Corporate consolidation is suppressing wages, breaking supply chains and driving inflation. The result of unchecked monopolies is a more fragile economy and a less democratic society.
This was the key takeaway presented by Portland resident Stacy Mitchell at the 2023 Policy Insights Conference, a virtual forum hosted by the Maine Center for Economic Policy on Wednesday.
Mitchell, a founder of Portland Buy Local and the co-director of the Institute for Local Self-Reliance (ILSR), a national nonprofit that advocates for greater community control of the economy, spoke about the impacts of corporate consolidation on workers, small businesses, rising costs and racial equity.
“As corporations have consolidated, they’ve had more power to hold down wages,” she explained to an audience that included Maine lawmakers and policy advocates. “This begins to explain this extraordinary growth in inequality.”
Mitchell continued, “A second set of effects is that concentration has really made our economy less productive and more fragile. Concentration has reduced innovation, because there are just fewer companies competing and coming up with new ideas. Our supply chains are highly concentrated. We saw this during the pandemic when there are four companies that process almost all of our beef, and when one of their plants goes down, lo and behold, suddenly we don’t have meat on our shelves.”
As Beacon previously reported, studies show that the increased cost of everyday items like meat, milk, bread, fuel and electricity are a product of this supply problem — rather than being a consequence of workers demanding higher wages. Combined with supply chain disruption caused by the pandemic and war in Ukraine and just-in-time production models, higher costs are the result of powerful businesses using their control over the market to set inflated prices.
Chains are causing economic distress
Mitchell expanded on how consolidation has hollowed out many communities in Maine and across the country. Last month, ILSR released a study focused on Dollar General and Dollar Tree and its subsidiary Family Dollar. Nearly half of the new retail stores that opened last year were chain dollar stores, “a degree of momentum with no parallel in the history of the retail industry,” the report reads. Many of those stores are concentrated in impoverished urban neighborhoods and in rural areas.
“I think the assumption has been, ‘Well, these dollar stores are coming in and sort of filling a need in places that need services,’” she said. “We found that in fact these stores are not just a symptom of economic distress, but they’re actually a cause of it.”
The report details how dollar stores single out communities, oftentimes Black and Latino neighborhoods, by opening multiple outlets near one another.
“This carpet-bombing strategy undermines existing food stores, especially the independent grocery stores that often serve these communities, and makes it hard for new businesses to take root and grow, effectively locking in neighborhood deprivation,” the report reads.
ILSR has also studied the shuttering of independent pharmacies in rural and urban America. Their disappearance has resulted in “pharmacy deserts.”
This is not because small pharmacies can’t compete with the larger chains like CVS, Rite-Aid and Walgreens, Mitchell noted, but because monopolies called Pharmacy Benefits Managers (PBMs) have been running them out of business.
PBMs — the largest of which is owned by CVS — set the reimbursement amounts that pharmacies receive and determine drugs that insurers will cover. Because of their vast market power, they are able to steer customers toward their own pharmacies.
To understand how this apparent conflict of interest has impacted access to pharmacies, ILSR studied North Dakota, which does not have large chains owing to a law passed in the 1960s that required pharmacies to be opened by healthcare professionals, rather than corporations.
“What we found is that North Dakota has more pharmacies per capita than any other state in the country,” Mitchell said. “They have a lot of pharmacies and those pharmacies are distributed across the state.”
Mitchell also spoke about monopoly control of the energy sector by investor-owned utilities like Central Maine Power and Versant and the problem it presents for building a carbon-neutral electricity system. ILSR has advocated for greater community control of the electric grid.
“There was a time many decades ago when publicly-regulated utility monopolies made sense. But because of technological shifts, they no longer make sense,” she said. “We can produce power, particularly renewable power, in a distributed way. There is great potential for monopoly utilities to undermine rooftop solar and small-scale wind production, to undermine and exclude those sources of power in favor of their own sources of power, many of which are dirty, polluting forms of power. That’s a real problem that we’re seeing in a lot of states.”
Mitchell pointed out that the U.S. Department of Justice and the Federal Trade Commission have the power to push back against these corrosive forms of corporate consolidation by enforcing antitrust laws. While the Biden administration and FTC Chair Lina Khan have been markedly better on antitrust than previous administrations (Khan published the influential essay “Amazon’s Antitrust Paradox” while at Yale Law School and her appointment to the commission was protested by Amazon and Facebook), the executive branch is still not aggressively pursuing enforcement.
Policy analysts with the Maine Center for Economic Policy have also previously noted that Maine Attorney General Aaron Frey doesn’t need to wait for federal regulators to enforce antitrust law, he can do it himself.
MECEP has urged state lawmakers to pursue long-term strategies that discourage corporate consolidation, such as eliminating tax laws that favor large companies over small businesses like the Maine’s Business Equipment Tax Reimbursement (BETR) program, where 46% of the benefit goes to the largest 1% of applicants.
Left unchecked, the effects of corporate consolidation will tear at the fabric of society, Mitchell said.
“Perhaps the most important impact is what it does to our democracy,” she said. “When you have this kind of concentrated power, you have a set of companies who rule our lives in a lot of ways and have extraordinary power over our government.”