By Dave Lindorff

The one thing we are not hearing from Congress or from incoming
president Barack Obama in the current economic crisis facing the
country are the words “anti-trust” and “public ownership.”

From the moment the crisis first struck, with the near collapse of
AIG, the mantra has been that companies like AIG, Morgan Stanley,
Merrill Lynch, Citibank, etc.--and more recently General Motors Corp.
and Ford--are “too big to fail.” That is, it is argued that these
companies are so huge that if they were to collapse into the rubble
they deserve to be, it would damage the nation irreparably.

The question is, if that is genuinely the case, why were they
allowed to be that big in the first place, and why aren’t we rethinking
that policy?

It’s not as though they got that way through organic growth by
being successful at what they did. Hardly. GM was the quintessential
result of a merger of smaller automakers. Ford grew too, by acquiring
the competition, most recently Volvo. Most, if not all of those
acquisitions were first vetted and approved by the Federal Trade
Commission and found to be acceptable as a matter of economics and
public policy.

In the banking industry, which is regulated, the picture is even
worse, with the government first opening the door to the creation of
national banking companies, and then routinely approving the gobbling
up of one after another regional or even national bank by another. At
some point we reached the point where the giants in the
industry—Citibank, JP Morgan Chase, Bank of America, Wells Fargo,
etc.—were able to say, when they ran into trouble, that allowing them
to fail would have dire consequences for the national economy. This
kind of extortion should never have been allowed to happen.

First of all, the argument for national banks never made sense for
ordinary people, and wasn’t necessary for large customers either. Large
corporate fundings have always been done by bank consortia, and this
could have been accomplished with the nation’s banking industry
fragmented into small state-chartered institutions. Meanwhile, small
businesses and individuals always lose when a bank is national in
scale. It is much more costly to handle the banking business of small
enterprises and individual families than it is to handle the business
of huge corporate clients, with the result that the major banks have
made it costlier and costlier for small customers to do business with
them.

The answer is clear. Bigness is fundamentally bad when it comes to
capitalism. There is a point where any company in any industry becomes
too big for it to be socially acceptable. Big companies not only
attempt to behave in a monopolistic fashion by destroying or buying up
the competition, both nationally or, as in the case of a retailer like
WalMart or a bank like Citibank, locally, using their huge financial
power to locally underprice the competition and drive them out of
business (after which they are free to gouge the local customer base).
They also ride roughshod over local political interests, demanding tax
breaks, zoning waivers, etc. This being the case, the government should
simply not be allowing corporations to achieve such scale and market
dominance.

Companies, whether banks, car makers, or media companies, should
never be allowed to grow to a point that they become “too big to fail.”
If that can be said about any company, whether because of the assets it
holds, or because of the number of people it employs, it is time to
break it up.

Think of GM. If GM were ripped up into six or seven competing
companies, it is certain that at least one of those smaller entities
would be producing electric cars by next year. The Saturn plant already
made one, the Impact, that was wildly popular (see the excellent
documentary “Who Killed the Electric Car”), and if left to its own
devices to sink or swim, could probably be cranking those out in volume
for the 2010 model year.

Some companies would certainly fail. But that’s what is supposed to happen in a capitalist system.

This piece is not meant to be a paen to capitalism. But having said
that, if you’re going to have capitalism, which is the ruling ideology
here in the US of A, you have to let it function as intended. As soon
as the government comes in and starts encouraging the establishment of
monopolies or quasi-monopolies, and preventing the failure of poorly
managed enterprises or dying industries, as it is doing in the case of
the banking and automotive sectors, it is no longer true capitalism.

That could work, too. Many democratic countries, including Japan,
Sweden, France and Germany, have the concept of shared governance of
corporations, in which large corporate entities are partially owned and
run by government, and of planned economies, in which certain sectors
are deliberately protected and promoted by government policy. The US
has moved in that direction with the investment by the government in
nine of the country’s largest banks, and in discussions to provide
$25-50 billion in financial assistance to the major US auto companies.
But in the US case, the government is studiously avoiding demanding a
role in running those companies. It is by design only a “passive”
investor.

This is the triumph of ideology over rationality and the public
interest. I recently interviewed a number of investment strategists in
the course of working on an article for an investment magazine. They
all had the same advice for worried investors: invest in shares of the
“magic nine” banks that are recipients of tens of billions of dollars
in bail-out money from the federal government. As they all point out,
the government’s stake in these banks means that they will not be
allowed to fail, and moreover, they are in a unique position to use
their flush capital reserves to acquire, at fire sale prices, the
assets of smaller banks that are being left to sink or swim in the
current credit crisis and recession. That is not a free market. It’s a
government program to reduce the competition in the banking sector and
hand all the business over to a favored few giant banks.

Now that would be okay if the government, in return for its
investment, were taking a management role in those favored banks. But
it is not. Congress, the Bush administration, and, so far at least, the
incoming administration of Barack Obama, have not been demanding a
management stake in any of the companies that are getting bail-out
funding. If the government takes ownership positions at all, it is
taking non-voting shares in those companies, solely in the hope of
someday getting some of the invested money back by selling those
shares.

This is not just a rip-off of the taxpayer. It is a craven program
to enrich big investors in the bailed-out enterprises, while putting
control of the nation’s economic destiny increasingly into a smaller
number of hands of people whose interests are not even aligned with the
national intereest (these are, after all, all transnational
corporations only nominally headquartered in the US).

There is, of course, another reason that companies should never be
allowed to become “too big to fail.” That is political clout. The US
political system is already largely an owned-and-operated subisidiary
of corporate America. When companies become as large as AIG or GM or
Bank of America, they also gain a disproportionate influence over the
political apparatus that is an order of magnitude larger than their
share of the national GDP. It’s not just that they have limitless money
to donate to political campaigns. They also, by their size, are able to
dispense political favors in virtually every congressional district,
much as the Pentagon has been doing for the past half century, and also
to threaten national havoc if they don’t get their way.

Don’t expect much in the way of scrutiny of this bailout process
from the corporate media, by the way, which has been engaged in the
same process of national consolidation for the past few decades. But
clearly, the public needs to wake up and start demanding that if our
money is going to be used to bail out these corrupt and horrifically
managed enterprises, we the people need to have a controlling interest
in running them, so that they are run in our interest. Better yet, we
should be demanding that these bumbling colossuses be broken up into
little pieces, and then left to sink or swim on their own like the rest
of us.
_________________
DAVE LINDORFF is a Philadelphia-based journalist and columnist. His
latest book is “The Case for Impeachment” (St. Martin’s Press, 2006).
His work is available at www.thiscantbehappening.net