What is the main message of The Curse of Bigness?

The main message of The Curse of Bigness is the negative impact of monopolies and the need for antitrust enforcement.

Who is the author of The Curse of Bigness?

The author of The Curse of Bigness is Tim Wu.

Economics

The Curse of Bigness Book Summary - The Curse of Bigness Book explained in key points

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The Curse of Bigness summary

Name: The Curse of Bigness
Rating: 4.6 (28 reviews)
Author: Tim Wu

Tim Wu

Antitrust in the New Gilded Age

4.6 (28 ratings)

33 mins

Brief summary

"The Curse of Bigness" by Tim Wu is a thought-provoking analysis of the history of corporate monopoly in the U.S. and its impact on democracy and capitalism. It calls for renewed antitrust laws to protect a healthy market.

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Socialism & Capitalist Critique

Table of Contents

The Curse of Bigness
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Key idea 1 of 11

What’s in it for me? Learn about the history and problems of economic concentration.

In recent decades, industrialized nations have witnessed the reemergence of an economic problem that once seemed like a thing of the past – the problem of economic concentration. This refers to the process by which industries become dominated by a smaller and smaller number of companies, which grow bigger and bigger, until just a handful of corporate giants reign supreme.

Today, the most visible giants are those of the tech industry, such as Amazon, Facebook and Google. But those are just the tip of the iceberg. In the United States, for example, more than 75 percent of all industries have seen increasing economic concentration since the year 2000.

In these blinks, we’ll look at how and why this problem first emerged in the late nineteenth century, subsided in the early to mid-twentieth century and then reemerged in the late twentieth century. While taking this whirlwind tour of economic, political and legal history, we’ll also look at the troubling consequences of economic concentration, as well as some possible solutions.

Along the way, you’ll learn

the counterintuitive arguments in favor of monopolies;
the compelling arguments against monopolies; and
the important figures and movements who made those arguments.

Economic concentration arose in the Gilded Age and culminated with the creation of monopolies.

The story of economic concentration began in the Gilded Age – the period of American history that ran roughly from the 1870s to 1900. In recounting this story, we will focus primarily on developments in the US, which exemplified the trends that were unfolding in industrialized economies all over the world.

At this time, the overall trend could be described as economic concentration on steroids. During the Gilded Age, the industrialized economies became tremendously concentrated, as one company after another merged into larger and larger corporations. These were called trusts. Between 1895 and 1904, about 2,274 American manufacturing companies consolidated into just 157 trusts.

Many of those trusts became dominant players within their particular industries. Out of the 93 major consolidations of the era, 72 of the resulting trusts captured market shares of more than 40 percent, and 42 of them reached more than 70 percent.

Beyond those heights, the most dominant of the dominant trusts became monopolists. A monopolist is a company that has gained almost total control over an entire industry – a condition that is called a monopoly. The word “monopolist” can also refer to the leaders of those monopolistic companies.

By the early 1900s, trusts formed monopolies in nearly every major industry in the United States. Their domains included steel, shipping, railroads, telecommunications, oil, cotton, tobacco, sugar and rubber. The largest monopolists of the Gilded Age became the most famous names of the era, such as John D. Rockefeller’s Standard Oil and Andrew Carnegie’s Carnegie Steel Company. These men became two of the wealthiest individuals in history, with fortunes worth over $300 billion each, when adjusted for inflation.

However, the most successful monopolist of them all was the banker JP Morgan, who achieved monopolies in a range of industries. These included the Northern Securities Company (a railroad trust), the International Mercantile Marine Co. (a shipping trust), AT&T (a telecommunications trust) and US Steel, a steel trust that he formed by fusing together hundreds of steel companies and then buying out his chief rival, the Carnegie Steel Company, in 1901.

Together, Morgan, Carnegie and Rockefeller became the main proponents of the pro-monopoly trust movement, which we’ll look into next.

Advocates of monopolies viewed them as a superior form of economic organization.

Traditionally, competition has been viewed as one of the cornerstones of capitalism. It forces companies to continuously strive to raise the quality and lower the prices of their products and services. If they succeed in doing so, they can take their rivals’ customers. If they fail, they may lose their market share. Thus, they must innovate to survive and thrive – and everyone benefits as a result. Or at least that’s how the traditional thinking about competition goes – but monopolies run directly counter to that thinking. After all, by definition, monopolies eliminate competition.

But the monopolists of the Gilded Age were unapologetic in their opposition to this idea. Instead, they believed that monopolies were a superior form of economic organization, which would usher in the next stage in the evolution of capitalism. Advocates of this view became collectively known as the trust movement.

Advocates of monopolies advocated social Darwinism and laissez-faire economics.

Although monopolies are antithetical to competition, they can also be viewed as the natural culmination of it – or so the trust movement argued.

The logic here is simple. When companies compete over a market, there are winners and losers. Some companies win greater shares of the market, while others lose their shares and are put out of business or swallowed up in mergers or buyouts. Either way, competition results in fewer competitors commanding larger percentages of the market.

Monopolies can be inefficient, and they undermine workers, consumers and competition.

For the trust movement, the enormous size of monopolist companies was a virtue, not a vice, since it enabled them to benefit from economies of scale. However, when a company gets too big it starts suffering from diseconomies of scale – its operations become less efficient as it gets bigger.

That’s because the bigger a company gets, the more complex it becomes. It needs more employees, which means more managers and more complicated hierarchies. On top of that, bigger companies are less adaptable to changes in the market. With more moving parts, corporate behemoths are simply less nimble than smaller companies. If becoming an economic giant comes with such disadvantages, why would a company want to become one in the first place? Well, there are also advantages to becoming so big. Unfortunately, they come at the expense of everyone else.

Large companies in noncompetitive markets can greatly influence governments.

In order to carry out their more dubious schemes, the big companies of the Gilded Age needed the government to turn a blind eye – or, even better, lend a helping hand. To that end, they used their economic clout to exert influence over the government.

For example, when pipelines started replacing railroads as the way to transport oil, Rockefeller convinced the government to withhold the permits that would-be competitors needed to build oil pipelines in many areas. And when they did manage to build pipelines, he worked to bankrupt them and then buy them out by using tactics like overpaying for crude oil in certain markets, while artificially lowering its prices in others.

In the early 1900s, the US government started fighting back against economic concentration.

The effects of the trust movement didn’t go unnoticed. Indeed, there was significant dissatisfaction with monopolists and oligopolists among citizens and the government.

Increased economic concentration led to civil unrest starting around the 1880s and extending to the 1900s. Workers went on strike, an Anti-Monopoly Party was formed and the populist Democrat William Jennings Bryan ran for president three times. Meanwhile, over in Europe, there were socialist, communist and anarchist movements afoot, portending the possibility of even greater unrest and revolution if things didn’t change.

In the mid-twentieth century, the US government continued to fight back against monopolies.

With one notable exception, the government kept busting the monopolies into the second half of the twentieth century. That exception was the Great Depression, particularly around the early 1930s. During that time, Congress suspended antitrust laws, hoping this would help jumpstart the economy.

But after the Great Depression and World War II, the US government returned to its trust-busting ways with renewed fervor. Part of that was because they’d seen what those monopolies could do if left unchecked, as had happened in imperial Japan, fascist Italy and Nazi Germany leading up to and during the war. For instance, prior to the rise of Adolf Hitler, the German Republic had tolerated monopolies in many of its major industries, leading to powerful monopolists such as the Krupp armaments company, the Siemens railroad and infrastructure conglomerate and the IG Farben chemical cartel. The latter became one of the main industrial hubs around which the Nazi war economy was organized.

The US government’s trust-busting campaigns culminated with the breakup of AT&T in the 1980s.

Created by JP Morgan, the telecommunications corporation AT&T was the largest company in the world in 1974, and it had been a monopoly for six decades. In fact, by the 1970s, it wasn’t just monopolist – it was a “super monopolist,” controlling six or seven monopolies at once. These were in industries such as local telephone service, long-distance telephone service, physical telephones and telephone accessories.

In theory, it was a regulated monopoly, since its operations were subject to oversight from the government. But in reality, the relationship often worked the other way around, with the government regulating the telecommunications industry on the company’s behalf.

In the late twentieth century, trust-busting stalled.

Just as the early twentieth century’s rise of the antitrust movement was led by trailblazers such as Theodore Roosevelt, the late twentieth century’s demise of the movement’s legacy also had its key figures. One of them was Robert Bork.

Bork was a legal scholar who studied law at the University of Chicago, which became a hotbed of conservative economic, political and legal thought from the 1950s onward. Bork became one of the institution’s main legal thinkers in the 1960s, especially with the publication of his landmark 1966 paper, “Legislative Intent and the Policy of the Sherman Act.”

By the end of the twentieth century, economic concentration had returned full force to the US economy.

After the triumph of Bork’s reinterpretation of the Sherman Act, trust-busting would never regain its former vigor. In the 1990s, the Clinton Administration initiated a major antitrust suit against Microsoft, but it proved to be the last hurrah of the trust movement’s legacy.

Winding through the court system, the suit against Microsoft seemed to be heading toward a big breakup – but before it could get there, George Bush was elected president, and the Justice Department decided to settle the suit. Under the Bush Administration, the Justice Department failed to pursue a single anti-monopoly case or block a single merger in eight years.

There are simple steps the US government can take to return to fighting economic concentration.

There are a few simple things the government can do about the dominance of monopolies and oligopolies. Instead of a consumer welfare litmus test, the government can institute a “protection of competition test.” The aim here is to broadly encourage and preserve competitive markets, rather than narrowly focus on prices.

That focus is a dead end, as witnessed in the legal arguments over the 2018 merger between AT&T and TimeWarner. Instead of talking about the public good and the dangers of concentrated private power, the lawyers ended up arguing over whether the merger might lead cable customers to pay an extra 45 cents per month for their cable service.

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What is The Curse of Bigness about?

The Curse of Bigness (2018) deals with topics and questions that have become especially pressing in recent times. How and why have markets become dominated by a handful of corporate giants? And what can we do about it? To answer these questions, the author recounts the political, economic and legal history of economic concentration. Along the way, he examines the dangers that come with it, and how they can be mitigated.

The Curse of Bigness Review

The Curse of Bigness (2018) by Tim Wu explores the impact of monopolies and the dangers of concentration of power in modern society. Here's why this book is worth reading:

It offers a critical analysis of the role of big corporations in shaping our economy and society, challenging conventional wisdom.
Through compelling case studies and historical examples, it sheds light on the consequences of unchecked monopolistic power.
The book raises important questions about the relationship between market power, democracy, and individual liberty, making it thought-provoking and relevant.

Who should read The Curse of Bigness?

Citizens worried about unchecked corporate power
People interested in the intersection between politics, economics and law
Late-nineteenth and twentieth-century US history buffs

About the Author

Tim Wu is a professor at Columbia Law School. He was formerly a senior advisor to the US Federal Trade Commission, a senior enforcement counsel at the New York Office of the Attorney General and a member of the Obama administration’s National Economic Council. As a policy advocate, he is best known for the phrase "network neutrality," which he coined in his influential 2003 paper, “Network Neutrality, Broadband Discrimination.” He is the author of The Master Switch and The Attention Merchants.

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