Goliath: The 100-Year War Between Monopoly Power and Democracy
By Matt Stoller
(Simon & Schuster, 2019)

I met Matt Stoller when I went to a book talk of his at the headquarters of Public Citizen, a progressive advocacy group. Although I was perhaps the only conservative in the room, Stoller was enthused when he discerned my political leanings, noting (with some disappointment) that contemporary populist conservatives tended to be more interested in the specifics of monopoly power and big finance than their left-wing counterparts are.

It was an astute observation of a change that has become more apparent over the past few years. The office of Republican senator Marco Rubio, for example, has produced reports on the financialization of the U.S. economy and threats posed to American business by Chinese industrial strategy. In recent months, Rubio has used his position as chairman of the previously sleepy Senate Small Business Committee to secure around $349 billion in lending to small businesses affected by the COVID-19 crisis. Meanwhile, Rubio’s colleague Josh Hawley, a Republican senator from Missouri, has mounted what the Washington Post calls a “Crusade Against Big Tech.” Hawley has also put forward an aggressive program to address the plight of the American worker, the U.S. supply chain’s dependency on China, and the need for antitrust enforcement in light of “mergers prompted by [the COVID-19] crisis.”

It is in the context of this renewed interest in antitrust policy that Stoller’s Goliath makes its case for reform. Stoller presents American history since the turn of the twentieth century as a protracted conflict between business monopolists, who seek to concentrate power in their own hands, and humble farmers and shopkeepers, who make up the yeomanry of America. In Stoller’s words: “Americans [in the past] understood concentrated land ownership and control over commerce as an aristocratic system, turning citizens into dependents, and thus eroding democracy. Liberty meant being free from dominion, by autocrats of both politics and trade. The rise of big business . . . was a challenge to this conception.”

Part of his argument is historical. Stoller tells the forgotten story of Texas congressman Wright Patman, who pursued and impeached Andrew Mellon—the three-time Treasury secretary, industrialist, and aluminum monopolist who used his influence to enrich himself at the expense of the country. He also recounts, with a certain relish, how President Franklin Roosevelt took the reins of government and sought to hold the nation’s financiers accountable, dispatching Attorney General Homer Cummings to “vigorously prosecute any violations of the law” in the Department of Justice’s investigations into big banks.

In less flattering depictions, Stoller describes how the Chicago school of economics, under the influence of Aaron Director, Milton Friedman, and Robert Bork, unwound the established wisdom concerning antitrust. Their argument—that regulation should be used only to prevent harm to consumers, not the concentration of economic power—even influenced a generation of Democrats, whose rise culminated in the victory of the “Watergate Babies” of the 1974 election. According to Stoller, their misguided efforts unleashed “the beast of monopoly on the land” once more.

This is a stirring story of political struggle. Throughout, Stoller demonstrates that economic outcomes are the result of specific efforts undertaken by real people rather than the result of impersonal market forces. Yet there are flaws with Stoller’s account of this epic clash. These warrant some consideration.

Hamilton v. Jefferson

Foremost among these is his framing of the conflict between monopoly power and democracy as originating with the ideological feud between Alexander Hamilton and Thomas Jefferson. Stoller describes Hamilton as “a powerful proponent of plutocracy and monopoly,” whose position as the nation’s first Treasury secretary makes him the father of Wall Street. Hamilton is characterized as disdainful of democracy and seeking to imitate the British Empire by creating a commercial aristocracy. Jefferson, by contrast, is presented as a tireless advocate of liberty and equality, seeking “to place power through elections in the hands of the farmer, the worker, the small businessman.”

This is a misleading portrayal of Hamilton, who was an impassioned defender of the Constitution and its republican character. It is true that in his June 18, 1787, speech to the Philadelphia Convention, he advocated a strong national government with an executive, and some legislators, holding life terms, using a blatantly Anglophile tone that he admitted “went beyond the ideas of most members.” Yet he nonetheless voted in favor of the more decentralized and democratic Constitution that the convention produced.

Hamilton’s preference for a strong national government must be understood in the context of his personal experience. As George Washington’s aide-de-camp during the Revolutionary War, Hamilton grappled with the herculean task of keeping the Continental Army fed, supplied, and armed. His February 13, 1778, letter to New York governor George Clinton complains of the

degeneracy of representation in the great council of America. . . . By injudicious changes and arrangements in the Commissary’s department, in the middle of a campaign, they have exposed the army frequently to temporary want, and to the danger of a dissolution, from absolute famine. At this very day there are complaints from the whole line, of having been three or four days without provisions; desertions have been immense, and strong features of mutiny begin to show themselves.

In other words, the Second Continental Congress was failing to keep the army funded. “Power without revenue in political society is a name,” Hamilton would later note. The problem, Hamilton observed in this letter to Clinton, was that the best and most capable men opted to serve in state governments rather than in the Continental Congress. This failing, owing to state parochialism, led Hamilton to support a strong national government, lest the United States be unable to repeat the miracle of a victory against a European great power.

The charge that Hamilton was a proponent of plutocracy and is responsible for the Wall Street we know today is too simplistic. Yes, as Treasury secretary, Hamilton did create the semi-public First Bank of the United States—the forerunner to our modern Federal Reserve—and issued new securities to pay off American debts. But Hamilton’s writings demonstrate that his intent was to jump-start America’s early economy and manufacturing sector for the sake of the broader public. In his Report on a National Bank, which laid out the case for the First Bank of the United States, Hamilton writes: “Public utility is more truly the object of public Banks, than private profit. And it is the business of Government, to constitute them on such principles, that while the latter will result, in a sufficient degree, to afford competent motives to engage in them, the former be not made subservient to it.” His plan—involving not only the creation of a public bank but also the creation of a national mint, the assumption by the federal government of state debts, and the establishment of interest-paying federal debt (via the aforementioned bonds)—succeeded in improving conditions for the general populace of the early republic. Investment was reinvigorated, economic growth took off, and deflation was tamed. Tax burdens on the average American decreased significantly.

Hamilton’s genius was to recognize the concept of endogenous money—that demand for credit determines the money supply. His proposal was that the government assist in meeting this demand for credit by introducing a “greater plenty of money” that could be used by the population for purchasing goods, developing businesses, and investment. Thus, Hamilton concludes, “by contributing to enlarge the mass of industrious and commercial enterprise, banks become nurseries of national wealth.” Hamilton understood what has seemingly been forgotten: in a properly regulated system, banks come to the service of the public by facilitating fair access to credit.

This is the view that Stoller endorses when he praises the New Dealers, who “ensured the banking business was simple and boring.” Under the New Dealers, “banks became essentially public utilities, unconcerned even with profit. . . . Government became a key player in structuring financial markets in a way that distributed power, and supported independent business, family farms, and home owning.” The intent was the same as Hamilton’s.

The similarity between Hamilton’s views on banking and the New Dealers’ is not accidental. FDR had a personal connection to Hamilton in his great-grandfather Isaac Roosevelt, a colleague of Hamilton’s at the New York ratifying convention for the U.S. Constitution in 1788. More important, Isaac Roosevelt succeeded Hamilton as president of the Bank of New York.

When the time came to bring the banking system under control during the Great Depression, FDR took a page from Hamilton’s book by proposing the creation of federal credit banks that could lend to businesses without resorting to Wall Street, which at the time was afraid of releasing more credit into the depressed economy. After this proposal failed, FDR pushed for an expansion of the Reconstruction Finance Corporation’s (RFC) authority so that it could lend directly. This effort culminated in the Industrial Advances Act of 1934, which granted the RFC and Federal Reserve district banks the power to carry out the same duties FDR had wanted the new credit banks to fulfill. Other examples of FDR taking inspiration from Hamilton abound.

Its misrepresentations of a key Founding Father aside, Stoller’s grand narrative also runs into trouble when we consider the damage inflicted by the more zealous antitrust policies emerging from the New Deal. One notable example is the case of electronics company RCA. Stoller makes sparse mention of the company, noting that the Eisenhower administration brought suits against it and that General Electric acquired it in 1985 to compete with the Japanese in color television manufacturing. What Stoller omits is that the Japanese attained an advantage in this field because of the earlier suits against RCA. In a 1998 essay for American Heritage, the historian John Steele Gordon explained:

In 1946 the companies that RCA had shared patents with during the war brought suit under the antitrust laws asking that RCA be forced to continue sharing those patents. . . . The eventual consent decree forced RCA to do just that, but it contained a curious proviso. While RCA had to share its patents with domestic companies for free, it was permitted to license the patents to foreign companies for the usual royalty arrangement. Naturally, RCA, being a profit-seeking company and no longer able to keep its immensely valuable technology to itself, sought to maximize its profits by licensing abroad as much as possible.

Seizing this opportunity, Japanese companies, aided by their protectionist government, took advantage of RCA’s work. Within decades, these companies came to dominate the color television market, depriving America of jobs, technical expertise, and profits. Such cases of reverse industrial policy facilitated by carelessness still occur today.

Other omissions abound in Stoller’s account. Robert Atkinson—whose book with Michael Lind, unsubtly titled Big Is Beautiful: Debunking the Myth of Small Business—runs through a few of them: Wright Patman was supported by small-retailer interests; Stoller dismisses the increased choices and lower prices that come with economies of scale; small businesses are exempt from numerous federal regulations on matters of wages, workplace discrimination, and more.

Yet Stoller’s core argument—that economic and political power concentrated in a few enterprises and individuals is corrosive to American democracy—holds true. The staggering influence of today’s corporate goliaths requires more oversight.

Where to start? Perhaps with finance, for which Stoller holds particular opprobrium. Banks, as the source of credit for the rest of the economy, become a danger to the entire system if they engage in profligate risk taking, speculation, and looting. Their primary function, in a Hamiltonian spirit, should be promoting active capital in the realms of labor and industry, rather than chasing unproductive, purely short-term financial profit.

“Antitrust” in this realm—a return to Glass-Steagall, credit controls, a ban on stock buybacks, and so forth—worked in FDR’s day. Americans will only benefit from a more far-sighted and decentralized banking system that doesn’t wield disproportionate power over the rest of the economy and the political system. Likewise, we could do with money being directed toward productive ventures rather than questionable and overvalued enterprises such as WeWork and Uber—to say nothing of outright frauds like Theranos.

The Three Tiers

Addressing the rest of the economy is a complex matter. Stoller notes in Goliath that American industry is essentially divided into three tiers. First, there are “network industries, where monopolies are sometimes unavoidable.” These include utilities (water, electricity, telecommunications) and transportation (trucking, railroads, airlines). These industries are strictly regulated to ensure that they do not expand outside their domain and “ensure universal service and reasonable rates.” Some of the tech giants’ lines of business should perhaps be included in this category.

Second, there are “industrial corporations requiring the use of science and technology in scale production,” which means an investment in physical capacity is necessary. In other words, anything that involves factories, serious manufacturing, refining, and the like. These companies must be large. As such, regulation here means ensuring that there exist a small number of large companies that compete (and do not coordinate too much) with each other, and that one company does not grow disproportionately powerful.

Finally, there are “areas of the economy that do not require substantial amounts of capital” and where scale, while beneficial, is not fundamentally necessary. This includes everything from farming and wholesalers to retailers, restaurants, and small-scale manufacturing.

It is possible to imagine clear rules for Tier One and Tier Two. Tier Three, though, is problematic. Under the New Deal regime, any firm that attained roughly between 5 and 7.5 percent of market share could be subject to antitrust action. Though Stoller and other anti-monopolists call for a return of fair trade laws and other measures to rein in large companies, advocates of big business point out, correctly, that large-scale enterprises allow lower prices for consumers. Here one must grapple with Goliath’s great question: Should low consumer prices at all costs be the be-all, end-all of our modern society? Are we paying not only a political price for an affluent standard of living (Stoller’s primary point) but perhaps also a social and cultural cost?

Anyone who has been abroad can tell you that food elsewhere often tastes better than in the United States. This is because other countries regulate food for quality, not just consumer safety. Likewise, a society that hangs onto local small businesses tends to be richer in character and quality of life. The act of visiting a distant supermarket does not compare to the experience of visiting one’s neighborhood grocer, butcher, or fishmonger. In the United States, zoning laws place this way of life out of reach.

Prolonged and depressing confinement has forced many Americans to reconsider their local environments in the wake of the coronavirus. Spending our days at home, we become aware of how much time is lost to onerous commutes. Something as simple as a pleasant walk around the neighborhood has become critical for physical and mental health. Restaurants, recreational facilities, and other institutions that provide us with a place to meet friends have been dearly missed. Is there not a better way to live one’s daily life rather than the one dictated by our consumerist culture and the political decisions made to enable it?

Goliath, while primarily focused on matters of political economy, compels us to contemplate what sort of country we wish to live in. It is an invitation to reconsider some of the underpinnings of our current society and aspire to an economic policy that is more humane.

Carlos Roa is the senior editor of the National Interest and a 2020 Constitutional Fellow at the American Conservative and the Center for the Study of Statesmanship.