The Curse of Bigness Summary

Concentrated industries aren't just bad for the economy—they threaten democracy itself.

The Rise of Economic Giants in the Gilded Age

During the Gilded Age (1870s–1900), the industrialized economies experienced a rapid centralization of power as smaller companies merged into massive trusts. This was an era characterized by unprecedented industrial growth, yet it came at the cost of mounting economic inequality. Over 2,000 companies in the US consolidated, reducing the competitive landscape significantly.

Monopolies emerged as single entities took complete market control. For instance, John D. Rockefeller’s Standard Oil and Andrew Carnegie’s Steel Company became representatives of this massive concentration, controlling over 70% of their industries. This overwhelming dominance not only stifled competition but also allowed these monopolists to wield enormous influence over both the economy and politics.

JP Morgan was the apex of this era’s monopolists, forming giants like US Steel and AT&T that controlled entire sectors. By stripping the market of competition, monopolies like these gained unchecked power, making it nearly impossible for smaller competitors to survive or new ones to emerge.

Examples

• Standard Oil controlled over 90% of oil refineries in the US.
• US Steel monopolized the steel industry by consolidating hundreds of companies.
• Northern Securities Company monopolized railroads, threatening economic balance.

Why Monopolists Defended Their Practices

Advocates for monopolies argued that they brought stability and efficiency to chaotic markets. During the late 1800s, the trust movement justified consolidating companies as the answer to unregulated competition, which they claimed created market instability and bankruptcies.

This pro-monopoly stance promoted centralized control, allowing businesses to benefit from economies of scale. For example, producing goods in higher volumes reduced costs per unit, making industries more efficient. Monopolists positioned themselves as ushering humanity into more organized and stable economic systems. However, this stability came at the cost of competitive innovation and fair distribution of wealth.

At its heart, the argument favored large corporations over smaller businesses. Their ability to regulate prices and production was seen as a superior way of serving the market, even if consumers and small businesses bore the costs of reduced choices and higher prices.

Examples

• Rockefeller negotiated exclusive railroad shipping deals to lower oil costs.
• Critics in the 1890s argued competition created economic turbulence, which monopolies resolved.
• Mass production by monopoly companies reduced short-term consumer prices but stymied long-term innovation.

The Role of Social Darwinism in Gilded Age Economics

Monopolists justified their dominance through Social Darwinism, the concept that only the strongest—both biologically and economically—would survive. Proponents of this theory believed monopolies were the natural outcome of a survival-of-the-fittest market structure.

This ideology extended to opposing any government intervention, favoring laissez-faire economics. Monopolists argued competition naturally weeded out weak companies, leaving behind only the most capable and deserving. This philosophy conveniently ignored the manipulation and exploitation that allowed monopolies to flourish, such as exclusive shipping deals and predatory pricing.

Further aligning with this doctrine, some monopolists resisted labor protections or consumer rights. This rigid adherence to Darwinistic views led to actions as extreme as some supporting eugenics programs to “purify” the workforce—showing how economic ideas permeated social policies.

Examples

• Rockefeller’s control over rail shipping was described as “natural” market dominance.
• Social Darwinism justified rejecting regulations like child labor protections.
• Advocacy for laissez-faire economics led to gaps in industrial accountability.

The Harm to Workers and Consumers

While monopolists claimed to act in the public’s favor, their practices frequently harmed workers and consumers. Monopolies wielded power to reduce wages arbitrarily, enforce harsh working conditions, and inflate prices. In essence, lack of competition left consumers and laborers with little leverage.

For example, Rockefeller’s Standard Oil charged competitors higher shipping rates while bolstering his dominance with discounts. Once other businesses failed, he raised gasoline prices for consumers nationwide. Monopolists also crushed unions, ensuring employees had no recourse against reduced pay or unethical treatment.

Rather than innovating, monopolists often blocked progress to maintain their market dominance. High entry costs, control over resources, and legal hurdles kept smaller companies from competing.

Examples

• Workers at US Steel endured long hours for low pay with no alternative employers.
• Gasoline prices rose sharply after Standard Oil dismantled rivals.
• Limits on pipeline construction ensured Rockefeller’s continued dominance.

Monopolists and Political Influence

Monopolists’ power didn’t stop at economic dominance—they influenced policy decisions as well. Gilded Age monopolies often ensured government support, lobbying for laws that either maintained or further cemented their control.

Rockefeller, for example, blocked rivals’ pipeline permits by leveraging government influence. Meanwhile, the pharmaceutical industry lobbied successfully to prevent Medicare from negotiating lower drug prices, ultimately securing billions in additional revenue for just a small lobbying investment.

With concentrated influence, monopolists manipulated laws in their favor. This created a dangerous balance where corporate interests replaced public welfare in governmental decision-making.

Examples

• Rockefeller convinced governments to favor his pipelines.
• Late 20th-century antitrust policies failed as mergers ballooned.
• The pharma industry’s $116 million lobbying in 2013 safeguarded $90 billion in profits.

Early 20th-Century Antitrust Wins

Antitrust movements emerged in response to growing inequality and unrest. Leaders like Theodore Roosevelt initiated bold actions, starting with the Sherman Act of 1890, which outlawed trusts and monopolies.

Standard Oil and AT&T were landmark test cases where government pushback succeeded in breaking monopolies. Roosevelt’s administration alone filed 45 cases, and his successor, William Taft, took on even more. Successful breakups spurred innovation and fostered competition—a trend that revitalized entire industries.

Public trust in government increased as tangible victories showcased its ability to temper private power. However, the fight was never consistently applied, leaving room for monopolies to re-emerge in later years.

Examples

• Standard Oil’s 1911 breakup transformed petroleum markets.
• AT&T's dissection in the 1980s created robust telecommunications competition.
• Roosevelt’s “trust-buster” policies pioneered government intervention.

The Decline of Antitrust Efforts

The late 20th century marked the retreat of trust-busting efforts. Scholars like Robert Bork posed arguments narrowing the Sherman Act to focus solely on consumer pricing. Interpretations shifted from protecting competition itself toward evaluating whether monopolies directly hurt consumers’ wallets.

This led to diluted interventions. The Microsoft antitrust case of the 1990s resulted in settlement, not systemic change. President Bush’s administration played a hands-off role, allowing mergers to resume. As legal frameworks softened, technology giants began absorbing competitors, solidifying their grip.

Examples

• Facebook’s acquisition of Instagram and WhatsApp reflects unchecked power.
• Airline mergers since 2001 cut options for travelers while inflating ticket costs.
• Cable monopolies like Verizon emerged from leniency in rules governing mergers.

Returning to Antitrust Traditions

To address today’s monopolies, governments could learn from historical trust-busting successes. Proposed solutions include banning mergers that reduce competition to fewer than four entities within an industry. Such rules could prevent monopolistic market formations before they become entrenched.

The government could also implement automatic investigations into markets dominated by one player. These would ensure unfettered competition over time, as seen in successful probes into the UK’s airports.

Finally, governments shouldn’t fear breaking down large corporations into smaller entities. Breaking up massive corporations like AT&T shows how it can be a structured, beneficial process for markets and consumers alike.

Examples

• UK regulators successfully reinvigorated their airport industry.
• AT&T’s 1980s breakup fostered telephone innovation and competition.
• Clear guidelines banning overtly large mergers would simplify regulation.

Takeaways

1. Advocate for rules that prevent further mergers in concentrated industries to sustain competition.
2. Support or petition for automatic investigations into industries that harbor long-term dominance by a single entity.
3. Push policymakers to reintroduce and prioritize trust-busting efforts that can renew innovation and balance in markets.