Cornered , livre ebook

Table of Contents
 
Title Page
Copyright Page
Preface
The Missing Force
The Next Crash
The Makers of Things
Acknowledgements
 
Chapter 1 - The Hidden Monopolies Everywhere
 
And Then There Was One
The Unkept Secret
The Feud over Feudalism
And Then There Was Less Than One
 
Chapter 2 - Supply and Command
 
The Law of Variety
The Illusion of Choice
The Price of Control
A Market of One?
 
Chapter 3 - The Crystal House
 
The Industrial Estates
Number One or Number Two
The Smashing
The Monopolist
The Hydra
The Industrial State?
Built to Break
 
Chapter 4 - The Market Masters
 
Markets and Freedom
The Harnessing of Power
Meet the New Boss
The “Progress ” of Man
The Restoration of Republic
The Pit
 
Chapter 5 - In the Cockpit
 
The New Sharecroppers
The Paradox of Efficiency
The Invisible Fist
The Two Roads to Serfdom
The Politics of Milking
 
Chapter 6 - Lightning Escapes the Bottle
 
From Land to Man
The Power of Patents
Quieting the Mind
The Monopoly Innovation Myth
One Best Way?
The Wave of the Past
 
Chapter 7 - The American Piece
 
Squeeze Play
Rule and Reason
The U.S. World System
Derangement
The Octopus and the Spider
Plantation Nation
 
Chapter 8 - Wreckonomics 101
 
Merely Money
The Wall Street Commune
To Have and to Hold
Cerberus Unchained
 
Chapter 9 - To Keep Our Republic
 
Manufacturing Destruction
The American Brain
To Get Regulation Right
 
Notes
Select Bibliography
Index

Copyright © 2010 by Barry C. Lynn. All rights reserved
 
Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada
 
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com . Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions .
 
Limit of Liability/Disclaimer of Warranty: While the publisher and the author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
 
For general information about our other products and services, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.
 
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com .
 
 
Library of Congress Cataloging-in-Publication Data:
Lynn, Barry C.
Cornered : the new monopoly capitalism and the economics of destruction / Barry
Lynn.
p. cm.
Includes bibliographical references and index.
eISBN : 978-0-470-55703-7
1. Monopolies—United States. 2. Capitalism—United States. I. Title.
HD2757.2.L96 2009
338.8’2—dc22
2009020805
Preface
Of Rule and Ruin
Sometimes, during the long haul of writing a book, reality catches up to what months before seemed mere theory and speculation. So it was when the Meltdown of 2008 cascaded through the U.S. and world economies, knocking over banks and hedge funds and industrial companies, and destroying small businesses and steady jobs and household budgets.
For nearly a decade I had painstakingly gathered stories and spun out analyses to detail the fantastic fragility of many of our vital human systems, and for years I had been warning that these dangers were largely the result of monopolization. Then suddenly I saw a few of my worst fears playing out in real time on CNN and Fox News, as dozens of financial institutions deemed “too big to fail” suddenly came very close to failing. Yet as horrified as I was by the mind-bending events on Wall Street (and the crashing of the automobile industry in Detroit), I soon came to realize that the Meltdown was making my task in this book much easier. These chain reaction crashes and the gargantuan bailouts and nationalizations that followed were educating all Americans, with brutal efficiency, about how things really work in our economy, and how they sometimes don’t.
The Meltdown of 2008 even delivered my punch line for me: that American financiers had erected a particular form of socialism that enabled them to dump all the risk in the industrial and banking systems they control onto us, even as they jetted away with all the profit. I had been developing my thinking on this issue for years, and I had planned to lay it out in this book with the utmost care, because as recently as September 14, 2008, the idea that these systems had been socialized in any respect still struck most people as absurd. Then suddenly there was conservative columnist George Will writing that socialism in America is “ already here.” Moreover, Will made clear that he was fretting not about penny ante redistribution from the rich to the poor but about the “surreptitious socialism of the strong.” 1
The Meltdown of 2008 also delivered the twist I had planned for my punch line, which is that the structural monopolization of so many systems has resulted in a set of political arrangements similar to what we used to call corporatism . This means that our political economy is run by a compact elite that is able to fuse the power of our public government with the power of private corporate governments in ways that enable members of the elite not merely to offload their risk onto us but also to determine with almost complete freedom who wins, who loses, and who pays.
Then suddenly there was Secretary of the Treasury Henry Paulson, not long since elevated from Goldman Sachs, using our tax money to fix his bank and the banks of all his friends. And there was Simon Johnson, the former chief economist at the International Monetary Fund, writing about the “quiet coup” that had been staged by America’s “financial oligarchy.” 2
I realized that I no longer needed to craft Cornered as a sort of murder mystery, in which I patiently reveal and analyze each clue. I was writing a chronicle of a death foretold, and the corpse on the street was the American Republic.
Great disasters often lead to reform and renewal. Unfortunately, our leaders’ initial reaction to the Meltdown indicates that they did not learn the key lesson: when something is too big to fail, we must make it smaller. Or perhaps they simply chose to ignore it. Whichever is the case, despite much public awareness of the role that monopolization played in amplifying the Meltdown—one Financial Times editorial was titled “The Bigger They Come the Harder We Fall” 3 —the Bush and the Obama administrations and the Democratic-controlled Congress all responded to the collapse of our financial system in most instances by accelerating consolidation.
“Our” government used our money to broker and subsidize such whopping mergers as the Wells Fargo takeover of Wachovia, the JPMorgan Chase acquisition of Washington Mutual and Bear Stearns, and Bank of America’s absorption of Countrywide Financial and Merrill Lynch—this despite the fact that in the year up to November 2008, the failure rate for banks with assets of $1 billion or more was seven times greater than for banks with less than $1 billion. 4 This was also despite the fact that big banks and financial institutions like Countrywide—which were able to import far greater masses of debt and then dedicate far greater marketing power to selling that debt to us in the form of mortgages—were far more reckless and destructive in their lending than their smaller rivals.
Nor was our “emergency ” bailout money used only to subsidize consolidation in our banking system, where at least there was a real crisis. After Congress demanded that our bailed-out banks act swiftly to flush cash into the economy, to get business “moving” again, Citibank and Goldman Sachs and Bank of America jumped to the task. They put $22 billion of our money into the hands of executives at the world’s largest drug company, Pfizer, to float a $68 billion takeover of the drug company Wyeth, in a deal that eliminated not only competition at a time of sky-rocketing drug prices but also nineteen thousand jobs. Then when the executives at the world’s number two drug company, Merck, said they wanted $41.1 billion to merge with Schering-Plough, these same banks ponied up another $9 billion of our money, even though this deal eliminated yet more competition and another sixteen thousand jobs. 5
We can’t blame all of this on greed and opportunism. Simple inertia played a role. So too did plain old confusion.
No matter the cause, however, the effects are clear. Consolidation of power by financiers over the basic institutions of our political economy has resulted in the derangement not merely of our financial systems but also of