The Finance Curse. Nicholas Shaxson
legalistic hairsplitting,” he thundered in 1961. “The world of antitrust is reminiscent of Alice in Wonderland.” The problem wasn’t big business, he said; it was big antitrust and big government. This irate Wall Street partner, whose name was Alan Greenspan, would later become chairman of the US Federal Reserve.7
The United States is the historical home of anti-monopoly, and trends around the world have been led by what happens there. Anti-monopoly has been hard-wired into the American psyche since the country’s founding. America’s rugged individualism emerged as a bulwark not only against oversized government but against overwhelming business and financial power too. The Boston Tea Party of 1773, which helped trigger the War of Independence from Britain, was in large part a protest against the monopolizing East India Company, “which, besides the trains of evil that attend them in the commercial view, are forever dangerous to public liberty,” wrote Samuel Adams and John Hancock.8 And this was always understood: monopoly wasn’t just an economic problem but a fundamental threat to liberty and democracy.
Anti-monopoly zeal and monopoly power ebbed and flowed for centuries alongside shifting political tides. President Andrew Jackson launched a titanic struggle in the 1830s against what he called a “hydra of corruption”—a net of interlinked monopolies centered on the Second Bank of the United States—and his victory preceded a period of strong defenses against business predation and of tremendous economic dynamism. “The stranger is constantly amazed by the immense public works executed by a nation which contains, so to speak, no rich men,” wrote the French political scientist Alexis de Tocqueville in 1840. “What astonishes me is not so much the marvelous grandeur of some undertakings, as the innumerable multitude of small ones.”9
The Civil War in the 1860s was a fight against slavery and monopoly: the abolitionist senator Thomas Morris of Ohio called “slave power” the “goliath of all monopolies,” and his fellow abolitionist Wendell Phillips railed against the “aristocracy of the skin” in the slave economies of the South. When the war ended, however, America drifted fitfully toward the “age of Caesarism,” the era of the Rockefellers, Carnegies, and J. P. Morgan, who justified their power as necessary to “rationalize” their industries in more “efficient” ways.10
Democratic pushback emerged to confront these concentrations of economic and political power, often with geographical roots that are eerily similar to what we see today. Communities across rural and poor America saw large conglomerates sucking wealth and control away from their regions to benefit elites in mostly coastal cities like New York. The Sherman Antitrust Act of 1890, which empowered the government to finally break up Standard Oil in 1911, was partly inspired by these geographical iniquities. “If we would not submit to an emperor,” declared Senator John Sherman, after whom the act was named, “we should not submit to an autocrat of trade.”11 The act was fairly broad and blunt, but its teeth were sharpened with new laws added over the coming decades.
The biggest wave of antitrust actions to date happened in the 1930s with Franklin D. Roosevelt’s New Deal, a sweeping package of progressive political reforms in response to World War I and the great crash of 1929, which helped shift economic and political power away from finance and large corporations toward ordinary folk. The New Dealers created a carefully calibrated system of government checks and balances to mediate between competing social priorities, regionally and nationally, breaking up concentrations of power in different parts of the economy. Their flagship legislation was probably the Glass-Steagall Act of 1933, which forced banks to separate their commercial banking activities from the more speculative investment banking, breaking up the banking behemoths.
At every stage it was understood that this was not so much about economics as political power and protecting democracy. Economic efficiency was exactly the wrong goal; the point of antitrust laws, as the antitrust lawyer Louis Brandeis explained, “was not to avoid friction, but by means of the inevitable friction incident to the distribution of the government powers among three departments, to save the people from autocracy.”
While Hayek and the neoliberals saw government as the agent of tyranny, with the post–World War II Soviet Union as the prime bogeyman, the anti-monopoly crusaders argued that large concentrations of private power bred tyrannical government, especially fascism. For them, Nazi Germany was the prime exhibit. “The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself,” Roosevelt said in a landmark address to Congress in 1938, as war loomed in Europe. “That, in its essence, is Fascism—ownership of Government by an individual, by a group, or by any other controlling private power.” The Nazi state, the corporatist Fascist Italian state, and the imperial Japanese economic system were all heavily cartelized; in fact the Nazis in 1933 had actively encouraged the formation of big industrial cartels as a way of enforcing top-down control, eliminating foreign competitors and juicing up profits for big firms backing the war effort. As trust-busting US congressman Emanuel Celler put it, “The monopolies soon got control of Germany, brought Hitler to power and forced virtually the whole world into war.”12
When the war ended, a victorious America began to spread its doctrine of benevolent antitrust around the globe like a democratizing shock wave. The United States inserted anti-monopoly principles into the constitutions of the defeated aggressor countries as one of its “four Ds” for postwar governance: denazification, deconcentration, democratization, and decartelization. European countries adapted in their own ways. Britain took all this rather seriously too, though in its own way. For Britain’s financial sector, run by an old boys’ network that had grown fat off the profits of empire and had been protected from international competition, the problem was less about monopolizing giants and more about gentleman’s agreements to carve up turf, restrict competition, and pocket the resulting profits.13 After the war, Britain’s bloodied workers were in no mood for compromise, and the new economic regime that began to emerge wasn’t so much about breaking up giant corporations as about full-scale nationalization, bringing the energy industries, the railways, the coal mines, and iron and steel under government control. And on the European Continent the 1957 Treaty of Rome, which laid the foundations for the European Economic Community, contained strong antitrust provisions modeled on the Sherman Act.14
But with the growth of the offshore Euromarkets in London, the steady resurgence of finance, and the rise of neoliberalism, the pendulum began to swing back again. US regulators began to notice British intransigence. “There was always a lot of trouble across borders,” said the antitrust lawyer Jack Blum. US laws in this area were supposed to apply internationally, but “the British fought us tooth and nail on that proposition,” he said. “That was with regularity. The UK passed laws to prevent the US investigating.”15 Yet these were minor difficulties when compared to the devastating blows that were to come, especially at the hands of Director’s dinner guests, most obviously Robert Bork.
Bork was a cranky lawyer who had been growing steadily more agitated about impending moral collapse. He blamed America’s ills on feminists, multiculturalists, gays, pornographers, fearmongering “race hustlers,” and most especially leftist professors. He once asserted that “homosexuals, American Indians, blacks, Hispanics, women, and so on” had only “allegedly” been subjected to oppression, and that the list of victim groups “is virtually endless, including at one time everybody but ordinary white males.”16 The answer to modern moral turpitude, he said, was censorship.
With eyes alternately hooded and bulging, and sometimes both at the same time, if you can picture that, Bork was beefy, physically imposing, and, to many people, terrifying. One television critic said he “looked and talked like a man who would throw the book at you—and maybe the whole country.” As US solicitor general, Bork fired the courageous special prosecutor in the Watergate scandal that would eventually bring down President Nixon in 1974, a dismissal that was later ruled illegal. Years later Senator Edward Kennedy would denounce him in these terms:
Robert Bork’s America is a land in which women would be forced into back-alley abortions, blacks would sit at segregated lunch counters, rogue police could break down citizens’ doors in midnight raids, schoolchildren could not be taught about evolution, writers and artists would be censored at the