Evil Geniuses: The Unmaking of America: A Recent History (18 page)

From 1980 on, Law and Economics arguments powered both the subversion of antitrust enforcement and the new mania for deregulation. It also, for instance, provided the rationales for legal and regulatory changes that were particularly sweet for the telecommunication and financial industries, and for corporate defenses of female pay gaps as being justified by economic efficiency. Law and Economics has shaped other policy as well—it even presumes to reduce marriage and child custody and civil liberties cases to simple questions of economic efficiency—but its primary and profound impact has been to fortify the power of big business to do as it pleases.

So the successful war launched by the economic right in the 1970s and ’80s had several theaters, one of which was the law, with two main battlefronts, originalism and Law and Economics. Both were long-haul strategic campaigns effectively camouflaged as impartial philosophical movements. Originalists’ deep anger didn’t really derive from legal analytics about what Bork called “the Supreme Court’s unconstitutional rulings” of the last century. Rather, it was about the progressive
particulars
of what he called “the sustained radicalism of the Warren Court,” such as the rulings that guaranteed equal legal rights for blacks and women and every such “attempt to remake society.” The common mission of the originalists and of the subtler Law and Economics conservatives has been precisely what they ostensibly oppose, of course—to utterly remake our society and political economy using the legal system, to make both resemble their vision of the American good old days, before the 1960s, before the 1930s, before the twentieth century.

*1
LOL. For instance: Alexander Hamilton, confessed adulterer and payer of blackmail to his mistress’s husband, and Thomas Jefferson, secret slanderer of his political opponents.

*2
More than three decades later, in his book
A Country I Do Not Recognize: The Legal Assault on American Values,
published by the Hoover Institution, Bork was still steamed about the 1960s—even by the Students for a Democratic Society’s gentle 1962 manifesto advocating for a “politics of meaning,” after which the “counterculture gained traction and further radicalized attitudes among elites,” in turn causing the Supreme Court to ruin America by “denigrating the sacred, by abolishing taboos, by announcing the principle of man’s radical autonomy.” He also said
in 1996
that “rock ’n’ roll is a subversive music and in that sense could easily lead to drugs.”

*3
Around that time, Bork also wrote a seventy-five-page memo for Barry Goldwater, the Party of Lincoln’s next presidential nominee, providing constitutional and legal backup for his opposition to a federal civil rights law.

Of all the important subjects about which I knew little before I started this book, government regulation of business was one where my knowledge didn’t even count as superficial. The details seemed confusing and tedious and really best left to lawyers and other experts. I think regulation strikes most people that way.

And it was that ignorance and complacency—
leave it to the specialists—
that enabled big business and the right to convince a large majority of Americans during the 1970s and ’80s that they were indifferent to regulation if not actively opposed. Back then, as the great regulatory rollback began, not many Americans were consciously, let alone passionately, dedicated to regulating business in general. For the libertarian right, however, reflexive opposition to any and all regulation was a fundamental principle. And since dealing with regulation usually costs money, big business’s new shamelessness about maximizing profits turned corporate executives into libertarians of convenience.

The public’s turn against regulation also derived from a special case of our confused feelings about the past. The rush to deregulate during the 1970s and ’80s was helped along by the intertwined strains of American suspicion toward government: the angry 1960s anti-Establishment fight-the-Man kind, and also the nostalgic kind based on fantasies of a simpler America before all these dang Washington bureaucrats were telling us what we could and couldn’t do.
^*1
But the vision of the past that Americans bought was a mythical one, consisting of only the nice parts and none of the bad parts—such as brutal and dishonest business practices. Moreover, political conservatives and liberals more or less came to agree in the 1970s that one part of the American past, the New Deal, was obsolete, unworthy of nostalgia. The alphabet soup of regulatory agencies and complicated regimes created in the 1930s and ’40s seemed so…
antiquated.
As with so much that happened to the political economy in the 1970s and ’80s, Americans never had a proper national debate about regulation.

The heart of the right’s successful strategy was to turn regulation of business into a simple-minded, single-minded for-or-against binary question. All politics (and most of life) involves simplifying complex issues. But the politicians’ and propagandists’ oversimplification of this question has been particularly problematic because regulatory policies are so complex, and because there are several distinct
kinds
of regulation that fulfill the basic mission,
serving the public good,
in very different ways.

First are the regulations that help citizens directly, which consist of two basic kinds. There are the ones meant to protect or enhance public health—requiring companies not to poison our water or air or land in the process of making things, and not to make or sell or operate things (foods, drugs, cars, toys, buildings, airliners) that are unnecessarily unhealthy or unsafe. Then there are the regulations that try to make life more fair, like not letting financial firms take advantage of investors and borrowers, and not letting corporate insiders abuse nonpublic information to buy or sell stock in their own companies, and not letting merchandisers lie in their advertising and packaging, and not letting airlines keep you trapped on a plane on a runway for more than three hours.

We’re mostly unconscious of the vast web of government regulations and codes on which we depend to make life safer and fairer and otherwise better than it would otherwise be. As soon as a rule or regulation solves some problem, we tend to forget about both the problem and the solution. If you were to read the previous paragraph aloud to people before asking them the standard Gallup poll question—“Do you think there’s too much, too little or about the right amount of government regulation of business and industry?”—I’m certain that many, many fewer would answer
too much
. In the most recent survey, in fact, 38 percent of people picked that choice, while a large majority, 58 percent, said they want as much or more regulation of business as we have now.
^*2

The other category of business regulation is at least as important, but harder for people to appreciate because it isn’t as much about directly improving their lives and preventing disasters and requires some economic understanding. These are all the laws and regulations intended to make our economic system operate as well as it can, to referee the balance between making American economic life both as free
and
as fair as possible, optimizing those two goals in tandem rather than simply maximizing one.

The main part of this other category of business regulation is antitrust, all the evolving rules spun out of our antitrust laws for more than a century—and, crucially, the
interpretation
of those laws by courts and judges, interpretations that Robert Bork and the Law and Economics movement so effectively changed in favor of big business.

The word
antitrust
was coined back in 1890 when Congress passed the first such law. A
trust
was one of the shockingly large new corporations that had effectively eliminated competition by swallowing up competitors (and suppliers) and thereby controlling whole industries. The important point is that antitrust laws were never anticapitalist or antibusiness. They are anti-
big
-business, but only to the extent that particular companies get so big and dominant in their capitalist sectors that the rest of us are cheated in one way or another.

Properly enforced, antitrust laws prevent corporate gangsterism. Giant companies, simply by being rich and dominant, shouldn’t be able to kill off competitors because they can afford to set prices artificially low temporarily, or to bribe competitors, by acquiring them, to throw the fight. In the 1990s, as Microsoft was extending its quasi-monopoly power over software to the new Internet, the company’s chief technology officer actually used a term from loan-sharking (for extortionate interest) and bookmaking (for taking both sides of a bet) to describe their plans—“that Microsoft intended to get a ‘vig,’ or vigorish, on every transaction over the Internet that uses Microsoft’s technology.”
^*3

The point of antitrust is to keep capitalism as competitive and sustainable and altogether desirable as possible by making sure prices stay as low
and
salaries as high and innovation as robust as an optimally free market will bear. Antitrust enforcers are thus pro-capitalist the way foresters who cut back trees to make room for new growth and gardeners who fight pests and farmers committed to seed diversity are all pro-agriculture.

I mentioned earlier how Americans, in the middle of the last century, took antitrust enforcement more and more for granted, assuming that the old problem of one or just a few companies dominating an industry had been solved. That was why, for instance, newspapers in the 1960s were publishing fewer and fewer articles that referred to corporate monopolies, and after 1970 references to monopoly in American books dropped by half. That complacency helped pave the way for the swift triumph of Bork and the Law and Economics movement and the rest of the anti-antitrust right. In 1969 the Justice Department had launched an aggressive antitrust case against IBM, when it was still effectively the U.S. (and global) computer monopoly. The case dragged on and on, and in 1979 Bork gloated that it was “the antitrust division’s Vietnam.”

In the first year of the Reagan administration, the head of antitrust at the Justice Department decided, as he said, that “the only sensible thing to do” was to drop the IBM case, in line with his new approach of “backing off” antitrust enforcement in general. A few months later, he backed off systematically and officially. The Justice Department issued much looser new guidelines for mergers, based on the Law and Economics premise that it was fine for a couple of companies to dominate a business sector as long as efficiency was maximized and prices were low, and hey,
just
don’t worry
about the other economic and political downsides of corporate behemoths. Under Reagan, the antitrust staff was cut in half, and consequential mergers—such as the
two dozen
between airlines during the 1980s—were consummated with barely a peep from Justice. “When I became a judge in 1981,” the Reagan appointee and conservative anti-antitrust pioneer Richard Posner later confessed, “I thought I had a lot of interesting antitrust cases, and I did—for about three years. And then they started to dry up,” and before long “there were virtually no antitrust cases left.”

The liberal media were also on board for phasing out antitrust. In the first weeks of the Reagan administration, one of
The
New York Times
’s main business reporters wrote an op-ed entitled “Antitrust: Big Business Breathes Easier,” explaining why and endorsing the new laissez-faire consensus: “Many economists and legal scholars contend that with productivity sagging, the nation can no longer afford the costs of antitrust actions,” so “big is no longer bad.” During Reagan’s second term, the
Newsweek
business and economic columnist Robert Samuelson went even further, arguing out that antitrust law itself was obsolete, vestigial.

The antitrust laws reflected the “American fear that concentrated private power could undermine democratic government.” When the antitrust laws were enacted, Big Business was dominant. Government checks were narrow and weak. Now the opposite is true. Government regulation is powerful and pervasive.

And so given “the triumph of [antitrust’s] central political premise,” which was “the subordination of private business to public purpose,” we were…all done! This take got remarkably little pushback in the 1980s.

The final, most interventionist kind of business regulation is quite different from antitrust. These regulators don’t sit and wait to catch a big business violating the law and then sue to stop it. Instead they oversee a given industry closely, constantly, writing and enforcing detailed rules prescribing how each business must conduct itself. For essential utilities like electricity and water that everyone needs, and where the private providers are nearly all local monopolies, or railroads’ inherent regional monopolies—in other words, in economic sectors where monopolies are “natural” and inevitable—that kind of tight control of rates and service is obviously necessary.

Extended to other industries, however, it’s the kind of regulation that by the 1970s and ’80s had often come to be outmoded. As air travel turned into a business in the 1920s and ’30s, the federal government came to exercise this sort of tight control over the new industry. Of course, the federal government needs to set and enforce aviation safety rules and operate the air traffic control system, but for decades a federal agency also decided exactly where each particular airline could and couldn’t fly, how many flights they could run, and how much they could charge for tickets. This system of regulation eventually became problematic because it created an uncompetitive market. Airlines had their own government-protected quasi-monopolies that let them charge high prices that virtually guaranteed high profits. The rigmarole required to adjust fares up or down or change routes was the opposite of nimble. Starting a new airline was nearly impossible. So who finally made airline deregulation happen in the late 1970s?
Famous liberals,
Senator Ted Kennedy and his aide Stephen Breyer, the future Supreme Court justice, in order to make the carriers really compete on price and service. Airline fares dropped, and new, better airlines got started.
^*4

It was also the Democratic president and Congress in the late 1970s that phased out the old government-set prices for natural gas and shipping freight on railroads. Electric utility monopolies were required to start buying electricity generated by other companies. Federal antitrust enforcers in the liberal Johnson administration began a push that finally led in 1975 to the end of the high government-mandated fees that people had to pay stockbrokers when they bought or sold shares.

Suddenly everyone agreed:
deregulation is great!
The Washington left was tweaking and improving the political economy in good faith, finding common ground with the reasonable good-faith Washington right, which still existed. But the craze for deregulation soon became a spectacular example for liberals of no good deed going unpunished. The new big business right had started caricaturing nearly
all
federal regulation as heavy-handed, job-killing, nanny-statist,
bad
.
^*5
Bureaucrat
became a more and more common term of contempt. And as soon as Republicans won the White House and Senate in 1980, they began a promiscuous deregulation frenzy that, with Democrats’ help, extended in every direction for decades.

In case you think
promiscuous deregulation frenzy
might be hyperbole, here’s the astounding hard fact: in 1977, companies in highly regulated industries produced 17 percent of America’s economic output, but just eleven years later, in 1988, that regulated fraction of our economic output had been cut by nearly two-thirds to just 6.6 percent.