The vast majority of the nation’s citizens do have the power to alter the rules of the market to meet their needs. But to exercise that power, they must understand what is happening and where their interests lie, and they must join together. We have done so before. If history is any guide and common sense has any sway, we will do so again.
Acknowledgments
This book is the product of several years of research, observations, and discussions, undertaken with many people whose insights appear throughout. It is impossible to thank all of them adequately. My colleagues at the Goldman School of Public Policy at the University of California, Berkeley have been founts of intellectual provocation and nurturance. I am particularly indebted to Henry Brady, Sean Farhang, Alex Gelber, Hilary Hoynes, David Kirp, Amy Lerman, Paul Pierson, Jesse Rothstein, and Eugene Smolensky for their valuable comments on earlier drafts. I am also grateful to several friends and former colleagues whose candid and constructive criticisms kept me on track. Richard Parker, Jacob Kornbluth, John Isaacson, Steve Silberstein, Michael Pertschuk, Paul Starr, Laura Tyson, and Erik Tarloff deserve special mention. The eminent political economist Charles Lindblom added valuable perspective, for which I’m especially grateful. Three exceptional graduate students—Liz Gross, Sonja Petek, and Taylor Smiley—provided superb assistance tracking down hard-to-find facts and examples. Technical assistance was deftly furnished by Manuel Castrillo and Sergey Shevtchenko. My ever-cheerful and remarkably efficient assistant, Rebecca Boles, helped in ways too numerous to mention. I have appreciated the research support provided by the Goldman School and the Blum Center for Developing Economies. My literary agent, Rafe Sagalyn, offered valuable advice, as he has done so many times before, and my editor, Jonathan Segal, was a source of wisdom and common sense, as has been his custom. Not the least, I am grateful to my wife and partner, Perian Flaherty, whose passion for authenticity and social truth is an enduring inspiration.
Notes
INTRODUCTION
Then, the CEOs of large corporations: See Lawrence Mischel and Alyssa Davis, CEO Pay Continues to Rise as Typical Workers Are Paid Less, Issue Brief #380, Economic Policy Institute website, 2014 (http://www.epi.org/publication/ceo-pay-continues-to-rise/).
In those years, the richest 1 percent: See, for example, A. Atkinsin, T. Piketty, and E. Saez, “Top Incomes in the Long Run of History,” Journal of Economic Literature 49, no. 1 (2011): 3–71.
Confidence in the economic system: While in 2001 a Gallup poll found 76 percent of Americans satisfied with opportunities to get ahead by working hard and only 22 percent dissatisfied, by 2013, only 54 percent were satisfied and 45 percent were dissatisfied. See Rebecca Riffkin, “In U.S., 67% Dissatisfied with Income, Wealth Distribution,” Gallup website, January 20, 2014 (http://www.gallup.com/poll/166904/dissatisfied-income-wealth-distribution.aspx).
The apparent arbitrariness: According to Pew, the percentage of Americans who feel most people who want to get ahead can do so through hard work had dropped by fourteen points since 2000. See Pew Research Center for the People and the Press/USA Today, “January 2014 Political Survey, Final Topline,” Pew Research Center website, January 15–19, 2014 (http://www.people-press.org/files/legacy-questionnaires/1-23-14%20Poverty_Inequality%20topline%20for%20release.pdf).
the economic and political systems seem rigged: Sixty-three percent of Americans believe most members of Congress are willing to sell their vote for either cash or a campaign contribution, and 59 percent think it likely their own representative already has. Sixty-six percent think most members of Congress do not care what their constituents think. See “Americans Don’t Think Incumbents Deserve Reelection,” Rasmussen Reports website, October 2, 2014 (http://www.rasmussenreports.com/public_content/archive/mood_of_america_archive/congressional_performance/americans_don_t_think_incumbents_deserve_reelection).
The threat to capitalism: See “Views of Government: Key Data Points,” Pew Research Center website, October 22, 2013 (http://www.pewresearch.org/key-data-points/views-of-government-key-data-points/).
While this book focuses: See European Commission, Standard Eurobarometer 81, Spring 2014: Public Opinion in the European Union, First Results, European Commission website, July 2014 (http://ec.europa.eu/public_opinion/archives/eb/eb81/eb81_first_en.pdf).
1 THE PREVAILING VIEW
“[in nature] there is no place”: See Thomas Hobbes, Leviathan, or the Matter, Forme, and Power of a Commonwealth, Ecclesiastical and Civil (1651), ch. 13, “Of the Natural Condition of Mankind as Concerning Their Felicity, and Misery.”
As the economic historian Karl Polanyi recognized: See Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (New York: Farrar & Rinehart, 1944).
2 THE FIVE BUILDING BLOCKS OF CAPITALISM
Accordingly, the “free market”: See John Rawls, A Theory of Justice, rev. ed. (Cambridge, MA: Belknap Press, 1999), pp. 102–68.
3 FREEDOM AND POWER
In 2010, a majority of the Supreme Court: Citizens United v. Federal Election Commission, 558 U.S. 310 (2010.) (http://www.supremecourt.gov/opinions/09pdf/08-205.pdf)
Therefore, said the court: Ibid (http://www.supremecourt.gov/opinions/09pdf/08-205.pdf).
In Carter v. Carter Coal Company (1936): Carter v. Carter Coal Co. et al., 298 U.S. 238 (1936), p. 311 (http://scholar.google.com/scholar_case?q=%22Carter+v.+Carter+Coal+Co.%22+OR+%22298+U.S.+238%22&hl=en&as_sdt=2006&case=6690667556596791816&scilh=0).
Carter was subsequently overruled: See, for example, United States v. Darby, 312 U.S. 100 (1941.) (http://www.gpo.gov/fdsys/pkg/GPO-CONAN-1992/pdf/GPO-CONAN-1992-13.pdf)
Allowing Internet service providers: See Nick Russo and Robert Morgus with Sarah Morris and Danielle Kehl, The Cost of Connectivity 2014, Open Technology Institute at New America website, October 30, 2014. See also Claire Cain Miller, “Why the U.S. Has Fallen Behind in Internet Speed and Affordability,” New York Times, October 30, 2014 (http://www.newamerica.org/oti/the-cost-of-connectivity-2014/#26) (http://www.nytimes.com/2014/10/31/upshot/why-the-us-has-fallen-behind-in-internet-speed-and-affordability.html?abt=0002&abg=1).
Permitting drug companies: See Valerie Paris, “Why Do Americans Spend So Much on Pharmaceuticals?” PBS NewsHour website, February 7, 2014 (http://www.pbs.org/newshour/updates/americans-spend-much-pharmaceuticals/).
4 THE NEW PROPERTY
Garrett Hardin warned: Garrett Hardin, “The Tragedy of the Commons,” Science 162, no. 3859 (1968): 1243–48.
slaves far outnumbered free persons: Adam Hochschild, Bury the Chains (New York: Houghton Mifflin, 2005), p. 2.
The Republican Party in the United States: See Heather Cox Richardson, To Make Men Free: A History of the Republican Party (New York: Basic Books, 2014), pp. 6–12.
By the end of the nineteenth century: Hochschild, Bury the Chains, p. 3.
It was not officially banned: Constance Johnson, “Mauritania; United Nations: Plan to End Slavery Expected,” Law Library of Congress website, March 11, 2014 (http://www.loc.gov/lawweb/servlet/lloc_news?disp3_l205403886_text).
Even in twenty-first-century America: See Shared Hope International, National Colloquium 2012 Final Report, Shared Hope International website, May 2013, p. 80 (http://sharedhope.org/wp-content/uploads/2012/09/National-Colloquium-2012-Report.pdf).
beginning with the Land Ordinance of 1785: “Teaching with Documents: The Homestead Act of 1862,” National Archives website (http://www.archives.gov/education/lessons/homestead-act/).
Henry George, in his book Progress and Poverty: Henry George, Progress and Poverty, 25th ann. ed. (Garden City, NY: Doubleday, Page & Company, 1912), p. 9.
The book sold two million copies: Ibid., p. x.
airlines with overbooked flights: See Julian L. Simon, “The Airline Oversales Auction Plan:
The Results,” Journal of Transport Economics and Policy 28, no. 3 (1994): 319–23.
The framers of the Constitution: U.S. Constitution, art. I, sec. 8.
The first patent law in America: Patent Act of 1790, 1 Stat. 109–12 (1790).
Congress has extended patent protection: The Patent Act of 1793 said patents could be obtained for “any new and useful art.” See Patent Act of 1793, 1 Stat. 318–23 (1793).
almost ten thousand employees: U.S. Patent and Trademark Office, Performance and Accountability Report Fiscal Year 2009, Patent and Trademark Office website, p. 11 (http://www.uspto.gov/about/stratplan/ar/2009/2009annualreport.pdf).
and the federal courts included: See Administrative Office of the U.S. Courts, “Caseload Statistics 2014: Caseload Analysis,” table “Federal Circuit Filings, Percent Change Over Time,” U.S. Courts website (http://www.uscourts.gov/Statistics/FederalJudicialCaseloadStatistics/caseload-statistics-2014/caseload-analysis.aspx). See also PricewaterhouseCoopers LLP, 2013 Patent Litigation Study, PricewaterhouseCoopers website, 2013, p. 6 (http://www.pwc.com/en_US/us/forensic-services/publications/assets/2013-patent-litigation-study.pdf).
Amazon, for example: Peri Hartman, Jeffrey P. Bezos, Shel Kaphan, and Joel Spiegel, Method and System for Placing a Purchase Order via a Communications Network, U.S. Patent 5,960,411, filed September 12, 1997, and issued September 28, 1999.
Apple received a patent: Casey Maureen Dougherty and Melissa Breglio Hajj, Embedding an Autograph in an Electronic Book, U.S. Patent 8,880,602, filed March 23, 2012, and issued November 4, 2014.
IBM and Microsoft: See Timothy B. Lee, “Software Patent Reform Just Died in the House, Thanks to IBM and Microsoft,” Washington Post, November 20, 2013 (http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/20/software-patent-reform-just-died-in-the-house-thanks-to-ibm-and-microsoft/).
By purchasing Motorola Mobility: See Phillip Elmer-DeWitt, “Is Google Buying Motorola for Its 24,000 Patents?” Forbes, August 15, 2011 (http://fortune.com/2011/08/15/is-google-buying-motorola-for-its-24000-patents/).
White House intellectual property advisor: Colleen Chien, “Reforming Software Patents,” Houston Law Review 50, no. 2 (2012): 323–88.
America spends far more on medications: OECD, Health at a Glance 2013: OECD Indicators (OECD Publishing, 2013), pp. 160–61. See also Valerie Paris, “Why Do Americans Spend So Much on Pharmaceuticals?” PBS NewsHour website, February 7, 2014 (http://dx.doi.org/10.1787/health_glance-2013-en) (http://www.pbs.org/newshour/updates/americans-spend-much-pharmaceuticals/).
Of the $3.1 trillion: National Center for Health Statistics, Health, United States, 2013: With Special Feature on Prescription Drugs, National Center for Health Statistics website, 2014, tables 112 and 114 (http://www.cdc.gov/nchs/fastats/health-expenditures.htm).
Drug prices are high in America: Robert Pear, “Bill to Let Medicare Negotiate Drug Prices Is Blocked,” New York Times, April 18, 2007 (http://www.nytimes.com/2007/04/18/washington/18cnd-medicare.html).
applications for patents on vaccines: Elisabeth Rosenthal, “The Price of Prevention: Vaccine Costs Are Soaring,” New York Times, July 2, 2014 (http://www.nytimes.com/2014/07/03/health/Vaccine-Costs-Soaring-Paying-Till-It-Hurts.html).
Pfizer raked in nearly $4 billion: Ibid (http://www.nytimes.com/2014/07/03/health/Vaccine-Costs-Soaring-Paying-Till-It-Hurts.html).
The capsules were simply: Ed Silverman, “Actavis Is Ordered to Continue Selling the Namenda Alzheimer’s Pill,” Wall Street Journal, December 11, 2014 (http://blogs.wsj.com/pharmalot/2014/12/11/actavis-is-ordered-to-continue-selling-the-namenda-alzheimers-pill/).
America is one of the few advanced nations: C. Lee Ventola, “Direct-to-Consumer Pharmaceutical Advertising: Therapeutic or Toxic?” Pharmacy & Therapeutics 36, no. 10 (2011): 669–84.
The ostensible reason: “Food and Drug Administration Safety and Innovation Act (FDASIA),” U.S. Food and Drug Administration website (http://www.fda.gov/RegulatoryInformation/Legislation/FederalFoodDrugandCosmeticActFDCAct/SignificantAmendmentstotheFDCAct/FDASIA/default.htm).
Yet the real threat: Sara R. Collins, Ruth Robertson, Tracy Garber, and Michelle M. Doty, Insuring the Future: Current Trends in Health Coverage and the Effects of Implementing the Affordable Care Act, Commonwealth Fund website, April 2013, pp. 9–10 (http://www.commonwealthfund.org/~/media/files/publications/fund-report/2013/apr/1681_collins_insuring_future_biennial_survey_2012_final.pdf).
Over a five-month period in 2013: Katie Thomas, Agustin Armendariz, and Sarah Cohen, “Detailing Financial Links of Doctors and Drug Makers,” New York Times, September 30, 2014 (http://www.nytimes.com/2014/10/01/business/Database-of-payments-to-doctors-by-drug-and-medical-device-makers.html).
Some doctors pocketed: Ibid (http://www.nytimes.com/2014/10/01/business/Database-of-payments-to-doctors-by-drug-and-medical-device-makers.html).
The tactic costs Americans: “Pay-for-Delay: When Drug Companies Agree Not to Compete,” Federal Trade Commission website (http://www.ftc.gov/news-events/media-resources/mergers-and-competition/pay-delay).
But that argument neglects: Marc-André Gagnon and Joel Lexchin, “The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States,” PLoS Med 5, no. 1 (2008): 0029–0033.
their lobbying tab came to $225 million: Center for Responsive Politics, “Influence and Lobbying: Pharmaceuticals/Health Products: Industry Profile: Summary, 2013,” OpenSecrets.org website (https://www.opensecrets.org/lobby/indusclient.php?id=H04&year=2013).
In 2012 it shelled out more than $36 million: Center for Responsive Politics, “Pharmaceuticals/Health Products Summary,” OpenSecrets.org website (https://www.opensecrets.org/industries/indus.php?cycle=2014&ind=H04).
When the nation was founded: Copyright Act of 1790, 1 Stat. 124 (1790).
This change operated retroactively: For the discussion of copyright history in the United States, see “United States Copyright Office: A Brief Introduction and History,” U.S. Copyright Office website (http://copyright.gov/circs/circ1a.html).
Most of those old copyrights: For a discussion of the Disney case, see Timothy B. Lee, “15 Years Ago, Congress Kept Mickey Mouse out of the Public Domain. Will They Do It Again?” Washington Post, October 25, 2013 (http://www.washingtonpost.com/blogs/the-switch/wp/2013/10/25/15-years-ago-congress-kept-mickey-mouse-out-of-the-public-domain-will-they-do-it-again/).
5 THE NEW MONOPOLY
Between 1978 and 2011: Ian Hathaway and Robert E. Litan, “Declining Business Dynamism in the United States: A Look at States and Metros,” Brookings Institution website, p. 1 (http://www.brookings.edu/~/media/research/files/papers/2014/05/declining%20business%20dynamism%20litan/declining_business_dynamism_hathaway_litan.pdf).
The decline transcends the business cycle: Ibid (http://www.brookings.edu/~/media/research/files/papers/2014/05/declining%20business%20dynamism%20litan/declining_business_dynamism_hathaway_litan.pdf).
And that trend has been immune: Ibid., figure 1 (http://www.brookings.edu/~/media/research/files/papers/2014/05/declining%20business%20dynamism%20litan/declining_business_dynamism_hathaway_litan.pdf).
The average peak Internet connection speed: Akamai Technologies, Akamai’s State of the Internet, Akamai Technologies website, 2014, figures 12 and 22 (http://www.akamai.com/stateoftheinternet/).
many lower-income Americans: Just 52 percent of those with household incomes under $30,000 had broadband Internet access at home in 2013 compared with 91 percent of those earning $75,000 or more. Pew Research Internet Project, “Broadband Technology Fact Sheet,” Pew Research Center website, data
from 2013 (http://www.pewinternet.org/fact-sheets/broadband-technology-fact-sheet/).
The costs are so high: See Susan Crawford, Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age (New Haven, CT: Yale University Press, 2013), p. 65.
When it comes to fiber connections: For speeds, see “Global Broadband: Household Download Index,” Ookla website. For prices, see “OECD Broadband Portal,” section 4.01, “Range of Broadband Prices per Megabit per Second of Advertised Speed,” OECD website, figure 7.17 (http://www.netindex.com/download/allcountries) (http://www.oecd.org/sti/broadband/oecdbroadbandportal.htm#prices).
The project quickly recouped its costs: Susan Crawford, “Government Should Invest in Fiber Optics,” New York Times, July 14, 2014 (http://www.nytimes.com/roomfordebate/2014/07/10/how-to-make-the-internet-available-to-all/government-should-invest-in-fiber-optics).
prohibiting cities from laying fiber cables: Allan Holmes, “How Big Telecom Smothers City-Run Broadband,” Center for Public Integrity website, August 28, 2014, updated September 15, 2014 (http://www.publicintegrity.org/2014/08/28/15404/how-big-telecom-smothers-city-run-broadband).
“Cable’s pretty much a monopoly now”: David Lieberman, “Liberty Media’s John Malone Says Cable Is ‘Pretty Much a Monopoly’ in Broadband,” Deadline Hollywood, May 6, 2011 (http://deadline.com/2011/05/liberty-medias-john-malone-says-cable-is-pretty-much-a-monopoly-in-broadband-129173/).
more than 80 percent of Americans had no choice: Prepared remarks of FCC chairman Tom Wheeler, “The Facts and Future of Broadband Competition,” 1776 Headquarters, Washington, DC, September 4, 2014 (https://apps.fcc.gov/edocs_public/attachmatch/DOC-329161A1.pdf).
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