced ocean liners as the dominant mode of transatlantic travel. 

A huge factor behind the explosive growth in air travel in this era was continuing dramatic advancement in aviation technology, much of it developed by the military and defense contractors during the war years. Aircraft manufacturers introduced a succession of new, increasingly larger, safer, and more efficient four-engine airliners, including the Douglas DC-4, Lockheed’s Constellation, the Douglas DC-6, the Douglas DC-7, and the Boeing 377 Stratocruiser. Starting in the late 1950s, these were followed by a series of still-faster jets offering still-greater capacity and lower operating costs per passenger. By 1968, a single DC-8 could produce more annual seat miles than the entire industry did 30 years before. By 1970, the first “jumbo jet,” the Boeing 747, went into service. 

This technological revolution did not occur, however, independent of the political economy governing aviation during this period. The other huge, and often overlooked, factor was the system of regulated competition overseen by the CAB. Because of CAB market regulation, airlines escaped the self-destructive rate wars and negative margins that had previously prevailed and instead earned consistent, modest rates of return throughout the next three decades. This in turn allowed the aviation sector to attract the capital it needed to develop and deploy rapidly improving but highly expensive new generations of aircraft. 

In short, technology and regulation combined to create a virtuous cycle. Airlines under CAB regulation still faced considerable competition with each other and so were incentivized to invest in faster, safer planes. But because of the carefully balanced limits the CAB placed on competition, aircraft manufacturers in turn understood that if they developed new and better planes, airlines would have both the incentive to buy them and enough capital to afford them. CAB regulation led to airlines investing heavily in more and better planes, and as they did so, the industry grew and became more efficient, allowing more and more Americans to enjoy the benefits of air travel. 

Largely because of this virtuous cycle, the cost of flying fell dramatically under CAB regulation while the safety, speed, and quality of air travel improved even more. Real revenue per passenger mile declined under CAB regulation by an average of 1.8 percent per year between 1946 and 1978. Reflecting this trend line, the inflation-adjusted cost of a typical flight between Los Angeles and Boston fell from $4,439 in 1941 to $915 in 1978, a 79 percent decrease, even as the new generation of jets made the travel time much shorter and the journey much safer. Because of the falling cost and improving value of air travel, by 1977, nearly two-thirds of all Americans over 18 had taken a trip on a plane, up from just one-third in 1962. 

The regulated competition provided by the CAB also allowed the industry to earn enough surplus to support a comparatively well-paid, highly trained, unionized workforce during this era. Another benefit was the promotion of regional equality and more balanced economic development. By requiring high-volume, high-margin routes to effectively cross-subsidize low-volume, low-margin routes, the CAB enabled a larger airline network, thereby creating positive network effects that included allowing businesses in smaller and heartland cities to better compete in larger markets. 

This was key to the flourishing of smaller cities in this era and to the increase in regional equality. The equalization of railroad rates had already allowed heartland cities like St. Louis to compete on equal terms as manufacturing and distribution centers during the first half of the 20th century. By extending the same principle to airlines, heartland cities also became better able to compete nationally and internationally in key service industries. In the early jet age, for example, St. Louis’s abundant air service allowed the city to become a major hub for advertising and public relations firms serving national and global brands, as well as a frequent host of lucrative trade conventions. In no small measure because of their freedom from price discrimination in the transportation sector, heartland cities converged with major money-center coastal cities like New York and Boston in their per capita income during this era, while overall regional inequality fell sharply. 

In summary, under the CAB’s watch, a high-risk venture with vast national economic potential had become by the 1970s a secure and stable backbone of American civic and commercial life. But the regulatory regime had its flaws, and a growing chorus of well-placed critics.

Throughout its existence, the CAB faced criticism from different quarters. An early complaint was that it set airfares too high because it used cost estimates based on flights being little more than half full on average. No doubt the CAB did not always get pricing right. But part of the rationale for this formula was to ensure adequate revenue not just during the top of the business cycle but also during economic downturns. Another consideration was that encouraging higher load factors would erode the quality and reliability of the flying experience. Not only would planes have been more crowded, but there also would have been fewer seats available to rebook passengers whose flights were canceled due to bad weather or mechanical problems. Today’s frequently overbooked planes and lack of capacity to deal with stranded passengers are just two of many ways in which the quality of air travel has declined since the days of the CAB. 

Another line of criticism charged that the CAB, particularly over time, erred in giving incumbent carriers too much protection from start-ups and from each other. Through the mid-1970s, the CAB refused to allow a single new trunkline carrier to enter the business, leading to charges that it had created a protected oligopoly. 

Somewhat inconsistently, other critics charged that airlines were competing too much with each other over the wrong things. The CAB set rates in ways that virtually eliminated price competition. Yet airlines still had to worry about losing passengers to other carriers as well as to other modes like autos or trains for short or intermediate-length trips. So they wound up competing over quality instead of price. This included competition over service standards like on-time performance, safety, leg room, baggage handling, and frequent, convenient scheduling, but they also included, critics charged, competition over “frills,” like inflight meals served on chinaware by comely stewardesses.

Another key argument leveled against the CAB was that it kept airfares unnecessarily high by underestimating the elasticity of demand for air travel. Led by the academic economist turned policy entrepreneur Alfred Kahn, these critics argued that if airlines were allowed to reduce fares to marginal costs and offer deep discounts to price-sensitive consumers, this would fill seats that otherwise would go empty. And with more passengers per plane available to share the fixed cost of flying, Kahn argued, the average cost for everyone could be allowed to fall without endangering airline solvency.

Informing the growing attacks on the CAB was the growing prestige of so-called neoclassical economics. More and more academic economists insisted on the power of unregulated markets to allocate resources to their highest valued use. According to this analytical framework, which became part of the influential law and economics movement championed by Richard A. Posner, virtually any form of market regulation was likely to cause a “dead weight loss” in society’s total welfare. Another influence was the rise of public choice theory, which emphasized how regulation could create barriers to entry that allowed established industries to escape competition and earn “monopoly rents.” 

Still another line of attack came from the era’s rising consumer movement. The consumer advocate Ralph Nader became a leading champion of airline deregulation, arguing that by creating regulatory barriers to new airlines, the CAB had allowed both airline management and unions to become overpaid and sclerotic at the expense of “the consumer.” Meanwhile many liberals, including U.S. Senator Ted Kennedy and his then Judiciary Committee staffer Stephen Breyer, the future Supreme Court justice, reasoned that deregulation would lead to more competition and lower consumer prices—a high priority at a time when the OPEC oil cartel had set off an inflationary spiral. 

Together, these forces created a unique moment in which both leading Republican and Democratic policy makers, as well as putative academic experts, formed a consensus in favor of ending regulation of airline markets. Implementation of these ideas began when President Jimmy Carter appointed Alfred Kahn to head the CAB in 1977. In that capacity, Kahn took administrative measures that allowed airlines to serve any routes they wanted under a policy known as “multiple permissive entry.” By 1978, the CAB had amended its rate-setting policies to allow airlines downward pricing flexibility of up to 70 percent. When airlines responded with deep fare cuts, the traveling public cheered, helping to build political support for disbanding the CAB altogether. In short order this caused Congress to pass, and Carter to sign, the Airline Deregulation Act of 1978, which ended any government role in managing entry, pricing, and route network structure in airline markets. 

The early years of airline deregulation saw a burst of new entrants along with steep price declines on many high-volume, long-distance routes. But it also brought a sharp decline in air service to cities in what we today call “flyover country.” In 1986, West Virginia Senator Robert Byrd publicly apologized for having voted to abolish the CAB:

This is one Senator who regrets that he voted for airline deregulation. It has penalized States like West Virginia, where many of the airlines pulled out quickly following deregulation and the prices zoomed into the stratosphere—doubled, tripled and, in some instances, quadrupled. So we have poorer air service and much more costly air service than we in West Virginia had prior to deregulation. I admit my error; I confess my unwisdom, and I am truly sorry for having voted for deregulation.

Overall, airline prices did continue to fall on most remaining routes. This caused much of the public, particularly those living in well-served, large coastal cities, to view airline regulation as a success. But with the benefit of hindsight a far different picture emerges. 

First, it’s now clear that the initial reductions in fares on high-volume routes were in large measure not the result of any increase in efficiency, but of a coincidental fall in global energy prices that occurred during the early years of deregulation. A 1990 study by the Economic Policy Institute concluded that, after adjusting for changes in the cost of jet fuel, overall airline fares fell faster in the 10 years before 1978 than they did during the 10 years after. A study published in the Journal of the Transportation Research Forum confirms that this pattern continued for many years. Except for a period after the 9/11 terrorist attack, the study found, real air prices continued to fall more slowly through the mid-2000s than they had before deregulation. Accounting for declines in the quality of airline service over this period would show real prices falling still more slowly. For example, due to the move to a hub-and-spoke system and the decline in the number of direct flights that occurred under deregulation, the time, distance, and inconvenience required to travel to many destinations lengthened substantially during this period.

The initial seeming success of deregulation was further belied during the aughts by the reemergence of ruinous competition, which evaporated airline profit margins and eventually turned major carriers into wards of the state. During all but three years of that decade, U.S. airlines had negative net income, racking up cumulative losses of more than $68 billion. Major airlines like United and US Airways declared bankruptcy and defaulted on their pension debts, requiring expensive taxpayer bailouts. Some of this distress was caused by recessions or spikes in fuel costs, but the larger structural cause was the loss of market regulation. Airlines were no longer assured of adequate margins or protection from price wars. 

Relatedly, the dramatic improvements in aviation technology that had occurred under the CAB disappeared under deregulation. The fuel efficiency of jet engines has marginally increased over the past 40 years, but otherwise, today’s commercial jet liners are little changed from what they were in the late 1970s. In large measure this was a result of deregulated airlines engaging in price wars that prevented them from covering their routine capital costs and accrued liabilities, let alone investing in dramatically improved planes and service quality.

Eventually, in an attempt to reverse their declining economic fortunes under deregulation, airlines not only cut service standards but also consolidated massively, taking advantage of lax antitrust enforcement standards that existed for much of that period. After a series of mega mergers, by 2015, a single airline controlled a majority of the market at 40 of the 100 largest U.S. airports. Through control of gate access at major “fortress hubs,” incumbent airlines faced virtually no competition on most of their routes, or even the threat of it. By 2021, the four largest remaining airlines controlled nearly two-thirds of the entire domestic market. Adding to the cartelization of the industry was the fact that the four remaining major carriers each counted among its largest stockholders the same four large institutional investors, creating an interlocking ownership structure rivaling that of the big colluding corporate trusts of Gilded Age. 

Along with the rise of concentrated ownership came a sharp rise in predatory pricing and other business practices, such as frequent-flyer rewards programs designed to further dampen competition among existing carriers and deter the formation of new airlines. At the same time, the airlines continue to add fees and lower service standards while eliminating flights altogether to many smaller and midsize cities, all while raising fares and engaging in massive stock buybacks. Not only does the traveling public suffer, but so does the promise of aviation itself. Now that they operate as an unregulated oligopoly, airlines once again have the profits needed to invest in new breakthrough technologies but no longer have any incentive to do so. 

The retreat from regulated competition did not just apply to airlines. Market regulation of railroads ended at roughly the same time, for example, and with much the same result. Thousands of American cities lost all rail service or became captive to a single monopolistic railroad, thereby losing their ability to compete as centers of manufacturing or distribution. Similarly, a retreat from regulated competition led to a near-total collapse of American domestic shipbuilding and ocean shipping industries after the 1980s. 

The federal government also retreated from the regulated competition model in many other key realms. These included the gas and oil sectors, electrical generation and distribution, communications, and, above all, finance. 

Until the 1980s, regulated competition of banks and other financial institutions controlled what interest rates they could charge or pay and where they could operate, while also strictly limiting mergers and their investments in adjacent lines of business. State and federal laws fostered a dense web of small-scale community banks and locally operated thrifts and credit unions. This not only prevented the growth of banks that were “too big to fail,” it also prohibited an increase in giant, unregulated hedge funds and private equity firms. Under this policy regime, the role of Wall Street over industrial firms was tightly contained, allowing the management of great American industrial companies like Boeing, General Motors, and General Electric to remain mostly in the hands of engineers committed to innovation rather than financiers intent on stripping out assets to maximize short-term profits. 

Yet the historical role of regulated competition in building the U.S. industrial economy is so poorly understood that the very phrase seems like a contradiction in terms to many Americans. Under the thrall of “neoliberal” doctrines popularized over the past 40 years, too many of us are conditioned to view “free market” competition as inherently productive, and to view government intervention in markets as inherently the opposite. But history shows that without smart rules, market competition is often ruinous to the firms involved, to the pace of technological progress, and ultimately to the larger public interest. Fortunately, history also shows that government measures that channel competition toward productive and socially useful ends are not only possible; they were fundamental to the creation of the world’s greatest, most innovative, most broadly prosperous capitalist nation.

Can we ever get back to a system of regulated competition? At a time when the Trump administration is slashing what remains of America’s regulatory state and “abundance liberals” are bemoaning excessive red tape as a key obstacle to prosperity, reestablishing the system of market regulation might seem like a political nonstarter. But we have already seen dramatic movement in both parties over the past decade in their rediscovery of the importance of effective antitrust enforcement. This has occurred not because of any great change in their respective ideologies. It has happened because of the sheer accumulation of documented harms caused by unregulated, predatory monopolies and a growing awareness among policy intellectuals and elected officials that century-old antitrust laws could be revived and repurposed to address new conditions. 

Similarly, it’s probably only a matter of time before wide-scale downward mobility, particularly the decline of heartland communities in key electoral states, leads policy makers to rediscover the merits of regulated competition. It is not hard to imagine, for instance, politicians from both parties who represent “flyover” cities banding together to demand more equitable, affordable, and practical air service through a new regulatory regime—perhaps one that takes advantage of AI and other modern data-processing tools to make pricing and other regulatory functions more precise than under the old CAB system. 

Taking the next step back to the future by applying market regulation to key existing and emerging industries might take time. But it seems increasingly inevitable as the alternatives variously advocated by Republicans and Democrats continue to fail or prove inadequate to the political economic challenges we face.

The post The Secret to Reindustrializing America Is Not Tax Cuts and Tariffs. It’s Regulated Competition. appeared first on Washington Monthly.

When I was a boy in Miami, we didn’t eat strawberries. Every morning I’d stare at the images on the box of Cheerios and wonder why there were no little red fruits in my own bowl. It was only later that my dad told me of his childhood. Starting at age six—after my grandparents lost their land to the bank—he’d spend 14-hour days picking berries on a sharecrop farm in Plant City, Florida. “I know how much blood,” he said, “is in each basket.” 

For most of my time at home, my dad sold insurance and my mom worked as a secretary. We lived paycheck to paycheck. But my parents saved enough for clean clothes, two-week vacations, even a new car once. Then my mom got sick and my dad lost his job and we were pretty poor. 

Still, I felt lucky. My parents were loving and supportive. Many of my friends at school had it a lot harder. Our district ran along the Snake Creek drainage canal from Norland to Carol City, then down 27th Avenue to Liberty City. Our curriculum included studying the effects of quaaludes, motorcycle crashes, drive-bys, and various forms of child abuse. 

Then there were the lessons I learned working in a factory and an industrial bakery and on the sandwich line at Burger King. All of which—as long as the boss wasn’t too much in my face—seemed preferable to helping my dad earn cash by mowing lawns and replacing tarpaper roofs. Of all my tutors, none was ever sterner than the Miami sun at midday in July. 

In the factory towns of Michigan and farms of Iowa, in the warehouses of Harrisburg and hospitals of Fresno, along the borderlands of Texas and floodplains of Missouri, most folks think about power every day. It’s not that any of us regular folk imagines having any real power. What we do think about is freedom from power. In communities like ours, economics is simple. There’s no escape from hard work. But there’s also no reason ever to be bullied and belittled by any petty foreman or distant corporate board. And that means working together to find ways to live free from any form of capricious control.

It’s in these conversations about liberty that we hear the original political economic language of America, dating to long before the founding. Most immediately, it might be the simple solidarity of letting someone sleep on the sofa so they can quit their bad job. Over time it evolves into the language of mutual protection. Sometimes the bottom-up protection of the union and guild and trade association. Sometimes the top-down protection of using the public government to limit the power of corporations and capitalists. 

Material well-being is not the only or even main subject of this language. It’s also a language of sharing out opportunity. Of breaking the barriers to making a larger human community. Of inclusion—even eccentricity and weirdness—in its inherent intent to disrupt the homogenization of uniform and cubicle. It’s a language of human dignity. Of finding one’s own purpose. Of freeing ourselves to dream. 

When I was in school, this language was largely still the language of America. We heard it in the music of Sly Stone and Johnny Cash and, a few years later, the L.A. punk band X. We also heard it in almost every utterance of Lyndon B. Johnson and Barbara Jordan and Walkin’ Lawton Chiles. And for the most part, the Democrats of that day delivered, in support for the right to organize, in protection from the chain store and the Wall Street bank, in affordable mortgages for the family home. In an entire political economy geared to empower the worker, independent business owner, and farmer—as well as the entrepreneur, innovator, engineer, scientist.

In the 1980s, the Reagan administration began to promote a new political economic language. They said the old fight for liberty from power made the economy inefficient. They said if we let corporations concentrate control over production and retail, they could build more things and sell them more cheaply. Their new language was technocratic, mathematical. It was designed, they said, to help illuminate the mechanical operations of the “market forces” that drove efficiency. 

Soon, Democrats began to follow. A new generation of leaders spoke less of sharing out power and responsibility and more of how to “deregulate” business to make—and in theory, share out—more stuff. They also embraced the idea that economics was metaphysical in nature, and lectured us on the new forces—“globalization,” digital technologies—that restricted our ability to shape our own lives.

Today we face the gravest set of threats to American democracy, and our most fundamental liberties, since the Civil War. We see this threat in the rise of a new class of oligarchs, who increasingly have the power to determine how we work, what we read and watch, how we make community, how we do business with one another, what technologies we must use and which are crushed. We see it even more clearly in President Donald Trump’s harnessing of the powers of these oligarchs for his own private purposes. 

These threats are a straight-line result of the Democratic Party’s abandonment of America’s original system of liberty. If we are honest, we will admit that Trump sits in the White House thanks largely to the rage of citizens Democrats betrayed. He raises mobs using systems of communications Democrats led the way in corrupting. He leverages the power of private autocrats that Democrats led the way in empowering. 

The task ahead for Democrats is not merely to resist and slow the predations and destructions of President Trump. It is not merely to knock the Republicans out of power in 2026 and 2028. It is to establish a new political economic regime which ensures that our liberty and prosperity are never again threatened by any homegrown oligarch or autocrat. And Democrats must do so in a world filled with great enemies, eager to exploit the chaos sown here in America by Trump and the oligarchs, to topple us.

None of this will be possible until Democrats first fully recover America’s original language of liberty. Doing so is the only way to relearn the wisdom about power and political economic structure baked into this language. It’s the only way for Democrats to convince the American people they actually understand how to make their lives better, and have the courage to act. And the only way Democratic elites can prove they understand their own responsibility for today’s crisis, and fully grasp the threats to their own lives and the lives of their own children.

The origins of what we understand today as liberalism trace to the early 17th century. It is both a set of assumptions about the nature of the individual—that every person has an equal capacity to do good in this world, and to earn entry to the next—and a set of political and economic rules designed to protect all the forms of liberty such an individual might desire, be they political, commercial, or spiritual. People first began to establish and formalize these rules in fights against the absolute monarchs of that time, especially Charles I in Britain. Liberalism, in short, is a system of political and economic rules designed to defend and expand individual liberty.

Technically, much of this new rule of law focused on protecting the properties of the individual. People understood that if the king could seize one’s land or business at will, then that person would tend to do whatever the king demanded. In practice, these efforts largely played out in the establishment of anti-monopoly laws—to prevent the king from concentrating power through either the granting of monopoly to a particular favorite or arbitrary threats to take an opponent’s property away. Not that this system of liberty served mainly the interests of the wealthy. Early liberals made sure also to protect the rights of tradespeople to use their skills, and of farmers to bring produce to market, and of authors and dramatists to copyright their work.

Further, people without any real wealth or other forms of social power forced their way into the debates about both the nature and structure of human liberty. A main path for such early democratic liberalism were the vibrant discussions in the Protestant Churches in Britain. In contrast to the hierarchies and mysteries of the established Church, Puritans preached an equality of all souls before God, which in turn led to visions of greater equality in this world. As the historian William Haller put it, “This spiritual equalitarianism, implicit in every word the preachers spoke … became the central force of revolutionary Puritanism.” 

The English Revolution was the first truly modern war for individual liberty. The victory was achieved largely by the New Model Army, a professional force led by the Puritan Oliver Cromwell and composed largely of Protestant dissenters. We remember the revolution today mainly because it culminated in the beheading of Charles I in 1649 and a period of brutal oppression in Ireland. But its importance for us lies in the fact that while in the field, various groups of soldiers—animated by the “democratic rhetoric of the spirit”—formulated visions of popular democracy that profoundly shaped thinking in America a century later. What they invented, the historian Edmund Morgan wrote, was nothing less than a new conception of a “sovereign people” whose authority rests on “the rights of men.” 

In the end, the Commonwealth of England could not hold. After the death of Cromwell, Parliament and the army disintegrated, and in 1660 a new parliament arranged for Charles I’s son to be crowned king.

But in America, memories of the people’s commonwealth lived on. A key actor was Samuel Adams, born to an ardent Puritan family that later went bankrupt. At Harvard, Adams studied the writings of John Locke. But it was on the streets of Boston in 1747 that he first witnessed the power of direct democratic action, as he watched African, English, Dutch, and American sailors lead a fight against impressment. Adams responded by founding a newspaper and expressing a new vision of democratic liberty, based on a belief in universal equality. “All Men are by Nature on a Level; born with an equal Share of Freedom, and endow’d with Capacities nearly alike,” he wrote. Thomas Jefferson later recognized Adams as “the earliest, most active, and persevering man of the Revolution” and the “patriarch of liberty.” 

In any discussion of the founding, it is vital to fully recognize the repugnant nature of the compromises made to the slaveholders. But if we focus only on the snakes who extorted a Big House in the sun, we miss the work of all the regular folks who first plotted out that garden, then cut the trees and tilled the land. This includes in 1789, when Adams and Patrick Henry helped lead efforts to force the Framers of the Constitution to append a clear statement of common equal liberty in the form of a bill of rights simple enough for every person to understand. 

Over the next 70 years, the belief in human equality provided the moral leverage necessary to make good on the promises of the Declaration of Independence, first through abolitionism and then civil war.

The political leverage came from the anti-monopoly systems Americans had built into the Constitution, and the anti-monopoly provisions of the common law inherited from Britain. The idea that the early United States was an unregulated libertarian utopia is a modern, dangerous myth. In fact, Americans from the first used their local, state, and federal governments both to protect themselves from private corporate power and to work collectively to create and distribute new forms of wealth. They established simple bright-line market structure rules to protect the independence of the individual and the family, and to limit the size, structure, and behavior of the corporation, usually through direct legislative charter. And they aggressively used government power to distribute land and education to those with little or nothing.

They also carefully updated these rules to apply to the railroad, telegraph, telephone, and other powerful new network technologies. They focused less on limiting the size and more on regulating the behavior of these powerful new network technologies. They aimed to prevent the people who controlled these corporations from extorting wealth and power from users, by requiring the corporations to provide the same service at the same price to all individuals and businesses.

One result was a political economy designed to promote the dignity of the individual, as well as the constructive engagement of the citizen within the political economy. Another was a fantastic explosion of material prosperity that made the average American much richer than their peers in almost any other nation.

Over these past 250 years, private autocrats twice overturned this American system of liberty. The first time came in 1877 when the “corrupt bargain” that made Rutherford B. Hayes president not only ended Reconstruction but also helped clear the way for lifting almost all traditional regulation on the corporation. This led to the rise of the vast all-powerful private monopolies of the plutocratic age and resulted, in the words of W. E. B. Du Bois, in an “Empire of Industry” that “assumed [a] monarchical power such as enthroned the Caesars.” 

Although Congress passed many vital anti-monopoly laws during this period—such as the Interstate Commerce and Sherman Antitrust Acts—it was not until the election of 1912 that Congress managed to reestablish a regulatory system fully able to protect liberal democracy from oligarchy, with passage of the Clayton Act, Federal Trade Commission Act, Federal Reserve Act, and a constitutional amendment enshrining the progressive income tax. This system, named the “New Freedom” by Woodrow Wilson, provided the foundation for the Second New Deal.

The second reaction against the democratic republic was launched in 1981 with Ronald Reagan’s suspension of anti-monopoly law. In 1993, President Bill Clinton then carried this anti-democratic libertarian philosophy to regulation of banking, finance, energy, media, telecommunications, trade, and the internet. 

In the years since, the consolidation of power and control has taken place in two broad stages. During the first, which we might call the age of Walmart, we saw the consolidation and offshoring of factories, the mass destruction of small businesses and family farms, the concentration of control in finance, the rise of Big Pharma and Big Hospital, and a slow-motion takeover of America’s housing and rental markets.

During the second, which we might call the age of Google, we saw a few vast information platforms consolidate control over online communications, commerce, debate, publishing, entertainment, and computing power, to a point where they have power to manipulate the thinking and actions both of the individual and society as a whole.

The result of these twin blows against America’s traditional system of liberty has been a collapse of the rule of law not merely in the political realm, but especially in the economic. Today in America, the chain of command is simple. The oligarchs boss us. And Trump bosses the oligarchs, including sometimes by instructing them how to direct us. In short, the restoration of monarchical autocracy, but this time amplified by surveillance tools vastly more powerful than even Joseph Stalin dared imagine.

It was not until college that I first realized the language I’d learned in Miami was not universal. At Columbia on scholarship I found a society of young people who’d never been forced to bend themselves to some job just to pay the rent. Their language was of fraternities and business mixers and parents with friends on Wall Street or in Washington or “the arts.” At graduation, they went to entry-level gigs at Salomon Brothers or Time Inc. or the State Department, or unpaid internships in film and theater.

I had long wanted to see the world. But this took money, and so I went back to the work I knew. I drove trucks across the country and dug ditches, pushed on construction sites and hauled office furniture. I learned what it’s like to not be able to scrub the smell of work off your body, how slowly a clock moves when you stand 10 hours on a line, how hard it is to sleep after you’ve picked hard rock all day. 

In time I learned how to pay for my travels through journalism, which led to six years as a correspondent in South America and the Caribbean. In addition to Maoist guerrilla war, cholera, and violent elections, I also had the opportunity to study up close two of the most brutal austerity “shock” programs of the Washington Consensus era of cartelized capital. The first, in Venezuela, led to a weeklong insurrection in Caracas, the death of more than 1,000 people, and ultimately the collapse of Latin America’s strongest democracy. The second, in Peru, did cure hyperinflation, but also left millions hungry.

Eventually I took a job running a Washington-based magazine named Global Business. Here again my timing—in terms of getting to learn how America’s new monopoly capitalism actually worked—was perfect. I started just as the Clinton administration was implementing NAFTA and finishing negotiations to create the World Trade Organization, and our circulation soon rocketed as C-suite executives at thousands of manufacturers scrambled to adapt their businesses to this radically new environment of law. We spent our days writing articles that helped corporations decide what to outsource, where to offshore, how to engineer a supply chain. I traveled to China, Singapore, South Korea, Russia, Hong Kong, and across Europe and the Middle East reporting on the revolutionary restructuring of every major industrial system in the world. 

It was thanks to this work that I immediately understood the implications of a massive earthquake in Taiwan in September 1999. That event, in turn, is how I came to understand that the American elite’s obtuseness toward the threats posed by concentrated power actually matters in the real world.

The problem triggered by the quake was easy to understand. A few years before, almost every type of industrial capacity was broadly distributed across many countries. Many factories, for instance, made wiper blades and alternators. Much the same was true for high-end items like semiconductors, as more than a dozen vertically integrated manufacturers in the United States, Europe, Japan, and South Korea competed to make roughly interchangeable products. But the radical changes in policy by Reagan and Clinton had undone this balance, first by clearing the way for corporations to concentrate control and capacity in the U.S., then by clearing the way to concentrate control and capacity at some single point in the world.

What the earthquake taught was that over the previous few years Taiwan had managed to lock up a huge portion of the capacity to make high-end semiconductors. When the quake then disrupted the ability to make and transport these chips, the result was a cascading worldwide industrial crash that within a few days shuttered factories in California, Texas, Germany, Japan, and elsewhere.

As it proved, we were lucky. The quake had not damaged the foundries, but simply disrupted just-in-time shipment of the chips. Within two weeks most factories were back online. But the quake also made clear that concentration of industrial capacity had reached a point where it was easy to imagine a far more devastating shutdown, triggered for instance by slippage of a fault line closer to the foundries. Or war, blockade, embargo, or some other disruptive political act. Or, say, a pandemic.

Over the next few years, I was among the first to describe the extreme concentration of capacity the quake had revealed, and to detail some of the potentially existential threats posed by such chokepointing of vital production. My work was anything but theoretical. It was based on conversations with hundreds of CEOs, vice presidents of manufacturing and logistics, engineers, reinsurers, and others—almost all of whom were eager to confirm my reporting. 

These managers and engineers also made clear that the problem was easy enough to fix. Unlike a pool of oil or vein of metal, we can locate machines almost anywhere. We can take all of a certain type of machine and put them in one place, or divide them among four or 40 places. What executives needed, they said, was for government to reestablish fair rules obligating all manufacturers engaged in a particular business to distribute their risk. Time and again, these engineers cited the same antique adage—never put all your eggs in one basket.

During these years, I met often with officials at top levels at Treasury, Commerce, the Pentagon, the CIA, and the Federal Reserve, as well as the White House, and it was here that I began to see a pattern. Time and again, the economists in the room would challenge my reporting. They assured me that what the managers and engineers said could not be entirely true. Such an extreme concentration of capacity, without any backup plan, violated too many core theories. Clearly the executives must be after some handout, some sort of subsidy or protection. I heard this not merely from staff economists, but from men who had won or would soon win Nobels. 

I eventually concluded that many economists educated in the post-Reagan libertarian era were simply unable to see or understand certain forms of systemic risk. They had never learned how to use law to engineer resiliency. If anything, in their fixation on efficiency, they had begun to celebrate—rather than condemn—brittleness and fragility. 

There are many flaws in the French economist Thomas Piketty’s analysis about the origins of inequality. But in his book Capital in the Twenty-First Century, he does cut to the heart of the problem posed by his U.S. counterparts. Despite their “absurd” claims to “scientific legitimacy,” Piketty writes, in actual fact “they know almost nothing about anything.” 

It was in these discussions that I also came to understand there was another factor, besides the flawed theories of the economists, that further reinforced this blindness to the extreme concentration of risk in complex systems. This was the new deterministic thinking that libertarians had been pushing into U.S. policy making since the early years of Reagan. 

When the Clinton officials in the early 1990s first began to lecture Americans on how “globalization” and the digital revolution were forcefully restricting our ability to shape our economy here at home, their goal was to redirect political debate away from actions, such as stripping factories from Ohio and moving them to Chongqing, that voters would oppose. In claiming that those actions were being dictated by forces of nature, they were saying something they knew—or should have known—to be untrue.

Over time, however, I realized that more and more policy makers and journalists were beginning to actually believe in these metaphysical forces, sometimes almost religiously. I found such beliefs to be especially strong among Democrats and progressives. Historically, progressives tend to learn such deterministic thinking from people influenced by Karl Marx, such as the economist Joseph Schumpeter. In contemporary debate, the most influential early source for such thinking was Robert Reich’s 1991 book, The Work of Nations. Probably the single gaudiest distillation was Tom Friedman’s The World Is Flat, from 2005, which he proudly described as a “technological determinist” vision of human thought and action.

Although in 2015 Reich repented of his earlier teachings, the damage had long since been done. The combination of bad science and weird metaphysics had helped foster a broad blindness—a collective incognizance—among an entire generation of progressives to the ways that extreme concentration had destabilized many if not most of the complex systems on which we depend today.

When I published Cornered in early 2010, my main aim was to help people see the new concentrations of power and control and understand all the ways this threatened their liberty, economic well-being, and safety and security. My main means was to resurrect the root language of American democracy, the language of power and structure and community I had learned growing up. Often this was as simple as replacing the word consumer with citizen, or the word welfare with liberty, or the word global with international.

Over the next few years, from a base at the New America think tank in Washington, we built a network of people able to see some key piece of America’s monopoly problem, and created opportunities to learn from one another’s work. We published many of the ideas we developed during those days here in the Washington Monthly. 

For more than decade now, we have also understood that in recovering and renewing America’s anti-monopoly system we were amending the motto that had guided the Democratic Party since the 1990s. Victory, from now on, would mean recognizing that “It’s the POLITICAL economy, stupid.”

In recent years, we have enjoyed phenomenal success. In 2016, Massachusetts Senator Elizabeth Warren thrust our message into public debate in a speech presenting a radically fresh analysis of the threats posed by concentration of ownership and control. In 2019 and 2020, groundbreaking hearings by the House antitrust subcommittee, chaired by Rhode Island Democrat David Cicilline, mapped America’s biggest monopoly threats and lighted the way for powerful antitrust lawsuits against Google and Facebook in 2020. Then President Joe Biden formally embraced our thinking in his executive order on competition in July 2021, and hired a new generation of law enforcers to carry the thinking into practice. 

That was just to start. The Biden White House also used competition philosophy to shape new visions for governing international trade, restructuring industrial systems, and protecting free speech and a free press. They also boosted innovation, protected independent businesses and farms, made it easier for working people to organize, and made it harder for monopolists to inflate prices. 

What these Democrats achieved was nothing less than the sweeping away of an extreme right-wing anti-democratic philosophy, and the first stages in the restoration of America’s true liberal centrist tradition based on pragmatic regulation of corporate power and behavior. These actions reinforced true rule of law, empowered citizens to shape their own futures, and made the world more secure and peaceful.

Come 2024, Democrats had everything they needed to win any debate about power, with Donald Trump or any other Republican. The one obstacle? Much of the aging mainstream of party functionaries and elite press sang from the old Clinton hymnal. In part, this was simply a matter of money; or more accurately, of a desire by people like Senator Chuck Schumer not to chase away some of the big donors who opposed Biden’s populist policies. But it was also—in some ways mainly—a function of intellectual inertia. Of the fact that so many liberals and progressives, convinced of their own necessary moral righteousness and superior erudition, never troubled to free themselves from the ideological shackles of the libertarian revolution of the 1980s and ’90s, with its fetishization of efficiency and pre-Enlightenment metaphysics. 

Reformers tend to blame political cowardice on cupidity and corruption. What I’ve learned over the past 25 years is that fatuousness, especially when combined with lack of imagination, often plays a much bigger role. 

Consider, for instance, the failure of these same Democratic elites to understand—let alone respond to—the threats posed to their own businesses, hence their own positions within society, by Google, Facebook, Amazon, and TikTok. As these corporations rolled up illegal control over advertising, the distribution of news, movies, television, and music, and the social media and email systems politicians use to speak to voters, Democratic-leaning publishers, journalists, and policy makers failed almost entirely to take coherent actions to protect themselves. 

When threatened by the rise of a new technology, every previous generation of Americans—of whatever party—would have immediately begun to use law and other policy tools to protect the democratic foundations of a free press, free speech, and free debate. Yet this last generation of liberals basically acted as if the concentration of control over these activities—and over the businesses they owned and market systems on which they depended—was a natural, inescapable, immutable function of the forces that power technological “evolution.” By contrast, this last generation of Republicans worked avidly for years to build an entire integrated complex of news publishers and communications platforms into a massive propaganda machine designed to shape thinking, action, and voting across the entire nation and political spectrum. (More recently, the Justice Department’s antitrust victories over Google’s monopolies in advertising technology and search offer a huge opportunity for all independent publishers to begin to build next-generation advertising-supported businesses.) 

And yet still, even with all the advantages this information machine conferred on Trump and the Republicans, Kamala Harris could have won comfortably last November. As Rana Foroohar detailed on these pages in October 2023, the Biden-Harris administration could have presented a powerful story of political economic transformation, including a sophisticated strategy to break the ability of monopolists to extort America’s families. 

If there’s a single emblem of why Democrats lost, it was Harris’s repeated refusal during the campaign to own Lina Khan and her team’s work at the FTC. When Reid Hoffman in July called on Harris to promise to fire Khan, the tech mogul provided the campaign an almost perfect invitation to demonstrate that their candidate understood the nature of private corporate power today, and had the strength of character to fight that power. Here was an opportunity to list all the successes of the Biden-Harris team in lowering prices, raising wages, and ensuring freedom in the digital economy. Here was an opportunity to identify a few villains Biden had missed but Harris would now target for action.

Instead, the campaign treated Khan—and Biden’s entire brave political economic team—like bastard children. And they continued to do so even as J. D. Vance and Steve Bannon happily embraced Khan and her policies. 

And so, during the final stage of the campaign, as Trump paraded oligarchs on leashes through the ballrooms of Mar-a-Lago, the apparatbrats of the Democratic Party tutored Harris on how to kiss the Lanvin low-top.

Let’s make sure we pull the right lessons.

Yes, Democratic Party elites’ failure to recognize the continuing bite of inflation played a big role in Harris’s loss. But the Democrats’ inability to speak honestly about the threats posed by concentrated power left much more than prices unaddressed.

Voters also want a party which recognizes that true democracy is not simply a matter of having your vote counted. They want a party that will protect their rights as workers, by addressing the soaring imbalances of power between the corporation and employee. They want a party that will protect their rights not to be manipulated and exploited in their day-to-day lives, by tech corporations that circle their every act and thought. People also want a party that will recognize the revolutionary upheaval in their homes as social media corporations reach into the souls of their children and spouses and brothers—addicting them to porn, gambling, gaming, and crypto—or who throw open the door to vicious bullying by everyone from nasty schoolmates to corporations selling weight loss drugs.

And people want meaning. To feel, if only for a moment each day, that they are part of some common struggle.

In Trump’s sneer, in watching him force the oligarchs to kneel, many Americans see their own rage about all these indignities, their own search for justice gratified, at least in the form of punishment. In the 2024 election, the Democratic Party never delivered a believable promise to fight for true equality of opportunity, responsibility, and dignity. Nor did Trump. What he did do was promise to drag Mark Zuckerberg, Jeff Bezos, and Sundar Pichai into the same stinking pit of mud with the rest of us.

When voters turned to the Democratic Party, by contrast, they heard the treacly language of charity—of condescension—delivered in the tones of a courtier class that itself stands on unfirm ground.

For four centuries, the vernacular of popular democracy taught that we all walk the same path to salvation and enlightenment. It is a language that balances the universal and eternal that binds all humans together, with recognition of the absolute glory of each and every individual quester and dreamer. 

Yet in 2024 as these pilgrims came to the Democratic Party’s door—and in the America of the 21st century, every human being is still in some way a pilgrim making their own particular progress—Democrats offered naught but a sack of pebbles and twigs that we called “policies.”

Our minds spin. We can almost feel his finger on our chest, his spittle in our face, as with twinkling eye he jackhammers our entire world of universities and law firms and goo-goo government offices, even the Kennedy Center. As his droogs perform “a little of the old ultraviolence” seemingly right in our living rooms, we sit in our mid-century loveseats, hands folded, waiting for it all to stop. Or, like that scourge of tyrants Tim Snyder, we book flights for Toronto, or flip through listings of pieds-à-terre in the Marais. 

Ain’t that right, Mr. Jones? 

Since the election, Democrats have been presented with three options for retaking power. The first, courtesy of James Carville, is to play possum till the hillbillies miss us. Second, championed by Bernie Sanders and Alexandria Ocasio-Cortez, is to oppose everything Trump does, everywhere, all at once. Third is to cozy up to good oligarchs, so they can shelter us until the MAGA storm blows over. This thanks to Ezra Klein and the “abundance movement.” 

The better path is to honestly admit the radical nature and full immensity of the political threat we face, which is the direct merger of the power of the private monopoly and the state. And our own complicity in creating this crisis. And all the ways the old libertarian thinking continues to lead us back into darkness, superstition, and savagery. 

And then we should set about finishing the job the true liberal democrats of the Democratic Party began a decade ago—of fully restoring the traditional system of liberty that smarter generations than ours designed precisely to protect us against oligarchy and autocracy. 

Simply assuming that Trump will fail is foolish; weeks from now we may sit marveling as he pulls rabbits out of the sewer in the form of peace in Ukraine and a trade deal with China. Targeting Trump only—as if he were the sole source of today’s crisis—is a good way to lose our democracy forever. Trump is a true autocrat, vicious and violent. But he is our child, birthed of our own barbaric destruction of the rules liberal democrats designed over the course of hundreds of years to master the power of private corporation and state. Trump bestrides oligarchs we created.

For now, these oligarchs fear Trump. For now, they lie quiet in the deep grass. But they know Trump will stumble, later if not sooner. And so they slowly coil themselves to strike, to make our garden forever theirs.

Behold, with open eye, the absolute disdain for all the old constraints that grows in the hearts of today’s big men, not just Elon Musk and Mark Zuckerberg, but Peter Thiel and Larry Ellison. Not only among the junta at Google, but even behind the smiling miens of Satya Nadella and Brad Smith at Microsoft, who in recent months unleashed a savage attack on democratic regulation of corporations in the UK, as they practice for bigger game. Smell their lust for control.

Their existing power over information already threatens a type of authoritarianism almost impossible for us to fully imagine. As Ellison has made clear, his aim is nothing less than an AI-powered surveillance state. Given such plans, any future American president who lacks a coherent strategy to break the oligarchs’ power will end up as little more than their enforcer, or pet.

The other threat, intimately related to that of top-down autocracy, is of chaos, collapse, and war. Every day the danger of cataclysm increases, as Trump in his Lear-like rage breaks the systems on which we rely for peace. As the oligarchs impose on society AI-amplified systems of control that lack any capacity to manage true human complexity, even as the oligarchs themselves create dangerous new chokepoints. It is a chaos that is already creating glittery new temptations for adventurism, perhaps right back at the original fault line of today’s world, Taiwan.

There is one way only to rebuild democracy, true prosperity, lasting security, and peaceful cooperation among nations. This is to break the power of the oligarchs and the system that created them. To join the people in their war to restore their liberty to use simple human commonsense tools to govern.

Today we enjoy the greatest opportunity since the New Freedom and the New Deal to frame a political economic system that truly works for every American. And given that the goal of such a system is to foster the independence, dignity, and confidence of each individual, perhaps we might even find it possible to build a new foundation for moral progress. It’s a prospect we should find exhilarating. 

So feel the cinder block wall against your back. Know with your skin you have nowhere to retreat. Relearn, thus, how to stand and fight. Relearn, thus, how to use the tools the people fashioned—over the course of four centuries—to keep you and your children free and safe. Relearn, thus, how to be a full part of a true American democratic community of equals, based on the common light in each of us.

The post Resurrecting the Rebel Alliance appeared first on Washington Monthly.

In the Fall of 2020, as local newspapers and national online outlets like BuzzFeed were increasingly laying off reporters or even shutting their doors because of collapsing digital advertising revenues, the Washington Monthly published a package of stories on what to do about the problem. In that package, Phillip Longman, a Monthly senior editor and policy director of the Open Markets Institute, argued that Google’s monopolization of the digital advertising market was the heart of the problem and that the solution was for the federal government to bring an antitrust enforcement action against the company.  

It was the first time any journalist had made that argument (amazing when you consider Google was literally stealing the source of their livelihoods). Many dismissed the idea as hopelessly naive. But in January 2023, the Justice Department charged Google with illegally monopolizing the digital ad tech market. Yesterday, following a three-week trial last September, a federal judge ruled that the government was right. 

In a landmark ruling, Judge Leonie Brinkema of the U.S. District Court for the Eastern District of Virginia found that Google has illegally monopolized several portions of the online advertising market. The decision, along with another decision from last August where Google was found to have unlawfully monopolized the online search market, stands to curtail the immense power of Alphabet, the $1.8 trillion company behind Google.  

That power has been damaging journalism, whose advertising revenue decline has spurred layoffs across the industry. Judge Brinkema directly acknowledged the damage in her opinion, writing that Google’s anti-competitive actions “substantially harmed Google’s publisher customers, the competitive process, and, ultimately, consumers of information on the open web.” 

As the trial proceeds to the remedies phase, which could see a potential breakup of the giant’s advertising businesses, news publishers could receive a long overdue lifeline through increased competition and higher compensation for advertising placements next to their content. 

The ruling was not a total victory for the plaintiffs. While Brinkema held that Google violated the Sherman Antitrust Act by illegally tying its ad exchange and server market together, she rejected claims that the corporation had monopolized the advertising purchasing tool market, declining to find that Google’s 2008 acquisition of DoubleClick was anti-competitive. Those findings could prove to be a challenge for plaintiffs if they seek a breakup of the company’s advertising businesses in the upcoming remedies phase of the proceedings. 

Still, even a partially rejuvenated marketplace could pay big dividends for embattled publishers. 

At the start of the century, the burgeoning digital advertising industry infused new life into the news media ecosystem. As Longman wrote last year, that influx of new revenue enabled startups whose innovation revolutionized the industry for the modern era. But, as Longman explains, that spark was snuffed out as Google tightened its grip over digital advertising marketplaces, and print revenue began drying up. Publishers have increasingly been left at the mercy of the tech giant, whose share of the ad-selling market has reached nearly 90 percent, according to filings from the Department of Justice, which brought the case along with several states.  

Google achieved that dominance through acquisitions over the last 20 years, which coincided with a historically permissive antitrust enforcement environment. The corporation has used that market power, in tandem with its surveillance advertising capabilities, to starve news outlets of revenue. The Mountain View, California-based corporation currently pockets well over 30 percent of the revenue from publisher ad sales, enabling the company to generate over $30 billion in revenue from the sector in 2023, about a 10^th of Alphabet’s annual revenue. As witnesses representing several news organizations testified at trial, the exorbitant rate and the devaluation of their ad space through surveillance methods that allow the corporation to target their high-value readers on cheaper sites siphoned billions from publishers.  

That revenue loss has proved disastrous for journalism. According to an analysis by the Press Gazette, U.S. and United Kingdom news organizations shed nearly 4,000 jobs in 2024, following an even more brutal environment in 2023 that saw over 8,000 positions eliminated. Those losses have, not coincidentally, coincided with a growing information crisis and increasing political polarization. Returning even a fraction of the revenue Google has extracted from content publishers would help staunch the industry’s bleeding and improve our information environment. 

However, that relief could still be years away. On top of what may be a lengthy remedies process, Google has already indicated its intent to appeal the decision. As the Center for Journalism & Liberty within the Open Markets Institute laid out in a seminal report, Democracy, Journalism, and Monopoly, at the end of 2023, reining in Google’s advertising monopoly is only one of many necessary measures to stabilize and revitalize the journalism business.  

Policymakers should build on whichever remedies Brinkema imposes by cracking down on invasive data practices that allow advertisers to undercut publishers by targeting their audiences in cheaper venues and by crafting stricter non-discrimination and must-carry laws that prevent search platforms like Google and social media platforms like Facebook and X from systematically suppressing links to news publishers’ content. Furthermore, the U.S. should follow the lead of lawmakers in Australia, Canada, and many other nations that now require major platforms to directly negotiate with digital publishers over the significant value that news content adds to their sites. 

The post Court Ruling Against Google Ad-Tech Monopoly Is a Victory for Journalism appeared first on Washington Monthly.