The 2008 financial crisis was traumatizing for millions of Americans. For some, the pain was visceral, caused by losing a job, a home, savings. For others, like Matt Stoller, the suffering was more existential. Stoller was working as a congressional staffer during the financial meltdown and witnessed firsthand how the US government screwed over homeowners while bailing out the bankers and speculators who had caused the crisis.
Stoller wasn’t alone in his disgust. Neil Barofsky, a prosecutor for the Southern District of New York who was brought on to oversee the Troubled Asset Relief Program, had similar sentiments. After much thought (and a book), Barofsky concluded that the US government had been “captured by the banks.” Stoller would no doubt agree, but in his new book, Goliath: The 100-Year War Between Monopoly Power and Democracy, he situates the crisis in a much longer struggle.
For Stoller, a fellow at the Open Markets Institute, the 2008–10 swindle was the culmination of a decades-long surrender to corporate power in America facilitated by the abandonment of the antitrust policies and norms instituted during the New Deal.
Stoller says policymakers during the 2008 financial meltdown were unable to come up with anything better than bailing out the bankers because they had forgotten (or never learned) American history — in particular, the history of how New Dealers successfully reined in corporate power. Goliath is both an effort to provide this history and to inspire readers to join a new anti-monopoly movement.
Stoller’s History Lessons
Goliath starts with the country’s “third crisis” (after the Revolutionary War and the Civil War): the emergence of concentrated corporate power in the Gilded Age and the threat it posed to democracy. The insatiable greed of robber barons spurred a “new political party, the People’s Party,” formed by ordinary Americans trying to “translate their desire for liberty in an industrial age into a political program.”
The Populist movement inspired visionaries, Stoller argues, like Louis Brandeis and Woodrow Wilson, who sought to curb the growing appetites of America’s corporate behemoths and warned that “failure to constrain the power of trusts would mean monopolies and financiers would be our ‘masters.’” Wilson’s death, however, destroyed the populist momentum. Instead the country got “Mellonism,” named for the last of the robber barons, Andrew Mellon.
In these dark days (the Roaring Twenties), the country was plunged headlong toward crisis as vast corporate trusts used and abused ordinary Americans. “After decades of antimonopoly crusading by aggressive politicians, pledging to stand up to big money, and failing spectacularly, this was the aftermath. The monopolists were in control.”
Treading familiar ground, Stoller argues that it took a deep depression, and a bold politician — Roosevelt — to put the country on the right path. Equally important to Roosevelt, however, were men like Wright Patman, a salt-of-the-earth congressman from Texas unafraid to speak truth to power. Together, these men put in place a framework of restraints on industrialists, retailers, bankers, and speculators to prevent a rerun of the Great Depression and the catastrophic war that followed.
By the end of the Second World War, a new balance of power had emerged:
The corporate CEO was still a powerful and influential actor both within the corporation and in the wider society. But his boss was no longer the investment bankers. He had to look out for a mix of stakeholders: organized labor, antitrust enforcers, national security officials, regulators, shareholders, congressional leaders, suppliers, and customers. There was competition, but attempts to merge or collude with competitors could be met with a swift antitrust suit.
In taking on the trusts, Stoller contends, populists returned the country to its roots of “industrial liberty” and regulated competition: “America became, once again, a nation of tradespeople. In this newly decentralized economy, an astonishing 49.7 percent of returning veterans from World War II eventually started businesses.”
As Keynes had promised, with a little regulation and a lot of legwork, corporations were transformed from “tigers and wolves” into well-trained “domestic animals.” The banking industry and Wall Street became sleepy affairs. “Wall Street had in many ways been reduced to a utility,” Stoller contends, “with financiers as supplicants to businesses, attempting to get their deposits and borrowing business.”
Alas, the beasts didn’t stay tame. By the 1960s, the tide had turned against the populists, and by the ’80s, the lessons of the New Deal had been thoroughly forgotten. Goliath points the finger at a colorful cast of characters.
First were the smug, elitist intellectuals like historian Richard Hofstadter and rock-star economist John Kenneth Galbraith, both representatives of the “corporate left.” Hofstadter, Stoller says, rewrote history to make the populists seem like grubby, backward racists. “His work would prove to become essential to dampening the American intellectual suspicion toward concentrated financial power.”
Galbraith, for his part, Stoller argues, was in thrall to “bigness”: “Bigness was modern and progressive, with smart new technology. Smallness was dingy and reactionary.” Stoller bemoans how Galbraith’s “quasi-Marxist” theories painted large corporations as essentially benevolent entities necessary for progress, paving the way for a return of monopolies.
Then there was the Chicago School, the tip of the sword for a renewed corporate right. In his treatment of this bunch, Stoller focuses not on the usual suspects such as Milton Friedman and Friedrich Hayek, but men like Aaron Director and Robert Bork, who he argues had outsize influence in resurrecting trusts through their social networks.
There was also the misguided consumer rights movement “influenced by Galbraith and elite postwar liberals, and organized by Galbraith’s friend Ralph Nader.” This group, Stoller contends, was part of a broader formation:
The final group in the debate was the leaders of rising generation of baby boomers influenced by the countercultural form of politics, young, numerous, self-righteous, dubbed “the New Left.” Much of the political energy in the 1960s was oriented around race relations, environmentalism, and the war in Vietnam, often organized on the college campuses the leaders of this generation attended . . . These were the children of affluence.
Goliath tells the story of how the New Left sent its representatives to Washington after Nixon got the boot. But these youngsters — the “Watergate Babies” — didn’t “know anything about banking, or corporate concentration, and fewer of them cared.” Instead, they saw themselves as consumers rather than citizens and “revered the seeming brilliance of the liberal intelligentsia, attracted to egghead technocracy.”
The corporate right and left, Goliath argues, morphed into a new kind of liberalism that begat increased anxiety, inequality, and precarity. In this environment,
Americans were taught to believe their longing for freedom was immoral. Power was recentralized on Wall Street, in corporate monopolies, in shopping malls, in the way they paid for the new consumer goods made abroad, in where they worked and shopped. Yet policymakers, reading from the scripts prepared by Chicago School “experts,” spoke of these changes as natural, “scientific,” a result of consumer preferences, not the concentration of power.
How to Rein in the Corporations
Stoller frames the struggle between democracy and monopoly as one not between left and right, but rather between populists and elitists. Indeed, he places equal blame on progressives, arguing that the Left – captained by elitist scholars Hofstadter and Galbraith – was a huge proponent of monopoly firms in the postwar decades, helping to lay the groundwork for the disastrous inequality that we see today.
Stoller is correct in the sense that there was, in the two decades following the Second World War, a broad understanding among progressives that big corporations could be instrumental in building working-class power. But it wasn’t because workers, union leaders, and labor scholars loved bigness and despised mom-and-pop stores (though small business were often just as exploitative as large ones). In the face of the Taft-Hartley Act and the vicious crackdown on the shop-floor democracy movement that had blossomed in the 1930s and ’40s, workers and their representatives had few illusions about the benevolence of big companies.
For genuine labor advocates, the focus on big corporations was rooted in a struggle to build lasting working-class power. As a result of the 1930s sit-down strikes at some of the country’s largest corporations, American workers won concrete and meaningful gains. For the first time, working people got a heady taste of their potential power if they worked together toward a shared goal. By forcing large companies to the bargaining table, workers could impact working conditions across entire sectors and industries, benefiting all workers and their families.
By the 1960s, the limits of this strategy were clear. The fundamentally contradictory position of unions in capitalism, the Cold War, and the hard line taken by companies toward anything beyond bread-and-butter offerings limited the transformative potential of organized labor. Meanwhile, the deeper impact of giant corporations (which, though reined in, continued to grow in the 1950s and ’60s) on society as a whole became a topic of much discussion on the left. Paul Baran and Paul Sweezy (Monopoly Capital) and, later, Harry Braverman (Labor and Monopoly Capital) were just a few of the scholars grappling with the deep shifts occurring in capitalism and what these shifts meant for working people.
But anti-capitalist critique of monopoly power and corporate abuse doesn’t find its way into Goliath. It is gestured toward in a couple of breezy paragraphs about the pitfalls of “inevitabilism.”
Toward the end of the Obama administration, a left-wing type of criticism emerged, an argument that the financial crisis and the response to it was all just an inevitable unspooling of capitalism with booms and busts and rampant inequality, a simple fact of life under a free market system. This critique, though appearing to present a radical challenge to the status quo, actually bore the same logic of the officials in charge during the financial crisis. It had an elitism of its own, a naivete similar to that of the Watergate Baby generation, an unwillingness to think hard about commerce and markets. Inevitabilism, whether oriented around the sin of capitalism or the glory of it, reflects a refusal to entertain free will.
We can give Stoller the benefit of the doubt here and assume he’s aware that “a left-wing type of criticism” of capitalism predates Obama. We can also admit that there are some Marxists who see the breakdown of capitalism around every corner.
But in consigning the rich body of anti-capitalist critique to the useless lump of “inevitabilism,” Stoller misses the chance to actually answer the question that purportedly prompted him to write Goliath: Why did the US government bail out the bankers instead of regular folks? Answer: the US Treasury was not only in charge of managing the US economy, but also global capitalism — it was the “lender of last resort.” With no working-class power to push it in a different direction, it managed the US crisis the same way it had managed dozens of crises around the world in the previous two decades.
Stoller’s dismissiveness of the value of an anti-capitalist critique also causes him to write off the social movements of the 1970s as a bunch of misguided, affluent “babies.” Even a cursory glance at radical scholarship about the ’70s highlights how the deep contradictions of US-led capitalism, in combination with the limitations of previous social movement formations, created an incredibly difficult terrain for progressives trying to grapple with a profound, society-wide crisis.
Antiwar protestors weren’t just spoiled college kids engaging in a pet project. The antiwar movement was, at its peak, an international, cross-class movement protesting America’s genocidal campaign against the Vietnamese people. It embodied a deep critique of both US corporations and the US government. It was a call for a different global model in which the economic and political sovereignty of countries, particularly poor countries in the Global South, was respected.
The antiwar movement was intertwined with a constellation of other movements, made up of rank-and-file workers, people of color, women, students, the elderly — ordinary people from all walks of life. These movements were trying out new strategies in the face of an entrenched racist, sexist, homophobic, and anti-worker status quo. The limitations of the “old left” pushed these movements in new directions, some fruitful and some decidedly not. But chalking up these attempts as little more than a bucket of mistakes isn’t all that helpful.
Finally, Stoller’s insistence on the irrelevance of an anti-capitalist critique prevents him from asking hard questions of his own narrative, such as: Why were antitrust principles, despite showing strong results and being enshrined in US law, already coming under attack by the 1950s, and ultimately incapable of constraining the power of capital?
The failure of antitrust wasn’t simply because people forgot that these laws were a useful tool. Antitrust failed because it didn’t fundamentally alter the drives of corporations, nor was it part of a broader project to democratize the economy and the state. The success of antitrust rested on a shaky foundation of strong labor and progressive liberal hegemony — both of which proved short-lived.
This doesn’t mean antitrust had no value or isn’t something that should be featured in a democratic populist program today. It is simply to say that antitrust is, and was, an extremely limited strategy for reining in corporations. The only way to challenge the power of corporations is to change the terrain on which they operate through a broad socialist movement rooted in an alternative vision of society.