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One of the most important political trends of the 2010s was a renewed focus on income and wealth inequality. It was heresy until recently to acknowledge that, since the 1970s, both the Republican and Democratic parties pursued relatively similar policy aims on business deregulation. These policies have resulted in increasing inequality. In the past decade, this has renewed a left-wing movement in the Democratic Party, demanding more populist policies on financial regulation, taxation, social services, and education.

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But important to the success of this movement is understanding why the Democratic party drifted from its populist roots. It’s the party that brought us the New Deal and Great Society programs, after all. In the writer and congressional advisor Matt Stoller’s recently published book, Goliath, he makes the case that cause and effect are one and the same: the revival of big monopolies.

He argues the New Deal succeeded not just by redistributing wealth toward impoverished Americans in the Great Depression (through programs everybody knows, such as Social Security). It also did so by breaking the political power of big oligarchs like Andrew Mellon, breaking apart monopolies few think about anymore, such as Mellon’s Alcoa or the A&P grocery store chain.

In fact, the New Deal revolutions in law and policy were so successful that the following generation of politicians and intellectuals took their accomplishment for granted. Although much of the postwar 1950s prosperity was the result of wartime stimulus and unparalleled American world power, both Democratic and Republican administrations pursued strong antitrust legal activity. This brought critiques from both the left and the right, and the rise of the neoliberal Chicago School of economics. But Stoller details technocratic leftist writing, a genre that was suspicious of the help that antitrust gave to the small businessperson, who was traditionally a Republican and an enemy of perceived “progress.”

One of the most fascinating liberal critics of antitrust in the 1950s was the economist John Kenneth Galbraith. While the field of economics was rapidly veiling itself in mathematical formulas, Galbraith became a public intellectual whose books were bestsellers. His most famous idea was that of the “affluent society”—that the American economy was so productive that scarcity was going to be a thing of the past.

In a 1954 speech, Galbraith responded to critics of an affiliated concept in his writing: “countervailing power.” Eliding decades of legal and grassroots political organizing as an inevitable political process, Galbraith asserted that big government, big business, and big labor are a permanent feature of the new industrial world, and so would balance each other out. As a result, he argued that vigorous anti-trust prosecution was only dragging the country in a regressive direction, negating the economies of scale and innovation that large institutions could achieve.

And yet, in the course of his comments, Galbraith nods to critics who pointed out that the countervailing power could be “circumvented by vertical integration or defeated by inflation.” As it turned out, this is exactly what happened. The 1970s crisis of “stagflation” led an emboldened right-wing to attack and undermine the American labor movement. And ever since, lax antitrust enforcement—in part owing to Galbraith’s encouragement—has allowed the creation of the most sophisticated vertically-integrated monopolies the country has ever seen: Amazon, Google, and Facebook. We are fortunate that Stoller and others are now speaking up about the fact that there is no “countervailing power”—only a long political struggle.

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The American Economic Review, Vol. 44, No. 2, Papers and Proceedings of the Sixty-sixth Annual Meeting of the American Economic Association (May, 1954), pp. 1-6
American Economic Association