August 03, 2006
Thanks Again, Ron

Until reading this piece by Barry C. Lynn in Harper’s Magazine it had never occurred to me that outsourcing was, fundamentally, an antitrust issue. As with so many of our problems, the initial push over the cliff came from the sainted Ronald Reagan. These excerpts only give the briefest sketch of Lynn’s argument, so read it all.

The Reagan Administration’s assault on antitrust enforcement had an even more dramatic effect on manufacturers. Complete license to expand horizontally resulted, in many industries, in the virtual collapse of the vertically integrated firm. Once they consolidated control over their marketplaces, scores of big manufacturers shut down or spun off most or even all of such naturally expensive and risky activities as production and research.

These firms opted instead to purchase components and other manufacturing “services” from smaller companies whose main or only path to the final marketplace passed through their offices. This is true of corporations as diverse as Nike, Boeing, 3M, and Merck. Although it has become commonplace to trace the phenomenon of “outsourcing” to the emergence of new technologies and changes in the global “marketplace,” it is much more accurate to trace it back to the disappearance of antitrust enforcement …

The difference between a system dominated by firms built to produce and a system dominated by firms built to exercise monopsony power over producers is extreme. The producers that dominated the American economy for most of the 20th century were geared to build more and to introduce new, to protect their capital investments against overly predatory investors, to raise price faster than cost, to show some degree of loyalty to workers and outside suppliers and communities.

Wal-Mart and a growing number of today’s dominant firms, by contrast, are programmed to cut cost faster than price, to slow the introduction of new technologies and techniques, to dictate downward the wages and profits of the millions of people and smaller firms who make and grow what they sell, to break down entire lines of production in the name of efficiency. The effects of this change are clear: We see them in the collapsing profit margins of the firms caught in Wal-Mart’s system. We see them in the fact that of Wal-Mart’s top ten suppliers in 1994, four have sought bankruptcy protection …



Posted by Jerome Doolittle at August 03, 2006 09:13 AM
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Mrs. Batard had an old book laying around that she must have picked up at a tag sale. In it I found this quote:

"Let us henceforth make war on all monopolies-whether corporate or union. The enemy of freedom is unrestrained power, and the champions of freedom will fight against the concetration of power wherever they find it.

Any guesses as to who said it?

Hint: It's a political book, written in my lifetime, and I'm under not yet 50, and the quoted person wasn't a Democrat.

Posted by: Buck on August 4, 2006 10:39 PM

Ike? I don't know, I give up. Who?

Posted by: CCRyder on August 6, 2006 10:33 AM

Yeah, who, Buck?

Anyway, in reading the article cited, I thought of Soviet monopsony as the sole buyer of wheat in the Ukraine, several paragraphs before the author started making allusions in that direction. That policy didn't work out in that instance or in general.

Posted by: Joyful Alternative on August 6, 2006 8:10 PM

Believe it or not, it's in Barry Goldwater's campaign book "The Winning Side --The Case for Goldwater Republicanism" in the "quotes section of the book. Some of Goldwater's statements make one wonder how the country ended up so far to the right that we've gone over the cliff. On the other hand, there's a whole host of racist screed in the book too.

Posted by: Buck on August 7, 2006 3:42 AM
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