Tim Wu, a law professor at Columbia University, spent the last decade establishing himself as one of the pre-eminent antitrust thinkers. In the Master Switch and The Attention Merchants, Wu used a wide-angle lens to examine the implications of the rising information cartels on American business and society. In The Curse of Bigness, Wu takes a magnifying glass to industrial concentration and the economic and political dangers it creates. The book succinctly distills a generation of research into one easily digestible volume. In this post, I will review and summarize the main argument that Tim Wu makes in The Curse of Bigness.
The Monopolization Movement
- In the early 20th century what became known as the Trust Movement took control of American economic and political life. Finding its’ roots in social Darwinism, the trust movement imagined a nation based on survival of the fittest, where one ultra-strong private monopoly controlled every single industry in America.
- From 1895–1904 2,274 competing manufacturing firms merged into 157 dominant corporations that dominated the economic and political soul of America.
- The most famous include Standard Oil and U.S. Steel, the later which was formed when J.P. Morgan paid Andrew Carnegie $310 billion to quit competing.
Democracy Strikes Back
- Wu’s core argument is inspired by the works of Louis Brandeis — “an advocate, reformer, and future Supreme Court Justice.” This section serves as a recap of Brandeis’ dominant philosophy.
- Brandeis believed that real freedom was freedom from both private and public interests. “If he had a unifying principle, politically and economically,” Wu writes, it can be summarized as follows” concentrated power in any form is dangers, institutions should be built to human scale, and society should pursue human ends.”
- Enacted in 1890, the Sherman Antitrust Act was the first attempt at combatting monopolization. The law was incredibly broad and lacked specific enforcement powers — leaving it relatively toothless without strong administration.
- Teddy Roosevelt was the first President to administers the laws’ powers — stopping a planned railroad merger in 1904.
- Roosevelt felt that the question was more political than economic. In a democratic society, a private trust should not be more powerful than the government. If a railroad trust controlled 75% of the nation’s shipping, it was more powerful than the government. It’s route decisions impacted businesses, schools, and governments. It was the government’s role to ensure the people had a say in the economy.
- The 1912 election was fought primarily about the proper role and use of antitrust. Roosevelt, now the head of the Bull Moose Party, wanted to legalize trusts, through nationalizations or government oversight. Democrat Woodrow Wilson whose chief economic advisor was Louis Brandeis, held that antitrust was really a question of democracy. The only way America could survive was if power was decentralized.
- Wilson won, and Brandeis’ views were ushered into the mainstream.
Peak Antitrust and the Chicago School
- The movement against antitrust began at the University of Chicago — a school founded by the owner of the most gigantic trust in history — John D. Rockefeller. Led by Aaron Director and Robert Bork, it held that mergers should only be stopped if they were to impact consumers through monopoly behavior.
- By this time antitrust was viewed as a defense against fascism, but Bork and his allies argued that significant issues of democracy and power should not be considered. Initially, the Chicago School was ignored, it won converts by crafting an intentionally misleading and revisionist argument.
The Last of the Big Cases
- AT&T was given a government-sponsored monopoly to maintain the nations communications infrastructure. In the 1960s the government began investigating the company — although it never went to trial.
- The risk of the trial led AT&T to divest itself, which led to America’s computer boom. Wu argues proof of this is in Japan. Once a rival to American technology, it never broke up the state monopoly and saw itself surpassed by smaller American upstarts.
- From 1980–1995, Microsoft behaved as an early monopolist, and the government threat of intervention allowed a nascent internet to develop commercially. Without it, we’d all be using Bing.
- Wu outlines how the Chicago view eventually became the standard of which antitrust was administered in America.
- The Sherman Antitrust Act does not have an enforcement mechanism. Intentionally weak administration of our antitrust laws has directly caused rampant inequality and the fracturing of American democracy.
The Rise of the Tech Trusts
- Google, Amazon, Apple, and Facebook are now the four core Trusts of the information industry. They defend their business not through a better product, but by creating monopolist moats around their industries.
The 15 word “The Curse of Bigness” Review
A great and readable primer into perhaps the most important issue of our time: modern antitrust.